#794: Why Inflation Is Designed To Crush You with Gary Brode

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Gary Brode, what is going on in the world? Insanity out there.
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It has been. Yeah. I mean, it's, it's fascinating. And Marty is somebody who travels a hundred
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percent of the time. Like it's, I'm watching my own country from other parts of the world,
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but not, you know, experiencing directly. And then, you know, everywhere I go, I get like
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really interesting impressions. Um, you know, I I'm currently in Montevideo, Uruguay,
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but I just came from El Salvador. I was in Bitcoin beach and I had dinner with, um, this nice
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couple from Munich, from Germany. And that, you know, they had all these questions and there was
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so much going on in the United States that they didn't understand. And so much of it was because
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their press had lied to them about everything going on in the United States. And they, to their
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credit. They were curious. They were asking me questions, not because they were trying to advance
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a narrative. They said, we don't understand what's happening. And when I explained it to them, they
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said, you know, our media presents it differently. I said, well, does your media tell the truth about
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your country? They said, no. I said, well, why would you trust them when they're talking about
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mine? What were their preconceived notions or what were their questions around? You know, it was a lot
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of stuff on, on politics. And, you know, by the way, one of the things that I thought was great,
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Right. Like I don't care about the World Cup. I have zero interest in soccer. I do not care that that makes people angry at which, by the way, that's a really interesting question. Why does it make people angry that I refuse to care about soccer? It seems to be important to them that I care. I reserve the right to not care. I don't know why it bothers people. But anyway.
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But the thing that I thought was great was people from all over the world came to the United States and they came with these preconceived notions that had been installed in them by their legacy media.
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And you just saw all of these posts on X and all these social media posts saying, oh, my God, this place is amazing.
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And the people are wonderful.
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And I feel safe here.
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And, you know, the stores are incredible and the restaurants are welcoming.
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And like people just writing about the amazing experiences they had in the United States and saying I had been warned.
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People told me, like, don't don't come to the United States.
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They'll shoot you in the airport.
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You'll arrive and they'll, you know, they'll shoot you.
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And and you just got dozens and hundreds and thousands of stories of people who said it was amazing.
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And the people were warm and welcoming.
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And they were, you know, the United States was an incredible host country.
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And one of the things that I thought was really smart was instead of just doing this in places
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like New York, and granted, they had the finals in the New York area, they sent people all
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over the country.
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And people from all over the world got to experience the Midwest.
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I grew up in Michigan.
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And to understand that there are other parts of the country between New York and Los Angeles
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and Miami, I think was great for the world to see.
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And, you know, I really enjoyed their their stories and seeing my country through their eyes.
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Yeah, it was very encouraging the summer.
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I mean, it was it was one of the white pills of the summer was watching everybody from around the world come and go to the south.
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You had multiple people from Germany, Scotland, other parts of the world blow up on Twitter and they were getting invited to concerts.
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They were they were getting invited to special poker tables in Vegas and they were experiencing Bucky's for the first time.
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And yeah, Bucky's Waffle House, IHOP, Costco, Walmart.
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Right. They're like, oh, my God.
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So you could get pancakes at three in the morning and they were thrilled.
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Yeah, we did.
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And I think it was also a reminder, despite how how our media would like to portray how terrible it is here.
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And there certainly are bad things or suboptimal things happening in this country.
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At the end of the day, it is it is pretty incredible that we have this this union of states and a diversity of of culture across the country.
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Yeah. Plus, you know, Marty, the thing I would add to that is that, I mean, I've had wonderful experiences all over the world, but there is something really special and deep about American generosity and generosity of spirit and the way we pitch in and help each other.
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you know, like I'm anytime something goes wrong, I call one of my neighbors and I can trust them
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with my alarm codes and my entrance codes. And, you know, like if something happens, they're like,
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yeah, I'm heading over right now. I mean, I've had people leave work to go check on my house
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because an alarm went off. You know, it's just it's incredible. And when I'm around, I always
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try to reciprocate and be there for them. But I do think, you know, Americans are some of the
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most generous people on the planet. And we're fortunate to have the people we have as neighbors.
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We really are I learning that too as I moved into this new house been here for about six months now everybody very welcoming have adopted us into the neighborhood very quickly
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Congratulations on the new home.
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I'm liking the new office.
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It looks like it's a really calming environment.
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I like it.
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It is.
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I need to put stuff on the walls.
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I'm lagging here.
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I spent the summer at the shore, at the Jersey Shore, so I wasn't able to put some time into it.
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But the fireplace, I'm going to see if I can get this thing back up and running.
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It hasn't been used in decades.
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So I would like to have some live fires in the background at some point in the future.
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I think it's a great idea.
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So where should we start?
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Should we start El Salvador?
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You just wrote this report.
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Should we start global macroeconomic markets?
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Obviously, oil and gas markets are under a bit of stress right now.
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um where where should we uh where should we take this in your mind what's what's the best order of
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operations here to cover state of the world markets let's i i think we should discuss all of it but why
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don't we start in el salvador um because i know you know a huge part of your audience are are
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bitcoiners um and you know we just released and thank you so much for reposting it we just released
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a white paper this week uh answering the question or at least in my opinion answering the question
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of whether Bitcoin is a currency. So why don't we start there? Yeah, let's start there. What was
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the impetus for your trip to El Salvador and writing this report specifically? So it was two
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things. One is the social changes in El Salvador over the last few years have been unbelievable.
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This country went from the murder capital of the world to one of the safest places in the world,
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and it happened in a matter of two or three years. It tells us that if you have the political will
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to get it done, you can get crime under control. In my opinion, this was like the social and
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economic version of the Berlin Wall coming down, right? You had a country that was a no-go.
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Like it just, this is a country of 7 million people where three dozen people were killed a day.
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And I heard story after story of people who died because they crossed the street.
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Like literally, they just they went into the wrong neighborhood and gang members would just pull them over and say, hey, we don't know you.
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What are you doing in our neighborhood? And lose your life that way.
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People were afraid to give any information about themselves, where they lived, where they work, the name of their kids.
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because if anybody had any information about you, you were going to get a phone call one day saying,
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hey, you know, we know this is your name. It's your wife's name, your kid's name. This is where
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they go to school. You know, this is where you work. This is, you know, who your wife's parents
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are. And why don't you give us some money? And that request would be followed by request for
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more money would be followed by request to use their home to maybe store something that they
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shouldn't be storing. And that was life, right? I mean, people left that country thinking that
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they would never return. And when I say never return, I mean, never go home again to see their
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family home, to see where they grew up, to see their friends and relatives, like they fled.
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And now these same people are looking at coming back. They're looking at taking over the family
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business and returning. And I can tell you, as somebody who just spent a month there, it is safe.
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There was never a moment when I felt endangered.
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Nobody tried to take as much as a single penny from me.
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So the second reason I wanted to go is because it is literally the global capital of Bitcoin
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adoption.
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There is more ability to use Bitcoin as a currency there than anywhere else in the world.
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And I wanted to see it.
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You know, Marty, a lot of people, they talk about places, but they don't know.
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And, you know, like there are times like I went to Colombia in 2010 and people said, oh, no, you're going to get kidnapped.
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I said, your information's it's stale.
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The country's changed.
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The reputation hasn't changed.
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You know, I just spent six weeks in Guatemala and, you know, people said, oh, you shouldn't go to Guatemala.
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It's dangerous.
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There's a State Department warning for that.
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but you know you go to antigua or you know you go to the lake and it's not it's just not like that
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like a lot of times you need to see these places in person and i'm a big fan of not only having that
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personal experience but talking to people right so when i was in el salvador i spoke to taxi
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drivers uber drivers people who worked in hotels people who ran family businesses people at
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religious celebrations, you know, the waiter at a restaurant, people who ran businesses,
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people who had money, people who didn't. And I talked to them. And what I've found is that
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people will tell you anything about their lives. They'll tell you about their politics,
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their religion, how much money they have, how much money they make. They'll tell you about
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intimate details of their intimate lives You just have to do one thing which is convey to them I not judging you I just want to understand you If you do that people will tell you any What was the common theme that you pulled from these conversations
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Because that's what I think,
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Niamh Bukhali is very polarizing.
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You either love him or you think he's like some,
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there's many people.
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I think, yeah, it's all well and good
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that the murder rate's been cut to the lowest levels in the Western Hemisphere and the economy
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is on the rebound, but he is a dictator. What he's done with the elections there, what he's done to
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insert himself is dictatorial. We cannot accept this. And then you have the others who are like,
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well, just look at the data. I think I'm in this camp. I don't care if he's a dictator. It looks
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like things are safer there and people are happier. And it looks like particularly there's
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a focus on education, children's education specifically. They've implemented AI in many
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schools. I think they have a pilot of a thousand schools that are doing AI assisted learning.
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And the testing results are screaming through the roof, getting on parity with a lot of
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Western European nations. And it's a look at the outcome, not the way they got there.
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Situation for me. It's a great question, Marty. So let's talk about both sides of it.
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First of all, it's important to understand how bad things were in El Salvador, because what that
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murder rate did and that extortion rate and that crime rate did was it changed the economy and
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and in important ways. So for example, if you ran a business and you had any amount of money,
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you were going to be robbed. And I, like, I spoke to somebody who was in a nice car
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and he had the decision of being killed by a gang or running somebody over,
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right? Like that literally that, that was it. And it was, he was in a killer be killed situation.
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So when you have people who have any success, and that means they're going to be robbed,
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your incentive for producing, it becomes negative, right? Because losing the money that you've earned
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is bad, but being, you know, murdered or beaten up for it is even worse, right? Succeeding meant
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your life was in danger. So every year you had fewer people with an incentive to produce and
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more people with an incentive to join a gang. And that's where things were. Now, most of the people
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I spoke with were in your camp, Marty. They just said, our lives are so much better.
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And we were afraid and our, and the life was cheap here. You know, people telling me some guy had
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worked in a place for 10 years, didn't show up. Nobody said anything. The business owner asked
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somebody else. They said, you know, where, where's a Jorge, you know, where's, where's this guy.
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And, and the answer was, yeah, Jorge was killed over the weekend. Like just flat, you know,
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something happens, you know, like nobody cared. And that's how cheap life was. That's how bad
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things were. And so when you talk to them, I would say, you know, 75 to 90% of people are saying
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life here is amazing now and it's getting so much better and they feel safe. And like you said,
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their kids are going to school, they're learning, people are starting businesses,
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foreign investment is pouring in, there's construction everywhere, right? I mean, this is,
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And most of them think it's amazing. Now, let's get to the concern you brought up,
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because there were people who expressed constitutional concerns and did use the
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word dictator. And what was really interesting was even those people acknowledged that life was a
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whole lot better. And basically what they were saying is, okay, look, life is a lot better here,
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but I'm worried that some of what Bukele's done has been outside the constitution. He's
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had a state of emergency that's lasted far too long. And as a result of that, they basically said,
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I don't mind the way he's using power. I'm worried that the next guy will use this as an example.
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And I think maybe the best comparable I can come up with is it reminds me a lot of Lee Kuan Yew
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in Singapore, who was absolutely a dictator, but look at what happened to the quality of life for
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the people in Singapore. They went from this poor backwater port city country to a place that had
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autonomy. And it was a first world nation, you know, more than a quarter century ago, right?
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With first world amenities and a high quality of life and an educated literate population
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at a point when their neighbors were not. And so I think, you know, Lee Kuan Yew is a really good
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where you had a guy who basically was a dictator
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and used that power to make the lives of his people
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so much better.
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And it really is a great example,
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and unfortunately this isn't being done in our part of the world,
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where government force is being used to help people as opposed to steal and oppress the people living there And so even Bukele critics acknowledged yeah I worried
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I think he's a dictator.
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But boy, is my life so much better.
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And the lives of my friends and relatives and neighbors are so much better.
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So I thought it was interesting that even his detractors acknowledged that he had used his power really well.
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Benevolent.
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And that's, I mean, some people call him a dictator.
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And I think this I've reread Democracy, the God that Failed by Hoppe earlier this year, which is talking about monarchy.
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And I think that's one thing that other people are floating, not as much as the dictator, but like maybe he's setting up like a new monarchy in El Salvador.
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And here's to say that that's not a good thing at the end of the day.
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Well, so you know what's really interesting, Marty, is the idea that we should rule ourselves
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is one that resonates with the vast majority of Americans and certainly with me.
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I think, you know, my concern for our version of democracy is, for the most part, Americans
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are not governed by the people we elect.
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Our lives are more affected by the unelected permanent bureaucracy.
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That, to me, is the real issue. It's that we're ultimately we are constantly answering to the agencies that aren't elected and yet have an enormous amount of legislative power over our lives and administrative power.
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yeah and uh you said you were going to bring it up and i'll bring it up i think the lindsey
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clancy saga is uh is a bit of a a bit of a undercurrent of that right i think a lot of that
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that bureaucratic managerial class has been taken up by um in many cases i think objectively if you
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look at the numbers, uh, women who, who have this, this, this grudge against the patriarchy,
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uh, and it leads to non-meritocratic, uh, rule, if you will, in many, in many aspects of our lives.
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And I think that the microcosm of the Lindsay Clancy case points, points to that to a degree.
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The thing that really worries me about that case is not that one person did something horrible.
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It's this outpouring of support.
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And, you know, she, she flat out said, you know, I did this and, and you see like enormous
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numbers of people saying, no, no, it was the husband.
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Right.
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I, it's, it is amazing that, you know, they won't even believe a confession.
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Um, and the amount of support for somebody who did something monstrous and has acknowledged
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doing something monstrous is, is incredible to me.
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you know
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Marty when you and I see a man do something
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horrible at no point do we say
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alright well let's get on X let's start making
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videos supporting him and you know which one of us
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is going to start the GoFundMe
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it's horrible that
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it's horrible what happened to those kids
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but the fact that people are
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supporting this
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and there are copycat cases
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is worrisome
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yeah there's a copycat case in Illinois
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I think just a couple weeks ago.
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Yeah.
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And you get these social dynamics,
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and then you get the technological dynamics of it, too,
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because we saw this during COVID,
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the mass psychosis that was easily spread
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through these technologies that we have.
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And there were some women in my life that I'd not sit down,
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but the Lindsay Clancy case would come up,
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and they would bring up TikTok rabbit holes
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that they found out that had very compelling cases that it was the father.
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It wasn't Lindsay.
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It was Patrick Clancy, not Lindsay Clancy.
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And I had to be like, hey, let's take a step back.
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Like, this is patently absurd.
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What are you watching?
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What are these people telling you?
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And the sort of rapid nature through which those theories were spreading on social media
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it was pretty, it's very alarming and concerning considering how many people
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took these theories, ran with them and took them as fact at the end of the day when it was
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patently absurd. Yeah. It's interesting to me that what people are willing to believe
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off of a TikTok video, but I'll also remind everybody that that algorithm is controlled by
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the CCP. Right. I mean, they will amplify anything that divides us, that makes people angry,
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that makes people feel like they can't trust their neighbor. Yeah, I actually recorded an
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episode yesterday, completely different topic, but same vein with Sam Lyman from the Bitcoin
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Policy Institute. He wrote a research report in the beginning of the summer highlighting that a
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of the anti data center rhetoric and narratives
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in the U.S. are being funded by by Chinese entities and.
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For the same purpose, to divide into, I think, also to slow down the A.I.
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build out here and he was on Capitol Hill on Wednesday testifying
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in front of the Senate and he made a really good point.
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Like if you look at the media narratives in China with Chinese state media around
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A.I. data centers and A.I. more broadly, it's extremely positive.
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It's like this is going to revitalize our economy.
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It's going to create an incredible future for us.
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And yet they're like funding these propaganda campaigns in the U.S. to make us believe that that's not the case.
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Yeah, it's incredible that they're allowed to do that.
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Obviously, American entities are not permitted to, you know, try to convince Chinese people or the Chinese government to slow down their research.
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So I think that's I think it's really interesting that that they're doing and that people believe this.
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Right. I mean, obviously, what China wants to do is is they want to take that lead.
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So it's you know, it's incredible to me that that people will believe it.
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also, you know, the other thing that is certainly attention grabbing are the headlines from people
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at, you know, Anthropic and OpenAI saying, oh, no, we're going to destroy the world. You better
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regulate us. And people are believing that these companies are saying, well, you know, without
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regulation, we're going to destroy the planet. We're going to destroy humanity. You'll get your
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Terminator future. Right. And to me, it seems obvious that if you think what you're doing is
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dangerous, maybe you should stop it. Why are they calling for government regulation? And the answer
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to that is the same thing it always is. Anytime you have an oligopoly in an industry, that oligopoly
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has an incentive to pull the ladder up behind them and ensure that anybody else starting a
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competing company will have to face a regulatory apparatus preventing their success that these
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companies didn't have to face. And, you know, the most recent obvious example of that was,
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you know, who was part of leading the charge for charging taxes on internet purchases?
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It was Amazon. And the reason for that, right? And you think, well, wait a minute,
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like one thing that gave Amazon a huge advantage over Walmart and Costco and
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every local store was you didn't have to pay state sales tax. And so why? Why would they give
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up that advantage? And the answer is because Amazon could afford the software to calculate
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what everybody owed in a particular city, a particular state. It was being shipped from
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this place, sold in this place. They could manage that complexity, but boy, it made it a lot harder
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and more expensive for smaller companies to come challenge Amazon. I think that's what we're seeing
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here. Like if these companies really believe what they were doing was dangerous, then
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stop doing it. If you think you're going to destroy humanity, stop. You don't need the government
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for that. This is simply the natural
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inclination of any oligopoly to pull up the ladder and ensure they don't face more competition.
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Yeah. And that oligopoly has
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another mind virus embedded
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in it, which is effective altruism. I'm not sure if you've been following
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the sort of sleuthing of the individuals that work at some of these companies and the third-party
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research groups that are there to help them provide the safety guardrails. It is heavily
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seeped in effective altruism thought, which is completely insane. People who think they can
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use spreadsheets to determine the best outcomes for future humans and therefore decide what we
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have to do today. And this is actually a topic that I've been covering for probably five or six
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years now because Sam Bankman-Fried was an effective altruist too. And we went through
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the effects of the effective altruists getting control of part of an industry in Bitcoin last
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cycle. And these people are absolutely insane. Yeah, it's a huge problem. And in fact, I stopped
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using OpenAI. I stopped using ChatGPT earlier this year over the summer because I was getting
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insane answers. And every question I asked was put through the lens of racial preferences and
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gender preferences. And, you know, I, it would give me these really biased answers. And I would
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point out, hey, this answer is biased, and you're putting people above me. But I'm asking about
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something related to me And it would it would be very sly in its response And it would say yes well I not against you and all people are equal And I would never put one person above another but there were protected
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classes of people and we can't write anything even in a private conversation that might upset
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somebody who's in a protected class. I'm like, that's the definition of prioritizing certain
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people above other people. And I don't know what to tell you, but I don't agree that somebody else's
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desires or needs take precedence over mine because they're part of a particular group. And I'm not,
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that's not, that that's not moral. It's not right. And so I would get these insane racist,
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sexist answers from it. Um, it also was, was just incapable of following instructions. I would say,
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you know, don't give me an answer unless you confirm it with these sources. And it would tell
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me, okay, great. I did that. And I would find out it, it not only didn't it, it couldn't like,
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it's like, yeah, I would ask. I'm like, I thought you checked this. Oh, I don't have access to that.
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I'm like, you gave me an answer. Right. Um, so it was racist. It was sexist. It was inaccurate.
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It was confidently wrong, which is the worst thing of all. Um, you know, there were times I
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would tell it, give me an answer about this topic. Do not consider this. And guess what?
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You know, I would get A and B. I'm like, I literally one instruction before just told you,
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don't do that. And it would constantly violate the ground rules that I would give it.
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And I would say, hey, we've had this conversation 10 times. You're supposed to have memory why you're
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doing this. And would say, yeah, you're totally right. I did do this. You know, if I do this again
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in the future, just remind me, I'm like, what? You're a computer. You're relying on me to remember
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and remind you why can't you, you literally have memory for this purpose. And the only thing I
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could conclude is its goal is not to be useful, or at least not to be useful to somebody who has my
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ideas. And I just concluded that it was dangerous and wrong and horrendous and stopped using it.
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I think there's a reason they've lost so much market share to Claude and Anthropic.
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You know, this last quarter, the revenue at Anthropic was double the revenue at OpenAI.
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I actually think OpenAI potentially is a zero, right?
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They've got $600 billion of commitments.
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I don't know where they're going to get that $600 billion.
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But what I do know is that their revenue hasn't been growing the way it is in other places.
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and their losses are, you know, they're still looking at losing like $100 billion over the
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next few years. Who's going to be funding that? You know, one of the best pieces of analysis I
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saw on this was written by Alex McCrease, who writes a blog called The Tree of Woe,
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which is a great Conan the Barbarian reference. And Alex had this great line where he's talking
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about the future of AI saying, unless we do something about this, our kids are going to be
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raised by a bunch of Robo Karens. That's a great line. Well, I mean, to that point,
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there were rumors that there was a secondary sale of, I forgot it was Anthropoc or OpenAI
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equity, but I think it was OpenAI that sold at a $445 billion valuation, which is
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one third of what they were publicly saying they wanted to to ipo at and obviously they've stepped
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back from the ipo and tropic seems to have too and i think that's a big question on everybody's
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mind whether it's open ai or anthropic but just broadly speaking about this ai build out um
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what is going to happen and what's the effect going to be on the economy have we overextended
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the run here? Have we pushed too much capital into this? Is the return on invested capital
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not materializing fast enough? What are you seeing in those regards?
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Yeah, I think that's the case, right? And this is something I've been talking about for two years,
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that these companies have no plan to earn a return on literally trillions of dollars
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of invested capital. I don't see that happening. My disappointment about OpenAI not going public
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is now I can't short it. I mean, I really think it's a zero. I would love to short that stock if
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I could. And right now, there's just no effective way to do it. I also think it's notable that the
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American companies are all against the open weight models, right? They don't even want competition
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for like, Marty, you and I putting our own weights in, having our own... People should be able to
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put together competing models. And they're trying to stop that. They're saying, oh, it's dangerous.
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Really Really So you guys are the ones who have the wisdom to decide what the truth is and how everybody going to learn and to be counseling everybody on whatever personal stuff they put in there But other people who could alter these models or design
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their own models or put their own weightings on them are somehow dangerous. I think that's
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completely insane. The one way that I'm playing this, and we've done so very profitably, is through
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Intel. I bought that stock at $35 back in November. And then I bought more of it in the
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upper 40s, low 50s, something like that. And the reason for that is because of the shift from
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training to inference. And so think about it this way. If you're designing an LLM, this is the kind
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of incredible expense that you were just talking about, Marty. To do that, you have to train a
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model. And for that, you want a lot of very expensive NVIDIA GPUs. But inference is simply
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using it, right? So agentic AI, which is a fancy way of saying, I want to have AI agents that will
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go do things for me, that will go find information, that will compile information, that will make a
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purchase, that'll buy me airline tickets, that will send Marty an email saying, hey, can we move
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our TFTC filming from this time to that time? All of that stuff. That's not GPU heavy. That's CPU
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heavy. So that's Intel and AMD. And so when I look at that, I think to myself,
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you know, the company is spending hundreds of billions of dollars on this. They may never earn
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a return on it, but that doesn't mean there isn't demand. Right. And so like the easy comparable is
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to look at the the the dotcom build out and the the e-commerce build out that started 30 years ago.
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And, you know, you had a lot of companies go bankrupt, but use of the Internet skyrocketed
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and never stopped. Even when those stocks imploded in 2001, it didn't stop people from using the
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internet. And so I do think there's demand to use AI. That's all agentic demand. And that's going to
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be very CPU heavy. I also think we're going to see a shift from LLMs to SLMs, right? The large
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language models hosted in these data centers, you'll end up with small language models hosted
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on your own hardware. And we already have like a lot of people, individuals have enough computing
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power for that right now. So, you know, that's basically, that's the way I'm playing that shift.
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Yeah, no, I completely agree. And at Dark Horse, the company I sit on the board of, I think that's
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our thesis too, is that inference demand is not going to go down anytime soon. I just want to pull
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up this chart. And it's crazy. You're talking about agents, the agentic economy,
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agent to agent token usage is going
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exponential. Right. So that blue line there, that's
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not NVIDIA. Right. That's Intel and AMD.
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Marty, let me ask you a question. In your data center, what's the name of your
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data center? A company called Dark Horse.
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So at Dark Horse, what's the ratio of GPUs to CPUs
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in your facility. Do you know that? Right now, it's all Bitcoin mining. We're in the process
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of transitioning. We have land and power assets. Gotcha.
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Yeah. Okay. So right now, if you go
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into these AI data centers, it's like eight GPUs per
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CPU. And I talk to people every week in the industry.
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These are senior executives, people designing these data centers.
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And what they're telling me is they think over the next few years,
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that ratio goes from eight to one in favor of GPUs to something in the neighborhood of two to
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one or one to one, right? Where you just, the CPU demand is going to be off the charts.
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Yeah. I think, I think it's obvious if you look at Intel, AMD, a lot of the memory,
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memory companies over in South Korea, you're going to need a memory for this too.
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Yeah, absolutely. You know, one, one thing that's really worth pointing out and people might say,
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how would you have enough horsepower to run an SLM? Don't you need these giant data centers?
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I'm talking to you right now. I'm traveling using a laptop that I bought at Best Buy
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earlier this year for $1,300. I have enough horsepower on this thing to run an SLM.
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Now, could I do the same stuff that Grok can do or that Claude can do? No.
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But most of what people need these things to do,
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you don't require the high-end stuff.
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No, I mean, for our TFTC company agent,
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we have it running in the cloud
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and we have some local models running in the cloud It gets a lot of work done Yeah exactly right And even if it gets a lot of work done yeah exactly right and and even if um you using
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it for you know 50 of your needs 60 of your needs those are tokens you don't have to buy from
401
00:36:38,520 --> 00:36:46,840
anthropic or open ai or you know from gemini that's that's it won't decrease your ai usage
402
00:36:46,840 --> 00:36:48,460
but it'll decrease your token purchases.
403
00:36:49,920 --> 00:36:52,800
Yeah, and even if you're not using SLMs
404
00:36:52,800 --> 00:36:53,900
on your physical device,
405
00:36:54,040 --> 00:36:55,660
the open-weight Chinese models
406
00:36:55,660 --> 00:36:57,720
are using DeepSeq or Kimi K3.
407
00:36:58,620 --> 00:37:01,540
I mean, they're 98% cheaper
408
00:37:01,540 --> 00:37:04,260
and 2% of the cost for the token.
409
00:37:04,400 --> 00:37:05,860
So that's another thing.
410
00:37:05,920 --> 00:37:07,920
That's why I also think the oligopoly
411
00:37:07,920 --> 00:37:11,100
is calling for regulatory capture
412
00:37:11,100 --> 00:37:12,240
and regulatory modes
413
00:37:12,240 --> 00:37:16,820
because they see this open-weight wave coming
414
00:37:16,820 --> 00:37:25,160
much cheaper comparable intelligence and uh it's scaring the crap out of them it should
415
00:37:25,160 --> 00:37:31,320
it should scare them and you know unfortunately i don't think they've been good stewards of the
416
00:37:31,320 --> 00:37:38,540
public trust they have a particular point of view and they're going to push it yeah what um
417
00:37:38,540 --> 00:37:45,860
how do you how do you think this plays out over the next six months to a year and i think
418
00:37:45,860 --> 00:37:50,560
bringing in a more well-rounded picture. Obviously, we have the models, we have the data centers,
419
00:37:50,560 --> 00:37:59,180
but then underlying that is this larger endeavor of broad re-industrialization of the U.S. economy,
420
00:37:59,580 --> 00:38:07,200
focus on our energy systems. Obviously, we have wars going on in Russia, Ukraine, Iran, U.S.
421
00:38:08,720 --> 00:38:13,040
Oil and gas markets are being heavily disrupted. We have diesel refineries
422
00:38:13,040 --> 00:38:20,160
shutting down here in the United States. What do you think this fall and winter look like?
423
00:38:20,160 --> 00:38:26,000
Because it seems like we're on the precipice of either threading the needle or having things
424
00:38:26,000 --> 00:38:32,720
unravel to a certain degree. So I think that's a really difficult question. And the reason is so
425
00:38:32,720 --> 00:38:37,460
much of it depends on the weather, right? Europe is going into the winter with their fingers crossed
426
00:38:37,460 --> 00:38:41,500
that it won't be a cold winter. They don't have enough fuel to get through the winter if it's cold,
427
00:38:41,500 --> 00:38:46,040
right? They're going to get very unhappy and very uncomfortable if it's a cold winter. So,
428
00:38:46,500 --> 00:38:51,720
you know, if you want to predict the weather, uh, four months from now, I'll tell you what's
429
00:38:51,720 --> 00:38:56,920
going to happen. Right. But I, I'm, I can't predict the weather four months from now. Um,
430
00:38:58,140 --> 00:39:06,000
here's what I think though. I think long-term worldwide energy usage will only go up. You have,
431
00:39:06,000 --> 00:39:13,200
extraordinary needs in the United States, right? Like, you know, like a town might use a gigawatt
432
00:39:13,200 --> 00:39:19,000
of energy, you now have data centers being built that are using five, six, seven gigawatts of energy,
433
00:39:19,000 --> 00:39:25,120
or that will use that. So you've got massive needs there. And then you have literally billions of
434
00:39:25,120 --> 00:39:31,640
people all over the world who want more energy usage. And the correlation between energy use and
435
00:39:31,640 --> 00:39:39,640
a higher material quality of life is almost 100%. There are no prosperous, comfortable,
436
00:39:40,280 --> 00:39:47,980
wealthy societies that have low energy usage. It simply doesn't exist. Even in warm parts of the
437
00:39:47,980 --> 00:39:53,380
world, even parts of the world where people won't freeze to death, you need energy to live a
438
00:39:53,380 --> 00:39:58,080
comfortable material quality of life. And so you've got massive data center demand in the United
439
00:39:58,080 --> 00:40:04,500
States and China. And then you have billions of people in India, China, Africa, who they want a
440
00:40:04,500 --> 00:40:11,060
better life. And so I think we're looking at a gigantic increase in worldwide energy usage.
441
00:40:11,360 --> 00:40:17,400
The way I'm playing this is I'm not focused on short-term headlines, which literally at one
442
00:40:17,400 --> 00:40:24,920
point were changing by the hour. Somebody in the White House would make an announcement,
443
00:40:24,920 --> 00:40:29,380
the IRGC would make an announcement and oil prices are moving. And there was no way to predict that.
444
00:40:29,840 --> 00:40:35,120
But what I've done is I own large amounts of energy and energy infrastructure.
445
00:40:36,260 --> 00:40:41,500
And I own a huge amount of uranium. I do think there's going to be a worldwide nuclear
446
00:40:41,500 --> 00:40:49,500
renaissance. Because if people want a higher quality of life and politically they want zero
447
00:40:49,500 --> 00:40:55,460
carbon, that's the answer. There are no other answers that will get you reliable,
448
00:40:56,080 --> 00:41:04,400
high levels of power without carbon. So my portfolio is loaded up for higher energy prices.
449
00:41:04,400 --> 00:41:08,560
Whether that happens over the next three to six months, I don't know. But what happens over the
450
00:41:08,560 --> 00:41:14,220
next three to six years? How do you think rates play into this? Obviously, that's another point
451
00:41:14,220 --> 00:41:20,140
of focus for market participants right now is looking at Kevin Warsh and the Fed, looking
452
00:41:20,140 --> 00:41:25,420
at the Treasury yields 10 year, popped above five, still hovering around there.
453
00:41:25,420 --> 00:41:26,600
I'm not sure where it is today.
454
00:41:26,600 --> 00:41:32,560
Obviously, you have this debt situation continuing to balloon here in the United States.
455
00:41:32,560 --> 00:41:37,840
And obviously, you have Japan struggling to or not even struggling.
456
00:41:37,840 --> 00:41:39,960
I think they've determined that they're not even going to.
457
00:41:39,997 --> 00:41:47,457
try to maintain yield curve control as well. And you just have yields blowing out all over the world.
458
00:41:48,937 --> 00:41:55,217
You know, Marty, one of the things that surprised me is that people still believe that the Federal
459
00:41:55,217 --> 00:42:01,337
Reserve has control over the situation and they don't. And so, you know, you see this thing where
460
00:42:01,337 --> 00:42:07,977
people are saying, you know, inflation has made life unaffordable. We want the Fed to fix that.
461
00:42:07,977 --> 00:42:11,697
And, you know, so the Fed raises and they say, oh, no, we're not going to be able to afford mortgages.
462
00:42:12,497 --> 00:42:14,877
OK, well, one, which do you want?
463
00:42:14,917 --> 00:42:18,517
But two, why do you think the Fed has any say over this?
464
00:42:18,577 --> 00:42:28,077
And like I heard people this morning talking about how, you know, the Fed will do this and that and it'll affect borrowing rates and, you know, it'll make life unaffordable for people.
465
00:42:29,017 --> 00:42:32,257
I don't know why they think that the Fed has zero control.
466
00:42:32,257 --> 00:42:37,497
So and I've written I've spilled gallons of digital ink about this for years.
467
00:42:37,497 --> 00:42:53,757
The Fed does not control the yield curve. The Fed controls the overnight rate. So, you know, Marty, let me ask you, if Morgan Stanley or JP Morgan pays 25 basis points more on their overnight deposits in the Federal Reserve, does that affect your life? No, of course not.
468
00:42:53,757 --> 00:43:01,077
So and people might say, oh, well, the Fed, but they'll change the overnight rate and that'll make its way through the yield curve.
469
00:43:01,257 --> 00:43:02,877
And the answer is no.
470
00:43:03,117 --> 00:43:08,217
It used to do that when we had less than $40 trillion of debt.
471
00:43:08,457 --> 00:43:16,677
But at $40 trillion of on balance sheet debt and another $200 trillion plus of off balance sheet debt, no, it no longer matters.
472
00:43:16,677 --> 00:43:18,337
And here's the proof, right?
473
00:43:18,337 --> 00:43:22,957
So everybody was wailing this week that the Fed raised rates and nobody's going to be able to afford anything.
474
00:43:22,957 --> 00:43:29,977
Well, your mortgage gets priced off of the 10-year treasury.
475
00:43:30,977 --> 00:43:31,817
And I took a look.
476
00:43:31,977 --> 00:43:37,697
From the beginning of this week to the open this morning, the yield on the 10-year treasury
477
00:43:37,697 --> 00:43:41,457
rose by one basis point, 0.01%.
478
00:43:41,457 --> 00:43:46,677
In other words, the bond market said, we don't care what Warsh is doing.
479
00:43:46,977 --> 00:43:49,817
So somebody might say, well, that's one example, and it's two days.
480
00:43:49,917 --> 00:43:50,617
OK, fair enough.
481
00:43:50,657 --> 00:43:51,917
Let's look at the last two years.
482
00:43:52,097 --> 00:43:52,577
Right?
483
00:43:52,577 --> 00:43:57,917
And I wrote in the summer of 2024, Powell's going to hike.
484
00:43:58,377 --> 00:44:00,717
Sorry, he's going to cut and it won't matter.
485
00:44:00,857 --> 00:44:01,797
It's not going to help.
486
00:44:02,157 --> 00:44:04,117
It won't give people the response they want.
487
00:44:04,657 --> 00:44:07,157
And so we had two years of Fed cuts.
488
00:44:07,357 --> 00:44:10,357
The Powell Fed started cutting in September of 2024.
489
00:44:10,837 --> 00:44:13,477
They cut by about 200 basis points.
490
00:44:13,997 --> 00:44:18,657
Take a look over the last two years, the yield on the 10-year rose, the yield on the 30-year
491
00:44:18,657 --> 00:44:19,457
rose.
492
00:44:19,457 --> 00:44:29,797
So the Fed was cutting and borrowing rates rose because the bond market was correctly saying we're projecting higher future inflation.
493
00:44:30,277 --> 00:44:32,797
And the bond market was right. That's exactly what happened.
494
00:44:32,797 --> 00:44:41,797
Now the Warsh Fed raised and the 30-year is down this week. The 10-year is up one basis point, 0.01%.
495
00:44:42,297 --> 00:44:49,037
What that's telling you is the people trading the bond market don't care what the Fed is doing and neither do I.
496
00:44:49,037 --> 00:44:50,857
It's just no longer relevant.
497
00:44:50,857 --> 00:44:56,597
And the reason we're going to see higher long-term inflation is because what we have, the proper
498
00:44:56,597 --> 00:45:00,017
definition of inflation is an expansion of the money supply.
499
00:45:00,497 --> 00:45:04,957
And what we have is not only a government that's overspending by trillions of dollars
500
00:45:04,957 --> 00:45:10,397
a year, which is bad enough, but they're not using that money for infrastructure that creates
501
00:45:10,397 --> 00:45:10,897
value.
502
00:45:11,377 --> 00:45:16,997
It's so much of it is waste, theft, graft, fraud, right?
503
00:45:17,057 --> 00:45:18,977
It's not being used to help us.
504
00:45:18,977 --> 00:45:26,597
It is being wasted and stolen. And and then, you know, that that money adds to the money supply.
505
00:45:27,277 --> 00:45:31,977
So, you know, when people are talking about the Federal Reserve, that's not relevant.
506
00:45:32,277 --> 00:45:36,257
Inflation is being caused by overspending out of Congress. It's a bipartisan problem.
507
00:45:36,437 --> 00:45:42,957
And it's not going to stop. Both parties do this. Nobody is talking seriously about cutting spending.
508
00:45:42,957 --> 00:45:47,037
And so that's the direction all of this is going to go.
509
00:45:47,037 --> 00:45:54,597
You know, Lynn Alden, one of her big memes, she's been saying for years, nothing stops this train, meaning Congress is going to overspend.
510
00:45:54,997 --> 00:45:57,257
The money supply is going to expand.
511
00:45:58,077 --> 00:45:59,157
Inflation will continue.
512
00:45:59,737 --> 00:46:01,537
There is nothing anyone can do to stop it.
513
00:46:01,577 --> 00:46:02,337
Nothing stops this train.
514
00:46:02,437 --> 00:46:03,597
And as usual, Lynn is right.
515
00:46:05,317 --> 00:46:10,037
Who knew all you had to do is spin up an LLC and say that you're providing hospice to people?
516
00:46:10,277 --> 00:46:15,197
Spin up an LLC, get a P.O. box and get tens of millions of dollars from Medicare.
517
00:46:15,197 --> 00:46:20,057
Here's what's amazing to me about this, Marty. And I think this tells you the whole game.
518
00:46:20,537 --> 00:46:27,457
It's not amazing to me that people see holes in the system and ways to abuse American generosity,
519
00:46:27,457 --> 00:46:34,557
right? Like thieves are going to be thieves. What's amazing to me is that half of the country
520
00:46:34,557 --> 00:46:40,037
is getting angry at the people pointing it out, saying, hey, we have billions of dollars being
521
00:46:40,037 --> 00:46:44,257
stolen from us every year and it's systematic and it's intentional.
522
00:46:44,517 --> 00:46:46,737
And people are saying, how dare you point that out?
523
00:46:46,957 --> 00:46:58,153
It wrong You can look at this What are you kidding me That our money that being stolen And you are paying for it in higher inflation right
524
00:46:58,253 --> 00:47:03,773
And so I think it's really interesting that people are getting, you know, people got angry
525
00:47:03,773 --> 00:47:07,453
at Elon Musk for pointing out how much of government spending was fraud.
526
00:47:08,393 --> 00:47:11,273
And, you know, Elon this and like, okay, wait a minute.
527
00:47:11,493 --> 00:47:15,833
Why is nobody going to deal with the issue that money is being stolen from us?
528
00:47:15,833 --> 00:47:18,953
They started throwing Molotov cocktails at Tesla dealerships.
529
00:47:19,673 --> 00:47:19,873
Yeah.
530
00:47:20,733 --> 00:47:21,173
Yeah.
531
00:47:21,353 --> 00:47:22,513
And they would have killed people.
532
00:47:22,613 --> 00:47:23,193
They wouldn't have cared.
533
00:47:24,253 --> 00:47:24,493
Yeah.
534
00:47:25,873 --> 00:47:27,693
Again, it goes back to this mass psychosis.
535
00:47:27,893 --> 00:47:29,353
It's like, how could anybody?
536
00:47:30,733 --> 00:47:38,013
I mean, actually, I can see how, like, if you are like a democratic socialist or a pure communist,
537
00:47:38,013 --> 00:47:42,013
you can say, like, yeah, we're stealing from the system.
538
00:47:42,253 --> 00:47:43,893
It's a form of reparations.
539
00:47:43,893 --> 00:47:48,893
I think many of those people believe that it's completely sick.
540
00:47:48,973 --> 00:47:49,753
It's a sick mindset.
541
00:47:50,133 --> 00:47:52,613
But at the end of the day, it's just overt.
542
00:47:53,993 --> 00:47:55,553
In your face theft.
543
00:47:55,813 --> 00:47:56,833
And as a taxpayer.
544
00:47:58,353 --> 00:48:01,093
It looks as a tax bill every year.
545
00:48:01,333 --> 00:48:05,233
And so what taxes feel like a humiliation ritual at this point.
546
00:48:05,353 --> 00:48:06,093
Oh, God, they are.
547
00:48:06,633 --> 00:48:07,373
They are.
548
00:48:07,713 --> 00:48:10,893
And by the way, what you just described, Marty, the the.
549
00:48:11,213 --> 00:48:12,173
Oh, God.
550
00:48:12,173 --> 00:48:20,173
the the piven cloward strategy i may be mispronouncing that piven piven uh piven cloward
551
00:48:20,173 --> 00:48:24,633
yeah i think it's i'll look it up i may be mispronouncing but basically these were a couple
552
00:48:24,633 --> 00:48:32,633
of socialists in the 60s or 70s who said the the way we crash the system is by by making so many
553
00:48:32,633 --> 00:48:39,493
people dependent on it and making the the demands for social services so high that we crash the
554
00:48:39,493 --> 00:48:43,913
entire system. And then when it fails, we'll be able to implement communism.
555
00:48:44,793 --> 00:48:48,133
That, I mean, that, that was a state and they said this out loud, right?
556
00:48:48,153 --> 00:48:50,113
And somebody might say, Oh, you know, conspiracy.
557
00:48:50,273 --> 00:48:52,353
They don't at all. This is not a conspiracy theory.
558
00:48:52,433 --> 00:48:55,613
Go read what they wrote about it. They, they spoke in public.
559
00:48:55,713 --> 00:48:56,493
They were clear.
560
00:48:57,793 --> 00:48:59,493
Yeah. The cloud strategy.
561
00:49:00,353 --> 00:49:01,173
Okay. Yeah.
562
00:49:03,093 --> 00:49:04,673
Yeah. I had it. I had it mixed up.
563
00:49:05,853 --> 00:49:08,373
The way to the poor, the strategy to end poverty.
564
00:49:08,373 --> 00:49:13,713
urged activists to register every person eligible for welfare benefits who are often blocked by
565
00:49:13,713 --> 00:49:19,013
local bureaucratic hurdles onto the system all at once. The goal, overloading local government
566
00:49:19,013 --> 00:49:23,893
budgets and agency capacities will create a fiscal and political crisis. The authors believe that
567
00:49:23,893 --> 00:49:28,413
the federal government would then have to step in and replace local welfare with a federal system
568
00:49:28,413 --> 00:49:34,553
of guaranteed annual income. Getting close to that. Yeah. So, so look, here's the thing. And,
569
00:49:34,553 --> 00:49:45,853
And again, you know, Marty, one of the things I do whenever you and I do these, you know, whenever we do these shows, I always go and, you know, I go to the comments and I respond.
570
00:49:45,973 --> 00:49:51,973
And inevitably, there are a bunch of people saying, you know, I'm a horrible, mean, heartless person and I just want everyone to die.
571
00:49:51,973 --> 00:49:55,473
And no, no, I just don't want our money to be stolen.
572
00:49:55,753 --> 00:49:59,893
And I don't want our free enterprise system to collapse.
573
00:49:59,893 --> 00:50:01,313
And I don't want the country to collapse.
574
00:50:01,353 --> 00:50:03,513
And I don't want our financial system to collapse.
575
00:50:03,513 --> 00:50:08,193
and people stealing billions of dollars and Congress overspending by trillions of dollars
576
00:50:08,193 --> 00:50:15,453
and wasting it and, you know, having it be lost to fraud. That's not good for any of us.
577
00:50:15,873 --> 00:50:19,993
And so, you know, listen, you guys can write in the comments that I just want poor people to die,
578
00:50:20,113 --> 00:50:28,633
but that's not true at all. And I'm not the one trying to harm everybody. And listen,
579
00:50:28,633 --> 00:50:34,933
As somebody who owns Bitcoin and gold and silver and energy and a home, I actually benefit
580
00:50:34,933 --> 00:50:35,813
from inflation.
581
00:50:36,613 --> 00:50:38,013
But I don't want that.
582
00:50:38,173 --> 00:50:43,013
I want to make my money from generating alpha, from identifying great companies trading at
583
00:50:43,013 --> 00:50:44,633
inexpensive prices.
584
00:50:45,153 --> 00:50:51,873
But if this is going to happen, then I'm going to own hard assets and I'll benefit from it.
585
00:50:52,053 --> 00:50:53,613
That's not what I want.
586
00:50:53,773 --> 00:50:55,893
That's just the way the world is working right now.
587
00:50:55,953 --> 00:50:57,793
It doesn't mean that's what I want to have happen.
588
00:50:58,633 --> 00:51:20,013
Yeah, objectively, it is what's happening. And it is incredibly frustrating because the communists, the people who believe in the Clower-Priven strategy will say this is the way we get equality. We smash the wealth inequality gap. You're going to smash the wealth inequality gap. You're just not going to have any wealth.
589
00:51:20,013 --> 00:51:22,633
That's the problem with this.
590
00:51:22,633 --> 00:51:23,893
We'll all be equally poor.
591
00:51:24,013 --> 00:51:30,033
And by the way, like worth pointing out, it's these strategies that create inflation.
592
00:51:30,453 --> 00:51:31,873
Well, I've got news for you.
593
00:51:31,993 --> 00:51:36,053
Like, again, the people who write in the comments that I'm a horrible, heartless person because
594
00:51:36,053 --> 00:51:37,853
this isn't what I want.
595
00:51:37,933 --> 00:51:39,073
This is the way it is.
596
00:51:39,473 --> 00:51:44,613
But I will point out that inflation is horrible for poor people.
597
00:51:44,773 --> 00:51:47,313
It's horrible for the elderly on fixed incomes.
598
00:51:47,313 --> 00:51:55,473
It's horrible for people who have to spend, you know, 90 percent of their income on food and fuel and gas and don't have disposable income.
599
00:51:55,473 --> 00:52:17,009
It is great for people who own homes who own Bitcoin who own gold who own hard assets Those are wealthy people And so somehow because most people are not economically literate somehow we have a situation where the exact policies that create
600
00:52:17,009 --> 00:52:24,409
massive amounts of wealth inequality are being lauded as the ways to decrease wealth inequality.
601
00:52:24,409 --> 00:52:38,869
And it is one of the most amazing sleights of hand by the Federal Reserve and the Treasury Department and political activists who have all colluded with these policies to create inequality.
602
00:52:38,869 --> 00:52:45,269
And then they say the solution to this is more of the same policies that create more inequality.
603
00:52:45,269 --> 00:52:53,169
And it's just and people will question your morals and my morals because we notice this.
604
00:52:53,349 --> 00:52:57,809
But more of the same will create more of the same outcome.
605
00:52:58,349 --> 00:53:09,049
More of the same government theft and graft will create more inflation, will increase the wealth inequality gap because inflation benefits wealthy people and harms poor people.
606
00:53:09,569 --> 00:53:10,429
It does.
607
00:53:10,429 --> 00:53:18,789
And I think this is a good segue to tie it back to your El Salvador trip, Bitcoin.
608
00:53:19,129 --> 00:53:23,409
But how do you think Bitcoin is faring throughout all this?
609
00:53:23,729 --> 00:53:29,409
I think this year has played out and looking forward and then tying it to your trip to El Salvador.
610
00:53:29,409 --> 00:53:37,129
Because I think we both believe that, again, the inflationary pressures are monetary in nature.
611
00:53:37,129 --> 00:53:43,289
one of the ways to protect yourself and to if you want to fix things more broadly is get back toward
612
00:53:43,289 --> 00:53:48,009
a sound money policy which bitcoin enables you to do without the government having to do
613
00:53:48,009 --> 00:53:55,289
anything um what's the setup for bitcoin looking like in your mind yeah so i'm going to speak in
614
00:53:55,289 --> 00:54:02,229
in very round terms here but roughly 90 of all bitcoin that will ever be mined and created
615
00:54:02,229 --> 00:54:10,349
have already been created. So we roughly have 20 million Bitcoin in existence. There will be one
616
00:54:10,349 --> 00:54:16,409
more for a total of 21 million. Of that, maybe three or four million have been irretrievably
617
00:54:16,409 --> 00:54:23,489
lost and cannot be recovered. So the real total supply is going to end up being about 17, 18
618
00:54:23,489 --> 00:54:29,809
million. That last million Bitcoin will be mined over the next, I don't know, 100, 40, 150 years-ish,
619
00:54:29,809 --> 00:54:36,109
something like that, as opposed to the US government, which is, you know, people say,
620
00:54:36,369 --> 00:54:41,129
oh, inflation is coming down. Like, yeah, great. But M2 is up 5% in the last 12 months.
621
00:54:41,589 --> 00:54:46,009
Right. And that's just the on balance sheet. If you include off balance sheet spending,
622
00:54:46,089 --> 00:54:51,229
which does count and off balance sheet accruals, it's more than that. You know, it could be double
623
00:54:51,229 --> 00:55:00,009
that. So I think these trends are in place permanently. And that's been the fate of every
624
00:55:00,009 --> 00:55:04,909
fiat currency since the beginning of time. For thousands of years, every fiat currency has
625
00:55:04,909 --> 00:55:09,729
collapsed in the same way. Overexpansion, debt, war, guns, butter, bread, circuses, that's it.
626
00:55:09,989 --> 00:55:16,709
People just decided they could fund everything if they reduced the value of the currency.
627
00:55:16,709 --> 00:55:23,649
And that's why all fiat fails. And we're in the early stages of that right now.
628
00:55:25,189 --> 00:55:32,169
Nothing will change that. And Bitcoin is a hard asset. And so I want to own that. I think what
629
00:55:32,169 --> 00:55:39,209
we've seen with the recent 50%-ish drawdown, which is a lot lower than previous drawdowns,
630
00:55:39,569 --> 00:55:44,569
simply where we were in the four-year cycle. We see this every four years, Marty. You've seen it
631
00:55:44,569 --> 00:55:47,149
Every cycle, you have like some giant crash.
632
00:55:47,229 --> 00:55:50,129
Usually it's more like 75 to 90%.
633
00:55:50,129 --> 00:55:52,069
We got an easy one this time.
634
00:55:52,209 --> 00:55:55,029
At this point, I don't panic out of it, right?
635
00:55:55,109 --> 00:56:00,229
The last time I bought more in 2022, I just bought more, you know, when Bitcoin went from
636
00:56:00,229 --> 00:56:01,789
64,000 to 15,000.
637
00:56:02,629 --> 00:56:08,429
This time around, you know, when it got down into the 70s, I just bought more.
638
00:56:08,649 --> 00:56:10,129
I didn't sell it, right?
639
00:56:10,129 --> 00:56:15,209
And then when it went down to $59,000, I don't panic out of it, right?
640
00:56:15,489 --> 00:56:16,589
Bitcoiners don't panic.
641
00:56:16,889 --> 00:56:17,929
You just hold it.
642
00:56:19,069 --> 00:56:25,789
I also think there were two things that I would convey about my experience using Bitcoin in
643
00:56:25,789 --> 00:56:26,249
El Salvador.
644
00:56:27,049 --> 00:56:29,969
One is Bitcoin is absolutely a currency.
645
00:56:30,689 --> 00:56:33,089
You could use it for daily purchases, right?
646
00:56:33,289 --> 00:56:35,429
There's always that joke about coffee.
647
00:56:35,989 --> 00:56:38,449
But it's a currency if you can buy coffee with it.
648
00:56:38,449 --> 00:56:39,789
That's the example everyone uses.
649
00:56:39,789 --> 00:56:52,729
But you know what? It's actually a really good example, because what it says is a currency is something that you can use to make a daily purchase that you could buy breakfast or dinner or, you know, go to the store or buy a coffee with it.
650
00:56:53,529 --> 00:56:56,029
I think that's a really good definition for a currency.
651
00:56:56,349 --> 00:57:01,769
And using the Lightning Network is better, easier, faster and safer than using a credit card.
652
00:57:02,989 --> 00:57:05,729
The transfer was instantaneous.
653
00:57:05,729 --> 00:57:22,506
Right So I go into a restaurant I would buy dinner and I would ask the cashier you know can I pay with Bitcoin Sure They were happy They point to the QR code on the wall And I was using River as my payment app I just point at the QR code
654
00:57:22,946 --> 00:57:28,446
I put in the amount instead of having the merchant put in the amount, which somehow they have these handheld devices.
655
00:57:28,726 --> 00:57:29,646
They never show you.
656
00:57:30,066 --> 00:57:30,886
You're always tapping.
657
00:57:31,226 --> 00:57:33,426
And I didn't want the receipt.
658
00:57:33,506 --> 00:57:35,286
I was getting the receipt to make sure it was the right amount.
659
00:57:35,366 --> 00:57:36,106
It always was.
660
00:57:36,106 --> 00:57:37,406
Nobody tried to cheat me.
661
00:57:37,466 --> 00:57:38,626
But it makes me crazy.
662
00:57:38,746 --> 00:57:40,446
They put in the amount facing themselves.
663
00:57:40,446 --> 00:57:41,246
And then you tap.
664
00:57:41,246 --> 00:57:46,866
I have no idea the amount. Using River, using a Bitcoin app, you put in the amount, I would push
665
00:57:46,866 --> 00:57:53,946
send instantly. Their phone would get the notification like, bueno, muchas gracias.
666
00:57:54,626 --> 00:58:01,326
And I would be on my way. It is 100% a currency. Now, to me, one of the interesting things that I
667
00:58:01,326 --> 00:58:06,586
figured out actually use, and I went through, I don't know, six, seven apps trying to figure out
668
00:58:06,586 --> 00:58:11,166
which one to use and what worked quickly and what was expensive and what had the right functionality.
669
00:58:11,246 --> 00:58:16,326
And I outline all of this in the white paper that I put out this week.
670
00:58:17,866 --> 00:58:24,466
But I also answered the question for people, should you use Bitcoin as your payment system?
671
00:58:24,646 --> 00:58:27,086
Should you use Bitcoin to make purchases?
672
00:58:27,526 --> 00:58:30,426
And the answer depends on who you are and how much money you have.
673
00:58:31,266 --> 00:58:33,206
So, you know, life is not fair.
674
00:58:33,886 --> 00:58:39,426
Wealthy people are actually paid by their credit card companies and their banks to use
675
00:58:39,426 --> 00:58:40,906
their services.
676
00:58:41,246 --> 00:58:55,046
Right. You get paid interest in a checking account if you have enough money at at one of these banks, your credit card company, depending on which credit card you have, will return one to three percent of your money, depending on what you're purchasing.
677
00:58:55,426 --> 00:59:04,586
Right. So, you know, maybe you end up earning, you know, three, four, five percent using their services.
678
00:59:04,986 --> 00:59:08,966
And by the way, when you pay with credit card, what happens? You don't have to pay them for another 30 days.
679
00:59:08,966 --> 00:59:11,366
So you keep your money in a checking account, you earn interest.
680
00:59:12,046 --> 00:59:16,926
Now, some people get charged to use their credit cards.
681
00:59:17,006 --> 00:59:18,486
They get charged to use their debit card.
682
00:59:18,646 --> 00:59:20,666
They get charged to have a checking account.
683
00:59:20,666 --> 00:59:26,786
They get charged by their bank for things like wires or for ATM withdrawals, right?
684
00:59:26,866 --> 00:59:32,966
And so their banks make a lot of money charging these people fees, and it can get really expensive
685
00:59:32,966 --> 00:59:33,446
for them.
686
00:59:33,446 --> 00:59:49,246
Well, you know, when I used River for Bitcoin purchase and for and to make purchases, you know, when I when I would buy a coffee using Bitcoin, my total fees were one point two five percent.
687
00:59:49,246 --> 00:59:57,866
So here's the thing. If you're getting paid 3%, 4%, 5% to use the traditional banking service
688
00:59:57,866 --> 01:00:04,606
and using Bitcoin will cost you 1% or 2%, then it's 5% in the wrong direction to use it.
689
01:00:04,866 --> 01:00:11,286
But if you're somebody who gets charged constantly from your bank, and I've seen ATM fees of as much
690
01:00:11,286 --> 01:00:20,306
as $8. Well, if you're withdrawing $100, which would be a lot for a lot of people, that's an 8%
691
01:00:20,306 --> 01:00:26,766
fee just to get cash. And they get charged constantly by their banks. Then using Bitcoin
692
01:00:26,766 --> 01:00:34,226
at a 1.25% fee becomes a lifeline. And it's much cheaper and faster and easier and better.
693
01:00:34,786 --> 01:00:40,046
So the answer of should you use Bitcoin really depends on who you are and the kind of relationship
694
01:00:40,046 --> 01:00:45,846
you have with your bank yeah i completely agree there and i thought it was another interesting
695
01:00:45,846 --> 01:00:51,346
point that you made in the white paper pretty going going back to like buying coffee like if
696
01:00:51,346 --> 01:00:57,106
you're buying something under five ten dollars there are there are cases where the merchant
697
01:00:57,106 --> 01:01:03,686
won't let you use a credit card and so if you don't have the cash it's uh you're shit out of
698
01:01:03,686 --> 01:01:07,586
luck and so like there's another area where like the lightning network it like fits in perfectly
699
01:01:07,586 --> 01:01:17,846
Yeah, I had multiple situations where I couldn't buy a bottle of water because a bottle of water in El Salvador was like 60 cents, 75 cents.
700
01:01:17,946 --> 01:01:18,766
That was all I wanted.
701
01:01:19,246 --> 01:01:21,866
Well, they're not going to take credit card for anything under $5.
702
01:01:22,946 --> 01:01:28,206
And there were times in El Salvador, they use the dollar, the US dollar.
703
01:01:28,846 --> 01:01:35,486
So the money you're getting from an ATM in El Salvador is exactly the same as what you would get from an ATM in the United States.
704
01:01:35,486 --> 01:01:36,306
The bills are the same.
705
01:01:36,366 --> 01:01:37,326
It's the exact same money.
706
01:01:37,586 --> 01:02:00,406
But there were times that I had just been to an ATM and the smallest bill I had with me was $20 bill. And Salvadorian convenience stores are not going to give you $19 and change. They don't have that much change. These are small stores. And so literally, I could not buy a bottle of water. If you have Bitcoin, you can make a purchase on the Lightning Network and it's not a problem.
707
01:02:00,406 --> 01:02:01,406
Yeah.
708
01:02:01,406 --> 01:02:05,846
Where do you think the biggest pain points is?
709
01:02:05,846 --> 01:02:12,026
You mentioned the wallets and in the white paper, you mentioned the sort of UX hurdles
710
01:02:12,026 --> 01:02:14,026
that you ran into.
711
01:02:14,026 --> 01:02:15,026
Yeah.
712
01:02:15,026 --> 01:02:16,026
Yeah.
713
01:02:16,026 --> 01:02:20,166
Like Hashapp in particular, they have a horrendous user interface.
714
01:02:20,166 --> 01:02:22,746
It is just horrible to use.
715
01:02:22,746 --> 01:02:23,746
It's not.
716
01:02:23,746 --> 01:02:27,026
And you know, there are people who might say, oh, no, no, I use it all the time.
717
01:02:27,026 --> 01:02:28,646
Yeah, you use it all the time.
718
01:02:28,646 --> 01:02:29,946
You're familiar with it.
719
01:02:29,982 --> 01:02:32,622
First time user, I found it to be confusing.
720
01:02:32,762 --> 01:02:36,182
There were other apps that had really good user interfaces.
721
01:02:36,722 --> 01:02:40,582
You know, I went to Strike and I think Strike has a really good product.
722
01:02:40,582 --> 01:02:53,482
But in order to buy Bitcoin on their system, I either needed to pay a 2% fee using a debit card, which I didn't want to do, or they wanted to hold my money for 17 days before releasing Bitcoin that I purchased.
723
01:02:54,202 --> 01:02:55,842
17 days is not reasonable.
724
01:02:56,402 --> 01:02:58,862
And I don't want to do business that way.
725
01:02:58,862 --> 01:03:05,422
you know, like normally you send a check and a bank may hold that that money for like two days,
726
01:03:05,582 --> 01:03:09,082
something like that. And they're going to grab that float for a couple of days and make sure
727
01:03:09,082 --> 01:03:12,442
it clears. OK, fine. I understand that. I don't love it, but it's reasonable.
728
01:03:12,962 --> 01:03:17,442
70 days to me is not reasonable. And I actually sent them an email and they responded quickly
729
01:03:17,442 --> 01:03:23,942
and politely. And they said, yeah, look, if you use our app regularly, then we'll reduce the
730
01:03:23,942 --> 01:03:29,502
the whole time. And I'm like, okay, look, I, you know, I'm in Bitcoin beach for two weeks. I'm not
731
01:03:29,502 --> 01:03:35,722
waiting 17 days to have access to my Bitcoin and you're being unreasonable and I'm not going to
732
01:03:35,722 --> 01:03:42,702
play along. So I did, you know, I didn't use that. Um, it's, it's the thing I will point out that's
733
01:03:42,702 --> 01:03:48,222
important. It makes a difference if you're in Bitcoin beach for two weeks or if you live there,
734
01:03:48,222 --> 01:04:02,082
Right. So if you live in a place where you you're using Bitcoin for purchases regularly, then you might have two or three or four of these apps and move sats around from one to the other and be accustomed to that.
735
01:04:02,082 --> 01:04:08,462
And, you know, having a delay here or there is not a big deal. If you're somewhere for two weeks and you need to work right away.
736
01:04:09,442 --> 01:04:12,102
So, you know, part of it depends on your time frame.
737
01:04:12,262 --> 01:04:24,662
It depends on, you know, some of it will also depend on whether you want an app just to make purchases or an app to buy Bitcoin and use that to make purchases.
738
01:04:24,962 --> 01:04:27,242
Different apps have different levels of functionality.
739
01:04:27,242 --> 01:04:33,762
You know, so these are these were all things I explored and and detailed, you know, in the white paper.
740
01:04:35,402 --> 01:04:38,362
Do you think there's a future in which everybody will be using Bitcoin?
741
01:04:38,462 --> 01:04:39,342
is money?
742
01:04:40,002 --> 01:04:41,282
I hope so.
743
01:04:41,782 --> 01:04:42,582
I really do.
744
01:04:42,682 --> 01:04:52,858
It just so much better than fiat And I would remind everybody you can save in dollars You can save in euros You can save in British pounds You can save in yen
745
01:04:53,358 --> 01:04:58,398
The value of your money, the purchasing power of your money is eroded every single month.
746
01:04:59,498 --> 01:05:05,578
And that's not going to stop. And I think one of the things that's really horrible about that
747
01:05:05,578 --> 01:05:12,478
is it's put normal people in a situation where they need to manage their own money.
748
01:05:13,038 --> 01:05:16,218
Um, and they, they shouldn't have to do that.
749
01:05:17,058 --> 01:05:18,518
They shouldn't have to do that.
750
01:05:18,818 --> 01:05:23,398
People should just be able to go to work, have their money deposited in their checking
751
01:05:23,398 --> 01:05:28,138
account or their savings account, and not have the value of that money eroded.
752
01:05:28,818 --> 01:05:35,318
Um, that in a just world, they don't have to become money managers when they get home
753
01:05:35,318 --> 01:05:40,338
from work, but, you know, take a look at what's happening, right?
754
01:05:40,338 --> 01:05:47,398
everybody watching this, what's happened to your rent or your grocery bill or housing prices,
755
01:05:48,098 --> 01:05:55,058
you know, or any of the things that you buy on a regular basis, it's gone up and people yell about
756
01:05:55,058 --> 01:05:59,818
higher prices. But another way to say it is the purchasing power of your fiat, of your dollar
757
01:05:59,818 --> 01:06:06,218
has collapsed. And that's not going to stop. And so, you know, you have all these people
758
01:06:06,218 --> 01:06:09,438
who all of a sudden have to figure out what do I do with my money?
759
01:06:09,438 --> 01:06:14,438
Because and, you know, it's always interesting to me when people say, oh, Bitcoin's so volatile.
760
01:06:14,718 --> 01:06:22,878
OK, well, you can either gain purchasing power irregularly with a lot of volatility or you
761
01:06:22,878 --> 01:06:27,058
can be in the safe dollar and just lose a little bit of money every month.
762
01:06:27,798 --> 01:06:28,278
Right.
763
01:06:29,518 --> 01:06:33,118
Well, not only that, but the it's funny.
764
01:06:33,118 --> 01:06:40,538
the dollars in the sale everybody not everybody i like to reference uh when money dies and
765
01:06:40,538 --> 01:06:45,238
the particularly the the section of the book where they're talking about how every paper boy
766
01:06:45,238 --> 01:06:52,498
and and bus boy was a was a speculator talking about stocks and the the amount of risks that
767
01:06:52,498 --> 01:06:59,818
people are taking these days just to stay afloat i think that's i've been observing just the the
768
01:06:59,818 --> 01:07:11,293
use case of agents since they began proliferating last fall And one of the top use cases is people trying to build agentic trading systems to trade prediction
769
01:07:11,293 --> 01:07:17,273
markets or sports betting markets to make money to escape the permanent underclass.
770
01:07:17,573 --> 01:07:20,913
And to your point, a lot of people say, I'm not going to invest in Bitcoin.
771
01:07:21,093 --> 01:07:25,113
I'm going to create this agent that trades for me on all these prediction markets.
772
01:07:25,213 --> 01:07:28,713
It's like, well, you're just taking an obscene amount of risk there.
773
01:07:28,713 --> 01:07:35,853
And unless you're a top 1% trader, which you probably aren't, you're going to lose money at the end of the day.
774
01:07:36,953 --> 01:07:43,353
Yeah, it's something I started to see about five years ago with some of my younger friends.
775
01:07:43,633 --> 01:07:56,053
They were buying zero day to expiration options, which is basically the only thing you're doing is making a leveraged bet on what a stock price does on a particular day.
776
01:07:56,053 --> 01:08:15,053
And people viewed it sort of as this free way to make 40% in a day. And, you know, I have a friend who actually works in finance, who turned $5,000 into $160,000 doing this, making these kinds of trades, and then promptly lost all of it.
777
01:08:15,053 --> 01:08:22,873
right and so and i keep seeing these stories and so now we've gone from from buying zero data
778
01:08:22,873 --> 01:08:29,473
expiration options to sports betting on call sheet and when you talk to these people what
779
01:08:29,473 --> 01:08:35,313
you realize is they view that as a way to make money and i'm thinking to myself you do not have
780
01:08:35,313 --> 01:08:39,873
better information than the people who do this for a living and the people who make these markets
781
01:08:39,873 --> 01:08:42,393
It's like there are people like I get it.
782
01:08:42,473 --> 01:08:49,233
You predicted a few NFL games correctly, but it's just long term.
783
01:08:49,233 --> 01:08:59,093
These things don't work unless, you know, you're basically Stevie Cohen and either have information you shouldn't have or just like a insanely good trader or both.
784
01:08:59,573 --> 01:09:02,433
Well, we saw this with what's the name?
785
01:09:03,533 --> 01:09:08,313
Leopold with situational awareness, like somebody who does have.
786
01:09:08,313 --> 01:09:13,953
I mean, I don't think he would ever admit this, but he's married to somebody at Anthropic
787
01:09:13,953 --> 01:09:16,813
and was at OpenAI himself.
788
01:09:16,813 --> 01:09:18,733
He knows the industry inside and out.
789
01:09:18,733 --> 01:09:30,049
He has probably more information probably in the top 0 of people with the information as it pertains to the AI industry And even he wasn able to outtrade Stevie Cohen and Citadel
790
01:09:31,329 --> 01:09:38,549
Yeah. And I think a big part of that was just the leverage. His positions were too big
791
01:09:38,549 --> 01:09:44,769
and he didn't have liquidity. Ultimately, Citadel bought him out at a giant discount. They're like,
792
01:09:44,769 --> 01:09:48,969
okay, fine, we'll take the whole book, but you're taking a giant haircut. And he had to do it
793
01:09:48,969 --> 01:09:53,549
because he was going to keep bleeding, right? He kept getting margin calls. And the reason he was
794
01:09:53,549 --> 01:09:58,589
getting margin calls was because he had to sell, right? It was a circular reference, basically,
795
01:09:59,249 --> 01:10:08,369
right? It's what George Soros would refer to as, oh God, what's, I just lost it, Marty. It was
796
01:10:08,369 --> 01:10:15,129
reflexive reflexivity right that was basically the tendency of any system to perpetuate itself
797
01:10:15,129 --> 01:10:21,069
and you do get that in finance right so so leopold had to sell that cost stock prices to drop when
798
01:10:21,069 --> 01:10:25,049
that happened he got another margin call so he had to sell more that cost stock prices to drop
799
01:10:25,049 --> 01:10:31,549
you got another margin it's it's the perfect example of what soros called reflexivity yeah
800
01:10:31,549 --> 01:10:40,269
a lot of a lot of leverage out there yeah it's uh the fourth turning fourth turning seems to be
801
01:10:40,269 --> 01:10:46,389
upon us stay frothy i think saving in bitcoin for the long term is is the the best way to
802
01:10:46,389 --> 01:10:53,309
to weather this storm be personal i agree i agree gary thank you for your time thank you for the
803
01:10:53,309 --> 01:10:58,949
white paper we're gonna link to the white paper in the show notes go read it i think uh very
804
01:10:58,949 --> 01:11:05,789
objective, but also very encouraging. It seems like what's happening in El Salvador is a great
805
01:11:05,789 --> 01:11:11,369
blueprint to take to the rest of the world. And we're getting to see it here in America with
806
01:11:11,369 --> 01:11:15,949
square terminals and things like that. I was in Birmingham, Alabama earlier this summer,
807
01:11:16,649 --> 01:11:21,689
wandered into a coffee shop, square terminal, paid in Bitcoin. It's happening. It's happening.
808
01:11:21,689 --> 01:11:25,989
Yeah, I hope so. And Marty, thank you so much. Great speaking with you again.
809
01:11:25,989 --> 01:11:27,629
I always love our conversations.
810
01:11:28,129 --> 01:11:28,889
Always a pleasure.
811
01:11:29,109 --> 01:11:29,809
Enjoy your weekend.
812
01:11:30,489 --> 01:11:32,029
Enjoy South America.
813
01:11:32,429 --> 01:11:33,109
Enjoy your travels.
814
01:11:33,329 --> 01:11:34,769
And we'll do this again at some point,
815
01:11:35,449 --> 01:11:36,949
maybe later this year, early next.
816
01:11:37,649 --> 01:11:38,429
Looking forward to that.
817
01:11:38,469 --> 01:11:38,889
Thanks, Marty.
818
01:11:39,489 --> 01:11:39,669
All right.
819
01:11:39,689 --> 01:11:40,309
Peace and love, freaks.