Kind: captions
Language: en
foreign
welcome back to the show my friend it's
always good to be here dude always good
to have you it seems like we're always
in some sort of tumultuous time so uh
FTX saga continues uh it seems like
fraud abounds total Mayhem how far does
that go what do you think is gonna
happen to crypto now I think even last
time we talked about we need to pass out
crypto into component parts so people
understand because if not if it feels
like this huge cluster [ __ ] going on and
nobody knows what it is firstly the
central banks are taking liquidity out
of the system and have been for a while
that has hit all assets
um and so crypto down 75 much like many
technology stocks around down about the
same so that's been going on that's been
putting the market under pressure
um at the same time when you get to the
bottom of the liquidity cycle if you
think about it if you think there's a
bunch of people in the street saying hey
buddy can you lend me a buck
and there's you've only got five bucks
and there's 10 people asking
well five people aren't going to get it
and that's what happened to the bottom
of the liquidity cycle
those who really need money don't get it
and they blow up
so in June that um you know we spoke in
the aftermarket of that that was
basically the blowing up of the
liquidity cycle suddenly you find out
that all of the people who are running
leverage in crypto
were getting blown up and they couldn't
get any money from borrowers or they
couldn't get any money you know from
investors
and so that had this huge ramification
so June was actually worse than now
because pretty much it triggered
everything do you think it feels
psychologically because right now I feel
like the biggest oh no right now
this is the I'll come on to this in a
sec but yes so June was the actual
damage right that was the basically the
nuke button to say leveraging crypto as
we've always talked about don't go
together right so that blew up massive
balance sheets three arrows Capital all
of them but one of them was hidden and
we didn't know
and that was Alameda we knew there were
a massive shop we knew they were kind of
a bit sketchy
but they kind of said it's fine but they
weren't fine so at that point they were
probably nine billion dollars in the
hole which is a staggering amount of
money now we don't know the exact
numbers yet and we won't do for a long
time but there were a staggering amount
of money in the hole
and
that was papered over by FTX when you
say paper it over what does that mean
they gave them ftt tokens
which is the the token that is part of
the FTX ecosystem that they control in
Alameda control and then gave them a
loan against it that's what it first
appeared but the plots thickened a lot
since then but that's so basically they
actually went up under in June so what
we're seeing now
is the end of the June thing it was the
bit that didn't happen that did happen
if you know what I mean so they were
able to hide it on paper keep the
perception that they were fine and when
you say they I assume you mean FTX
loaned Alameda ftt to quote unquote
paper over their losses and make it look
like they still had and then they gave
them cash in exchange for that
collateral but that cash was customer
money right now this is we're in the
Realms of bad bad that's what the story
appeared to be
and I have been speaking a few times and
said well you can kind of understand
that if Sam backmanfree is going to lose
his entire Empire in June you might be
psychologically pushed to do something
bad in the hope that maybe you can avert
it right if the 10 chance is worth it
but I asked the question a while ago and
I did this big Twitter spaces like it is
not clear to me
that there wasn't systemic fraud in this
whole thing to start with the story is
now coming out it's coming out in waves
and again nothing is verified here
but it's starting to appear that FTX was
just a front
for Alameda
to capture customer order flow to give
them an advantage
it's now becoming clear that FTX
Alameda because we can now assume
they're basically the same entity which
is very bad to have a trading operation
that takes advantage of customers
we've also seen that
that they changed their strategy from
being these lower risk Traders doing
Arbitrage buying one thing selling
another or very quick trading to Big
position takers and it seems that the
lunar debacle
was them just providing liquidity all
the way and it blew them up and they
pretended it didn't hurt them but it
seems that Alameda itself had changed
what he was doing
quite a while ago and was basically a
punter then there's the confusion of who
all these people are and half of these
people don't check out properly
we then hear from the guy the the guy
who's gone in the CEO
who's the now the the liquidating CEO
and he's like I've done Enron I've done
all of these this is the worst mess I've
ever seen so again news flows coming out
slowly but it feels like there was never
any proper accounting
that there was never any customer
positions that weren't being used by
Alameda again not clear yet
that they just pulled everything
together and there was no particular
Bitcoin or anything else that you
thought you bought on FTX that was being
stored for you that it was just Giant
pool of cash that they were just abusing
and it's becoming clearer even after Sam
Beckman Freed's tweets recently to a
journalist
that maybe constructed his whole
personality as well and that none of
that was real
so that that whole Twitter thread was
really unnerving he since came out and
said oh I didn't know that was going to
be uh public but nonetheless that was
his take
from the you know me being the Savior
and doing all this for good was really
just Persona and it wasn't really real I
was like wow I was shocked that he was
so forthcoming about it what do you
think and I know that there's going to
be a lot of speculation to answer this
question but what do you think it is
that he understood that allowed him to
pull this off was it that he understood
the weakness in the way that investors
were getting greedy in the Euphoria of
the market does he understand something
about Market making that allowed him to
trick people like what what he because
when you hear how people talk about this
guy
they're like yo he's the biggest genius
ever like this guy's amazing very bright
accomplished investors are like this
kid's the future
it's you know it was on oh God who who
had it on their website where they
actually had the juice
Sequoia I mean Jesus Sequoia is gigantic
so what is it that SBF San begman freed
understood that he took advantage of
here there is a cult of personality that
happens in Silicon Valley that we invest
in the founders
that was the Elizabeth Holmes thing
right the same thing was you appear like
a genius you act like a genius people
give you money
um and he's a smart guy right there's no
doubting Sam's not a smart guy what I
think he saw probably inadvertently was
that in banking
we'd gone through this which was the
banks used to be trading firms and would
have customer and those famous shops
like Salomon brothers who were huge at
this and then what happened is they
would abuse that because they would kind
of they wouldn't take the customer money
well they kind of would because it's all
the same balance sheet so the bank might
blow up but they would also trade
against the customers and then the
regulator said no no you're not doing
that then 2008 comes on so you've got
you've now got what's known as customer
and house and there's a Chinese wall the
wall means you two can't speak to each
other because you have privileged
information if you're advising or you
have balance sheets Etc and you guys
were the customers
we can't give it to the rest of the firm
because we can we would abuse it so that
is fine except that in 2008 the trading
side blows up of the banks
and the customers are going to get hurt
because everyone gets kind of have to
get bailed out
so then they change the regulations and
said trading has to be a much smaller
part in crypto
none of that exists you can do over the
[ __ ] you want
I'm not even sure using customer
deposits is illegal in crypto well
because Gary Gensler and others had not
regulated it depends what jurisdiction
how far their regulations got but this
is a problem I mean I got caught out in
another one a Futures brokerage I mean
this is not a crypto thing this is a
fraud Leverage
um thing I got caught out in MF Global
which was a huge Futures broker
and it was run by the xco Goldman Sachs
who you who was the senator for New
Jersey as well I mean this guy was one
of the most powerful people in the world
John Corzine
super famous
and so I'm so I have my entire trading
funds with them
because it's John Corzine it's MF Global
the biggest brokerage firm in the world
um he takes a huge he gets confused and
kind of thinks he's Goldman Sachs takes
a huge bet on European government bonds
blows up and lo and behold he's been
using customer money
so it happens endlessly in the
Securities industry because that little
pot of gold which is customer money
people just can't keep their eye on the
precious that's over there they want it
they can use it I can make return on
Capital and then it goes wrong so this
story is as old as the hills it's a
deep fraud it's so it seems it's now on
the scale of Bernie Madoff and Elizabeth
Holmes and Enron it's an accounting
fraud it's a cult of personality fraud
it's um
many many things it appears again we
don't yet know but as the news flow
comes out it's staggering so to go back
to your earlier question
is what's the knock-on effect here from
here so my hypothesis is this was the
final outcome this was the whale that
happened right the end of the crisis
so I think much like
an earthquake we had an earthquake here
like uh when was it January 2020 2020
was a freaky year we started with a
massive earthquake in the Cayman Islands
which never happens and you know for a
week afterwards you feel the aftershocks
you know oh my God is this a bigger one
that's what's going on now so yes there
are going to be some other firms that
get into trouble but pretty much all of
the levered trading houses the leopard
customers all got taken out quite a
while ago in between January and June
the levered trading shops the people who
were lending money to the trading shops
people like Celsius and block file all
of those guys they've all blown up
so who's left there's a couple of
trading firms like jump and Genesis and
that's it
so
they will probably be smaller
aftershocks if they fail
so what we've got is peak freak out
because the earthquake happened and
everybody is hypersensitive I've never
in my career
seen sentiment like this both in crypto
and the stock market really I mean
Twitter is so bad I put up a relatively
bullish chart just marginally bullish to
say maybe the nasdaq's priced in a deep
recession
I must have had a hundred comments of
anger
how dare I suggest
I'm like wow people I mean there's anger
resentment
fear
at this moment that of a scale that
wasn't in 2008 wasn't in 2001. I've
never seen anything like it I I haven't
been through this before so I can only
say that the having gone now through a
cycle of euphoria to doom and despair
that the shift is so Stark and it really
got me looking at okay
is something happening that hasn't
happened before or is this like you said
A Tale As Old As Time and that got me
thinking about money as a game and
people not realize like so I've gone on
this journey of trying to learn and
understand money going back to 2020 when
I was just really paranoid for people
that
um you know whether it was friends
employees whatever I knew there were
going to be people that were going to go
through a hard time I was going to be
fine because I had Capital that was
going to see me through but I knew that
a lot of people were gonna really
struggle
and so I wanted to be the one-on-one
primer of money as I got into that the
more I realized wow this really is a
game like it's a board game it has rules
there are things that you can do can't
do and a big part of it is the human
psychology of it all and understanding
where people get
happy sad whatever and so trying to
parse all of that out when I think about
the nature of you talked about a
liquidity cycle walk me through what are
these Cycles so you have a quote the
scam Ponzi crowd will be buyers in the
next cycle
so what is this cycle of money exactly
that allows you to go yes there was
fraud yes this is a problem but repeat
repeat repeat repeat
and there's still something workable
here so there is an expression Warren
Buffett's used it is when the tie goes
out you see who's swimming naked
so the tied out in this
is liquidity
and liquidity is driven by central banks
trying to stop inflation
so they raise interest rates when they
think there's inflation it slows down
the economy it's harder to borrow money
the whole economy slows down
and we restart it's called the business
cycle and you and I have talked about in
this in the past so the economies are
cyclical they're naturally cyclical
because the credit cycle even without
central banks is you kind of lend or
borrow too much money then something
happens at the margin and you're like oh
[ __ ] I borrowed all lent too much money
and you pull it all back again and then
you do it again right so the central
banks try and soften that cycle but they
still create it and use it to try and
not let economies go too far like
hyperinflation or depression whatever it
is right so that's what they're trying
to do
that cycle drives the movement of asset
prices and so that's the stock market
the bond market Equity Market the
currency Market the crypto market and
with that cycle becomes the human
emotion cycle
and the human emotion cycle is I'm
making a fortune I'm a genius I'm a
genius I can never go wrong I'm going to
be rich extrapolate extrapolate Future
Vision of myself is now going to be
driving a Lambo and you know Etc
to
and if you think about it and that's
what that's exactly what happens to all
of us and we have to fight that demon is
you start extrapolating out
and you start thinking my vision of My
Future Self has now been ratcheted up so
Investments are just a manifestation of
your future self right that's what we're
trying to do it's like you've got that
vision of what you'd like to be
and to get there you invest because that
will deliver that so if your Investments
do well you start stupidly readjusting
yourself higher all the time so then
what happens is when the market goes
against you
you have to go through the emotional
inner journey of
oh maybe I won't get there right that's
really hard for people
it's emotionally really hard to kind of
plant a flag on that's what my future is
definitely going to be definitely
because I'm really good at this
investment game to I was completely
wrong and what happens is you then over
extrapolate on the downside if this
continues crypto is going to zero all of
my savings that have been dollar cost
averaging listening to Tom andrell it's
all [ __ ] you know this has been a
scam it's the exact opposite
but when you step back you take a nice
logarithmic chart of Bitcoin and anybody
can do that on trading view or any of
those charting things
and it's a nice smooth upward trend
which is the adoption of
cryptocurrencies and blockchain
Technologies
as a new Financial system and a way of
exchanging value on the internet
in the middle of that on a log chart it
just looks like it slowly does that on a
linear chart it looks like this well no
it looks like more correct does this
collapse and what happens is everybody
goes
when it goes up
on a linear chart it's a bubble people
who aren't involved
then we all get to the over
extrapolation of like we're all going to
be billionaires let's order my Lambo
then it starts coming down its denial
typical you know the human phases of
emotion
and then you get to anger and despair
which is where we are now
but that's all that whole story of
humanity liquidity central banks is all
within this long smooth uptrend that
keeps going
and people forget it they forget it at
the bottom and they forget it at the top
and it's as simple as that so to go back
to what you were suggesting has anything
changed in the crypto Market
not a thing
is the technology
being utilized has Solana just agreed to
use it um to use their blockchain with
meta for nfts yes are Google working
with Solana yes is ethereum being built
out did D5 fail no does the
decentralized financial system idea work
yes
uh our cryptocurrencies being exchanged
in a in a value system on the internet
yes is the number of people growing in
that ecosystem not a lot
because it's stabilized but if you look
at the past cycle so the
2017 Peak
to the low in 2019
we lost about 80 percent of the active
wallet addresses wow when I look at it
now
we've lost about 30.
because the adoption keeps Rising
so it really is a psychological game
and it's a long-term game because you
know and you've talked about this is
we're not involved because we can make
money over a one year time or a two-year
time we're saying listen the BET here is
if you hold on
and if you add at the bottom of the
panic cycle and just keep holding and
don't use leverage and just be sensible
about what you're doing and don't keep
checking the market every day
the probability of you coming in at the
end of the decade
and having manifested
your future self in a way that probably
might be quite unexpected
and if you do that you won't go through
that emotional Journey yeah this is the
story of money is is solidifying into
two things for me you you've got a game
that has rules and you have human
psychology that is so
big and chaotic it becomes very
difficult to track and then on top of
that most people don't understand the
rules of the money hearing Sam begman
free talk about how you become a market
maker how you can effectively create
value out of nowhere you can do that
fraudulently you can do that
well so if you look at Global currencies
those were all value created out of
nowhere
for people that know about fiat currency
Fiat means by decree this is valuable
because I say it's valuable and we all
go along with it which then had me
thinking about specialization because I
was really trying to get to like what is
the root cause of all of this I think it
comes down to the efficiencies that are
created through specialization so
we all realize our life gets a lot
better if I handle my one little piece
of the world you handle your one little
piece of the world hopefully it's a
piece that you find thrilling in a way
that I don't and I find mind thrilling
in a way that you don't and so now we're
all contributing to the whole but I have
to have some way to exchange so I'm not
trying to constantly exchange Christmas
tree because I've got in this digital
age there's nothing to barter with you
with right right because you're so
you're doing non-physical you're not
making cheese and I'm I'm not growing
sheep so we don't have even if you were
though even that's a pain in the ass
yeah totally so like oh God like trying
to figure out imagine how many
spreadsheets you would have to have to
figure out how many uh
toenail clippers equal how many oranges
right it's like oh God so that that
would be a literal Nightmare and so we
create this very wise layer of
abstraction but then it like that layer
of abstraction creates all these
potential games so for instance
quantitative easing I mistook that for a
thing that we have done as long as there
have been central banks I didn't realize
that's a 2008 invention
and so you for people that are just
listening Raul was nodding like that I
had no idea that that was something so
well it's time to be fair as with all of
these things
the game is actually very old
but the the lipstick they add to it yeah
so quantitative easing
is a way of saying we're going to debase
the money
but but you'll hear you'll see on
Twitter people said well it's not
debasement because and they talk about
some mechanism
the net effect is the same because
they're too much debt what the hell do
we do with too much debt you either have
a massive inflation
or your debase your currency
the Roman emperors used to clip the
corners off the coins
and in fact anybody who's ever used gold
as a system of money has always debased
their money by clipping the edges off at
first you don't notice because they take
three percent off and then before you
know they're just cutting them in half
and saying there you go it's the same
and then the Empire collapses it's it's
just that story what it's several
thousand years old if you're ready to
level up all you need to do is take the
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your life what's the difference that
goes back to rules of the game What's
the difference between inflation and
debasing the currency I thought
inflation was a result of debasing
difference this is where everybody got
this wrong and I've been bleaching on
about this forever
inflation is a generalized rise in
prices
the price of eggs goes up the price of
gas in your car goes up you know the
cost of employing people goes up Etc
debasement of currency is this really
weird little trick
things of fixed Supply or relatively
fixed Supply
go up immensely optically because the
price of the currency has fallen
things of variable Supply like wages
corporate earnings don't and they don't
go as much
so what you find is after quantitative
easing what happens stock market goes up
gold goes up cryptocurrencies go up
housing goes up fine art goes up all of
that stuff
assets
so assets are a way of storing wealth
that's what an asset really is
so in relative terms they've held their
price and the currency's fall and makes
them look like they've gone up in price
it's not and this is what everybody gets
confused with this is why price earnings
ratios have gone up so much because the
earnings doesn't move as much as the
price of the asset because it's a small
fraction of it so peas keep going up the
more we debase currency
if you want to see another example you
look at charts of the Venezuelan stock
market
in Venezuelan Bolivars and it goes
straight up if you put it in US Dollars
it's actually down 99 percent
so
so it doesn't create a generalized rise
in prices this is what everybody can
fuse because they think it they thought
it was an increase in the money supply
in a way that you and I could get it we
can go buy more stuff it doesn't work
that way all right so would inflation
happen though if you didn't have the
basement I am not a monetrist I don't
believe inflation is always an
everywhere a monetary phenomena
interesting I think it is a
Supply demand phenomena Above All Things
some people claim it's of supply and
demand for money phenomena I don't
believe that because of the 1970s
inflation
is as provable as it possibly can be was
driven by demographics
the Baby Boomers all hit 30 at the same
time bought the first house their first
car their first blah blah blah blah blah
and that what was caught that's what
caused
the inflation of the 70s we've never had
inflation like that before or since
because guess what we've never had such
a big cohort of 25 to 30 year olds all
at the same time
that have a limited Supply correct
or by anything because they used to live
with their parents and before you know
it they're buying duplicate stuff
because you live with your parents
there's one car or two cars whatever it
is right you leave there's now another
car
and you meet a girlfriend or a partner
there's another car so you've now
doubled the con out and you bought a
house so that's the second house that
didn't exist before that's why
demographics are deflationary and
inflationary depending where you are in
the demographic cycle okay this whole
idea of demographics is Destiny's really
interesting here's a question that I've
never thought of before would we run
into a problem if you could so one I
let's put a finger on uh the basement
the basement is the government creates
money out of nowhere and so they
literally just make it up so if we were
back in the days of printing you would
just turn the printer on that's why they
call it printing money though now it's
just a database entry but if we were
back in the printer days you would print
more would we run into a problem if we
couldn't create more money because more
people are being born the population is
going up if money like I I think about
this sometimes with Bitcoin
that's what a depression is
a depression is when there's not enough
money for the demands like literal money
so what happens is the opposite of the
debasement
assets get devalued and currency which
is the thing that's in scarce Supply
but the money is the thing that
everybody desperately needs
when that is Extreme
that's a depression
what we're seeing now is the opposite so
we've got inflation
but
they've reduced liquidity to try and
cool the demand
and okay people want a preferring to try
and get hold of money as opposed to
assets and the price of assets has gone
down so they've actually done the bot
the opposite quantitative tightening is
the opposite of quantitative easing
so theoretically if contacted easing
causes assets to go up then quantitative
tightening should make better prices go
down because you're making currency
scarcer simple okay so one I I've asked
this question before but I forget the
answer how do they quantitatively
tighten how do they get money out of
Supply because they're not going around
burning paper dollars so how are they
doing it they're just buying it so
they're buying bonds from Banks or other
participants wouldn't that put money
into the system because at that point
they're buying something so sure sorry
they're selling off their bond inventory
so they're doing the opposite right so
they give people something but they take
the money and then they hold it
and so that I wrote that down as you
were talking about a depression a
depression really isn't that the money
goes away a depression is that the money
is now locked in people's wallets bank
accounts whatever they still have it
they're just not moving it is that
correct and you can't get it for level
money you just you want the money and so
the depression is is what all the assets
fall in price you know it it's that it's
the it's the it's it's all supply and
demand in certain ways it's all
psychology I mean this is the the
utterly fascinating thing that I'm sure
will keep looping back to
okay so money isn't moving during a
depression and so I was talking to
Robert Breedlove about this and I still
have a nagging feeling as much as
I don't right now with my limited
understanding I don't like that money's
being inflated right now with my limited
understanding I absolutely love Bitcoin
because I see how it's going to hold my
wealth over time but there is a part of
me that keeps asking the question am I
actually mad at them using this cycle
because if this game really is
psychology
and we get all of the Innovation and
everything that we get because of
innovation
and
to get people to innovate and I'm
remembering now how Robert uh swatted
this down but I'll be curious to hear
your thoughts so
I keep my default position is that
people innovate because money is moving
so you make something and people
don't think that their money will be
worth more over time if they hold it so
it is not a good asset in that sense
they think it'll be flat that's how I
think most people think of it I think
inflation is sort of invisible most
people don't account for it until you
get into a higher inflationary
environment and so they think of their
money as being flat and Truth their
money is actually declining and buying
power because of inflation but they
think of it as flat at least I always
have so I think of my money as flat
people think of their money as flat so
if I want a KitKat bar today I'm just
going to give you money for it and I'm
going to eat the KitKat but if I think
this is like the the joke that people
make about the guy that bought a pizza
for you know 20 Bitcoin or whatever it's
like bro that's 67 million dollars you
know or whatever at the height and so
what a fool you were that is when your
money is depreciating instead of
inflating or deflating excuse me instead
of inflating
so you've got this
trick that happens psychologically when
the banks put money into the system you
feel like your money is going to be
worth the same tomorrow that it is today
and so you don't have a problem spending
it does that seem crazy to you
no so
it's all about this marginal propensity
to consume or to save or whatever and
that's your expected future value of
money
the reason there's not a lot of velocity
of money in Bitcoin there's a lot of
hodlers
is that the general view is
well I'm going to be better off if I
just hold it
right which is why nobody's going to use
Bitcoin as a transaction layer apart
from lightning because it's just the
blockchain rails
but why would you
because nobody wants to be the Bitcoin
pizza guy
so you don't
so it's actually kind of deflationary in
that respect
and
all of this is a game
it's a game of
who are the other competitors in this
game who the
the rules as you would call them right
okay we've got the central banks they
want to do one thing to us we've got the
asset prices and they can do another
thing based on whatever's going on there
you know if you're investing Commodities
or equities or whatever
and I need to navigate that to get to
where I want to get to
and I have this base assumption that my
cash is going to be flat
so I put 10 grand in a bank I'm assuming
my 10 grand is worth 10 grand we know
it's not but in a one-year time Horizon
but we care if it's worth
take two percent less because we don't
notice that
so then we're looking at the other
levers and saying okay what is going to
deliver what Tom wants which is I want
my money to offset
debasement not inflation because
crypto's done a terrible job of that
as has everything including gold I mean
virtually nothing offset this inflation
we've just had
so that kind of took us all by surprise
but the debasement well I just divide
all of these assets by the FED balance
sheet
that's really interesting the s p kind
of goes nowhere
it kind of it's right at the bottom now
since 2008.
so as they started using the FED balance
sheet debasing the currency the stock
market has just accounted for that the
FED balance has been doing that the
stock market's done that but actually
they've nested each other out you
haven't got any richer
um gold Trails you've actually got
poorer versus the FED balance sheet so
the big
gold narrative failed I don't know
because probably because of crypto so I
people just had a less marginal
propensity to use it in a digital age
gold is not actually that useful
the NASDAQ did actually pretty well we
still got back up to 2008 levels or 2007
levels
but it's been going up why technology
technology is a secular Trend the S P
500 does not have a secular Trend behind
it
so and then when you put crypto crypto
is the only thing that's really
outperformed because what you've got
there is you've got technology
and this kind of whole network adoption
model
and it works really well for the
basement of assets because it's scarce
technology companies aren't scarce
really you can just keep building them
but you can't do it here
so it works phenomenally well so you're
taking the bet that future Tom
wants to not have screwed up
and therefore future Tom wants to choose
the asset that he thinks best represents
a set of risks that he sees that being
played at the table in the game
and that risk to you is debasement of
currency which I think is probably the
larger risk
um and therefore
Bitcoin or crypto
is the best bet to take
but it depends what what future you is
depending who's watching this and what
they need
because some people want to protect some
people want to grow
some people want to you know there's
different motivations but generates
protect what you've got so you can
maintain your level of yours who you are
because nobody wants to ratchet down
the reality or their expectations of
themselves there is psychology again so
velocity of money this is a very
interesting concept and I hope everybody
takes me as you would take somebody who
is learning something every time I get a
new piece of this puzzle it does feel
like the emotional ups and downs are
easier to deal with I won't say that I
feel that I'm better at predicting and I
do want to talk
at some point before we go about looking
forward to 18 months and what that looks
like but first I want to contend with
this idea of velocity of money so the
rate at which money moves seems to be
the thing that the FED is trying to
influence because they understand the
psychology so Roaring 20s if I had to
guess high velocity of money uh 1930s I
know because you said earlier that a
depression is when the money stops
moving so depression low velocity of
money
I think it was Jerome Powell that said
recently I want to keep cranking up
rates because it will slow the economy
yes and if I go too far and I break a
bone that's okay because I have tools
that I know how to use to fix a broken
bone but I don't have tools facing your
currency exactly so but this goes back
to the velocity of money and so
okay I'm I'm put putting this all in
context of a guy who has a a meaningful
not a scary but a meaningful part of my
net worth in Bitcoin
because I believe in The Narrative of it
will hold value over space and time
there's an interesting note there to be
made about did Bitcoin just inflate gold
which is an utterly fascinating thought
and that 50 years from now will there
still be gold and Bitcoin anyway so I I
believe in Bitcoin I believe in its
ability to hold that but I also have
this feeling especially now sitting in
the soup of uh all this madness has
happened in crypto with fraud yes it
happens everywhere cool but my punch
line is that regulation I'm always
tempted by the libertarian notion of
just like don't tread on me let me do my
thing then I'm like uh humans like
they'll find the edges there are
psychopaths among us even if SBF didn't
mean to be a uh just absolutely ruinous
psychopath like that's what ended up
happening and I can only imagine the the
human Agony expense of nine whatever
billion dollars that ends up getting
lost like whoa that just absolutely
devastating
okay so sitting in that soup I find
myself going
I'm actually okay with a certain amount
of government I pay a lot of taxes I do
have a breaking point where I start to
get really annoyed and feel like it's
being overstepped and misused let me try
to put all the context on the table here
but I don't feel like just that no
regulation is the right answer we need
some regulation to all of this to keep
people from going crazy but God is it my
ignorance that's telling me that the
central banks may not be the worst thing
ever oh I know how people that know more
than me are going to have a seizure but
I can't help but think
given that this is a game of psychology
given how easy it is to sort of nudge
humans in a direction that they could
clamp down on their money be too
paranoid to spend it and that it isn't
necessarily a bad thing that we do have
this tool to nudge it now conspiracies
the beasts from Jekyll Island like I
understand all of it and so it's like
it's all sort of bad
but
on balance
I come down on I don't know the system
seems reasonably functional how
crazy does that sound from your far more
knowledgeable perspective so there's a
few things first velocity of money
is as you say but it's a demographic
phenomena so velocity of money has been
super low since 2000 so not influenced
by the FED no
interesting whoa okay shocking you're
you're not making my worldview around
they have not been able to
interesting because
psychology
who is hoarding money
Baby Boomers the same people who cause
the inflation are causing the deflation
or disinflationary trend
because they're hoarding money because
they're now 75 years old and all you
want to do is make sure you don't die
destitute at 85 or 90 right imagine if
you're homeless at 85 right so you are
driven by one of the strongest
psychological factors you have is I
cannot get any worse than I am today
right so you're a hard stop
so you won't spend so the baby booms
have stopped velocity of money
and I've proven this with charts over
time that that's what's causing it
that's why we've got this
disinflationary trend in the world even
though we we're in a temporary
inflationary Trend and it's been that
that the FED of debased currency to try
and offset
the Baby Boomers have and I did this
whole long two and a half hour thing
that people should watch on the real
Vision YouTube channel with Robert
Breedlove about why we got here it's a
very long two and a half hour video and
I can't tell you how important it is
but the Baby Boomers with the debasement
of currency over time found that their
income didn't go up
but the assets did because there was too
many of them competing for these assets
just before the basement and so they
borrowed money to fund the gap
when we started the big debt though it
was all driven by this demographic so
yeah go and check out that video it's I
think it's pinned the our YouTube
channel that that that's a big issue
here it's a bigger issue with this
demographic game because that's one of
the rules of the game that you can't
change so what happens over the next 15
years as Boomers start dying they will
get firstly more
propensity to not spend
so when my dad retired
dad used to quite like spending money
you know he he was reasonably you know
he was a middle class reasonably did
reasonably well not phenomenally well
and what happened the moment he retired
he's like [ __ ] this is a fixed sum of
money
I don't know how I'm wrong I'm gonna
live for and my wife's probably gonna
outlive me
so his spending pattern probably in two
years fell 65 percent well
you know he was the guy who died
champagne he'd go out for dinner with
friends buy a bottle of champagne
whatever blah blah
you know by the time he hit 70
6.
he'd be on the
five euro special at the supermarket
because he just didn't want to not run
out of money the worst thing for him is
a him to die which he did and leave my
mum with no money
because then his whole sense of self is
tied up so anyway so it's really
strongly driven
by these kind of things so I think as
they get older it actually gets worse
but they are going to die so we've got
I'm gonna guess 15-ish years and then
they start dropping like flies that's
right and that's so then we've got the
other issue right which is depopulation
of the world right that's coming at
scale
but this gets offset by technology
so if you look at Amazon warehouses
Amazon is employing robots at a faster
rate than humans and the robots there's
now half a million of them and one and a
half million people work for Amazon
but the robots work three times as many
hours and are probably twice as
productive
so and they never have a holiday nothing
right
so that's going to happen at scale and
replace the Baby Boomers well what's
going to happen when the Baby Boomers
money floods into the system I mean
that's I heard some crazy number about
how much money Baby Boomers have locked
but they're gonna give that I mean
charity kids whatever but it's it's
gonna come in a pretty well I've heard
this story before there's one economy
that's LED everything that's Japan
the issue was is that people start
living longer the Japanese actually
passed on the wealth
to their retired kids
whoa
that was the problem
because if you had your if you lived to
90 and you had your kids at 20 the kids
are 70 by the time you die wow
and so they didn't get the wealth effect
of the pot change over in wealth now not
every economy is as long living
as Japanese and the Americans are 40
second longest livings inexcusable
um you know considering how much they
spend on health care as a percentage of
GDP and it's inexcusable what happens in
the US but I just can't eat like that
I'll just say it yeah you can't eat like
that and you can't have the drug
companies involved as far as they are
um so I don't know if there's a big wall
of money coming Tom that's something and
more scary and I think people's jobs get
replaced by technology but
I think there is a productivity boom
which we've not had for a long time
because of this retired population and
debt I think this what I call the
exponential age this rise of
Technologies may give us more wealth per
GDP
so it'll manifest itself in ways that we
don't know now it doesn't matter if it's
stuck right because as long as it's in a
pension fund that's investing in VC
that's driving technology it's okay
I mean the worst thing to happen is for
you spend it on bags of chips and
cans of drink because then you're
creating food inflation
what you actually want is it to create
GDP growth
so by Pension funds lending it or giving
it investing in companies
VC companies you're fueling
new technology New Wealth new GDP okay
so that brings me back to uh velocity of
capital people putting funds into the
market
if you could snap your fingers and make
central banks go away would you probably
not I'm kind of like you I'm actually
quite Centrist in most things I can see
the absurdities of of everything
but given the basket of stuff I asked
many people who were like I hate the fed
I'm like okay
2008 what would you have done well I
wouldn't have got there in the first
place I'm like okay but they did and how
do you get there in the first place well
and again watch that video with with
Breedlove I'm like
well that was a factor of
um
of
globalization would you have stopped
that and foreseen the outcome of that
and then that was a function of the Baby
Boomers in World War II and there's so
many factors it's like no they're doing
the best that they can
now nobody wants the debasement of
currency
but if you don't what is the outcome
that's why I ask people
if you don't buy the debt
if you allow the collateral of the
system
because the US is the most inductive
economy in the history of the world as a
percent of world GDP whoa it's over a
hundred percent of world's GDP and debt
that's a lot and that's not just that's
the country the people the corporations
right it's the whole lot the total debt
so what do you want to do
what do you want to do do you want to
let all of that collateral go to zero
the whole system Burns to the ground and
a complete destruction of Lifestyle even
whether we're living in a fancy
lifestyle driven by a debt and other
stuff do you want to destroy all of that
I don't think you would I don't think
anybody would so in which case you knew
the central Banker to try and just
juggle the bloody Bulls in the air
and yes we get angry because it kind of
gets the rich gets richer because it
keeps driving those assets up and the
poor get poorer
so we have to focus somehow on that but
America doesn't like the idea of helping
poor people I think it seems to be
you're a communist it's ridiculous you
know why would you not have a welfare
state if you've destroyed the ability
for wages in real terms to rise over the
last 50 years they're not risen at all
so you need to think about this and this
is why technology people are thinking
about Universal basic income because
these same people in the workforce are
going to compete against robots they
have no chance zero chance
so there is a lot of structural issues
here and I don't think you can do this
without government
and I don't think you can do it without
central banks and I don't think central
banks they've made some mistakes some
big mistakes they made a mistake in 1997
which was cutting interest rates
to defend the stock market
The Leverage hadn't built as big by then
and we could have had a clearing event
and The Leverage wouldn't build up
that's what's happening in crypto right
The Leverage can't build up it just
cannot do it because it keeps getting
blown out why because there's no
counterpart but look at how vicious the
Cycles are so do you want the whole
economy to go through the crypto cycle
well you can do that that's not having a
central bank
there's so many trade-offs of Zeus as
you suggest so
I think for a generalized population
you would trade
smoothness and
some level acceptable level of
debasement or inflation whatever you're
looking at
some acceptable level
versus an economy that does this
and you can't you don't know when to
save or how to invest
because the world I don't even think we
would ever get there I think people
would Turtle up so fast you would just
be in protect mode uh man even just
looking at
so I as somebody who but this is going
to make us really hated this video Tom
by some because we're both saying the
same thing and people are gonna go how
dare you how do you get it doing I get
it and that's the thing I wanted people
to know like hey the beast from Jekyll
Island the conspiracy is like I they may
even all be true let's just assume for
now that they are true
all of it is still born out of the
nature of the human animal and there
having now been in uh
uh I'll say blockchain instead of crypto
because the part that I function in is
very much not a currency looking at that
and going hey I I'm totally down for
some rules I would just like to know
what those rules are I don't want to
have to guess at what the rules are and
then you come later and you're very
angry so I like
to just let's have what the rules are we
can debate the rules we can fight about
the rules all that but now we can move
forward in a far more reasonable way but
I don't think that things settle on
stability if you have the ability for
the more powerful that could be physical
could be intellectual like I I really
think Sam bankman freed
has a talent for being able and and it
could be just of this moment where that
sort of He's Got The Geek Chic look he's
I've never I haven't I actually haven't
even seen an interview with him but I
will assume that what I hear is correct
that he's a very smart guy
he's certainly able to convince people
that he's a smart guy so he understands
something about this that he was able to
leverage against other people and I
think that will always happen and what
governments are is basic and this is
going to sound terrible but governments
are
the weaker people saying well we're
going to get our asses handed to us
physically intellectually so let's come
together as a collective and as much as
like that can spiral into tyranny I'm
well aware that somebody who runs a
business in California let me tell you
how aware I am of that there is a
pathological side on that side but I
think there's a pathological side on
this side and if we're going to find a
real path forward I think people need to
understand the rules of the game
I think we have to
stabilize the rules of the game impact
Theory University one full year for only
997 dollars and if you act now you get
to join my exclusive live 90-minute
Workshop called make any goal stick the
great news is I don't care if you were
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people and that's why I'm going to be
going live later this month to host a
workshop on exactly what you need to do
if you want to make any goal stick do
not miss it I'm going to add some
complications of this too please of
course so one of the arguments about the
FED that people have is they're not
elected officials
and therefore we should have a say how
much our currency gets to based or
whatever
but the crowd is not always very good at
making these decisions either
and brexit is a great example
brexit the unintended consequences have
been enormous
I don't know anything about it so what
have been the second and third order
consequences so
there was yeah all these Brits love to
go on holiday to Spain France Italy they
had all their holiday homes they got to
retire they wanted to spend you know six
months a year in one country
and now they're finding they're not
allowed to and they have to leave
and they're like what but we're British
how dare you and we're like no no you're
not part of the EU anymore you have no
rights you have no rights over the
Health Care System there and they're
like well this is not what we agreed to
at the Border in France
you can drive a car from France to Spain
to Italy to Austria do anything you want
you don't even go to passport control
Brits at the Border in huge long lines
getting in and have to produce all the
right papers they're like but we're
British how dare you like you've you've
voted out
so normally speaking
that should have been done not as a
referendum
it should have been done as a political
process and that was going on as a
process that takes years of debate and
discussion and voters can say we like
that party because they're against
leaving or for leaving and that's fine
but it gets debated properly over an
extended period of time what we did was
say you make decision instantly and I
was like what okay
completely not given the tools
and they screw up so do we want to give
the same tools to everybody with
interest rates
do they even know what drives the
economy now I don't think they're better
particularly good with that either
I think they do a terrible job on
forecasting the economy
and that's why you know fintuit gets so
angry with them is like it's bloody
obvious we're going into recession and
you won the battle on inflation
but you're going to keep fighting and
you're going to make it worse people and
then people are going to lose their jobs
they're going to be angry at you again
and just and so on and so forth but
nobody's ever managed to make the
business cycle flat nobody
yeah it's a degree of what volatility
you'll accept
yes exactly
um
talk to me about Japan and the UK what
so it seems like demographics is playing
a huge role maybe brexit is playing a
huge role but
they're they're having very substantive
issues when I got married to a Brit the
pound was at almost two uh pounds to or
sorry two dollars to one pound and now
it was like
103 like a month ago
so what is happening the UK
lost a huge amount of its buffer
because it basically shuts up on
immigration why is that bad because
the demographics are getting older so
GDP growth is actually a pretty simple
formula over time GDP growth is
population growth plus productivity
if you've got an old population you
don't have any productivity
because they don't work
and an old population means your
population's shrinking so your GDP goes
down
so Japan has suffered that and what
happens generally is that's offset by
leverage people add debt so Japan is the
older population they do have more
productivity because they've got
industry there and the industry can
become productive over time the UK's got
no industry left it's just service
economy there's nothing left
and because they've now knocked
themselves out of the EU
you know I I could be a guy who
manufactures tiles and I could sell them
to some you know guy in Paris and
construction firm in Paris can't do it
anymore without taxes so you've
completely ruined that so all of their
levers now are basically devalue your
currency
they've got very little room for a
maneuver
the Japanese have had a lot of room for
the maneuver because the population
saved so much money because they have a
system of saving the Brits like the
Americans have a system of debt
um it all came from actually Margaret
Thatcher and Ronald Reagan is where it
all came from but
the Japanese are slightly opposite so
they kind of manage their economy better
so they don't have violent swings it
just doesn't grow
didn't go anywhere now I've heard that
they really tried to stimulate the
economy and just couldn't
correct they can't create inflation why
for the same phenomena we talked about
there's a bunch of 80 year olds a
massive amount of them who are like I
just need to have enough money to live
on for the rest of my days and I'm
Japanese I might live to 100.
so I retired at 70 after 30 years of
money
I mean half most people find it hard
enough to save for a bloody house
deposit how do you say for 30 years of
living without a job
and what does that do for your
psychology and your spending habits it's
huge
people forget all of these kind of
bigger picture equations so Japan
didn't allow their interest rates to
rise because they've used a lot of debt
to keep everything going they allow the
interest rates to rise it causes a
bigger problem but by doing that because
now people can't they can't pay the
interest on the debt correct
so it's you kind of slowly have to
devalue or you do it all in one go
which is the you know nobody can pay the
debt so what they chose was actually
quite a rapid devaluation of currency
by fixing bond yields at 0.2 percent
while the rest of the world was seeing
bond yields at four percent
and the central bank said nope they're
not going we're just going to buy every
Bond you try and sell us until there was
no liquidity left in the bond market the
bond market doesn't even trade and this
is the second
most indebted economy in the world
and the bond market that stopped Trading
um because the the Japanese Central Bank
bought all the bonds but what it meant
was the currency collapsed because
you're debating your currency by that
quantitative easing route which is
you're basically printing money to buy
bonds
so if they're
the core problem that they're struggling
with is demographics is there any way
out for them other than immigration yeah
technology
that's what I think the solve is I think
the fourth turning as technology solves
this
because the logical conclusion of world
population growth which is essentially
going to zero so the birth deaths rate
of the entire world is at one percent
I'm crazy now
so yes populations like India and the
Middle East are very young but they've
all stopped having kids
so the whole world is going through the
same cycle on the lag with Japan at the
front then Europe
uh Europe and South Asia South Korea
Taiwan all the same
then the U.S
then Latin America
then uh Africa the Middle East and India
so
all populations are going to collapse
which is what Elon Musk keeps talking
about
and the solution to that is technology
uh you need to create productive units
with less people
because you you've lost the glacier
productive units that somehow funnel the
money into other people's hands or are
you saying that as long as they're
creating something that people can get
somehow some way that the quality of
life maintains like I'm trying to make
that make sense yeah so keep coming back
to velocity of money if money isn't
getting into my hands and going out of
my hands for things that I want no you
don't matter in this equation really
because the big GDP growth is the growth
of the population which is shrinking
right so that whole part's gone
for the whole world immigration doesn't
solve it can solve it for single
countries but not for everybody
plus productivity you're an old
population
they're not productive okay so that
sounds like you've got a broken system
and debt is the outcome but at some
point people can't pay the debt the
velocity of money thing doesn't help in
this equation because you're not
actually creating
enough GDP growth to service the debt
so
and if death debt growth is higher than
GDP growth
that is is the income level about debt
at the country level because I don't see
how GDP helps at an individual debt
level
well GDP is the total amount of activity
within the economy that's what you do
what yeah that's being done by robots
that helps uh Jeff Bezos and Elon Musk
but it doesn't help my mom and this is
why we need a distribution of capital
now there are ways and I think crypto is
one of them which means that we can
participate in these communities
and get paid in a reward system for
being a Community Driven person that's
good for the community
so that is where
um we're seeing it in Reddit where we
start seeing this Nexus between social
tokens and nfts creates an economy in
your cultural community
and so I can be a good actor and I can
get paid in an asset that has value and
a system of money that has value to me
that may be fungible with the outside
world you know I think that becomes a
Black Mirror episode real fast
everything does my friend
grabbing got to the end of this story
but
um that is you yatsui calls it Universal
basic equity and I think that's right
but the universal basic income side is
going to have to be solved for the exact
reason is I am not doing a job and
earning the money myself
the robot or the AI is doing the job now
can I monetize my digital identity
so I participate in the advertisers
doing that or in the network and you
know I attach myself to a network where
I get monetized or I get share that yes
so that's a free that's a free market
form of universal basic income but yes
we have to solve this because if not
there's going to be a few people who are
going to be so ridiculously Rich the
world has never seen anything like it
we're already seeing that
um and we've got a big problem but
that's not the bigger problem the Black
Mirror is
clearly
because AI is accelerating so fast as
our robotics
there's no need for humans at all
so there's two parts of this and it's
the phase that is almost inevitable
one is that
at first we become augmented humans so
we use the AI so I use grammarly right
that's
augmented AI to make me a better speller
because I'm pretty add and I can't spell
anything ever
um so it helps me okay that's augmented
human
um and that will become much bigger
but obviously in the end we don't need
humans yeah this is a little thing and
that's the singularity yes I think the
singularity will probably come even
sooner if we keep the definition of the
singularity is the moment at which we
can no longer predict the future because
it's just changing so fast uh okay so I
think the singularity is is when the
predominant species
is the computer okay so you predict a
world where we merge with computers or
where computers wipe us out or we just
stop breeding we stop first
and it always ends up in the latter
because of the exponential knowledge
accumulation there's a great book and
you've got to read it homodeus a
negotiate it that's an huge detail of
why and how
and again he doesn't need to be right on
everything
but a computer actually acts as a virus
code is a virus and AI is a virus and
that because of how they morph and
changes that they're Unstoppable and we
were that beforehand on Earth as humans
we were the Unstoppable Force now again
this doesn't have to be utopian
dystopian because that Black Mirror
episode could be in 50 years time 100
years time 200 years time I don't know
don't really care
my guess is from here
to the augmented humans part
is probably a Renaissance very
interesting why do you think it becomes
a Renaissance because
should be married to a break you should
say Renaissance
I'm married to an American we all speak
this hybrid now so the um
why because I think that productivity
explodes from the rise of Technology
augmenting us as humans mean that we get
the financial benefit at first
I think that you know biotech Sciences
Internet of Things robotics
um
AI
um Big Data you know Cloud space they're
all going to be like a complete step
change like discovering oil again
right if World activity is another way
of thinking of it is how much
productivity can you get out of one unit
of energy we're going to create a lot
more and I think within this we're going
to drive down the cost of energy to near
zero because once some people say that a
lot how we how do you think that happens
is it just getting better at solar is it
it's just not using fossil it's just not
using fossil fuel so fossil fuel
has a fixed cost because we need to get
out of the ground and we can get
efficient at it so Shale became more
efficient so it lowered the cost of
energy overall
but as we start marginally eating away
at new forms of energy whether it's
solar wind nuclear whatever it may be
right hydrogen who knows right and yes
of course right now they don't scale big
enough to replace fossil fuel
um yes we'll use fossil fuels for
chemical manufacturing and stuff like
that so it's not going away as an
industry
but
all of these forms geothermal end up
cheaper
than at generating energy than others
because technology keeps driving them
even fossil fuels have got cheaper
really because of shale and stuff like
that you can produce more of it at the
lower price but we just don't
necessarily
because we need to extract out of the
ground it's actually harder than
eventually extracting out of the sky
more efficiently so I think the cost of
energy comes down so it's negligible
okay what does that mean for society
I mean that was the one restriction we
had was output from a unit of energy you
know kilojoule
what it gives us in productivity well if
that changes that changes the whole game
too I think this is all up for grabs
and again some of this is going to be
pretty societal breaking
some of it will be amazing for people
because of how Medical Science will
change dramatically
because now even the medical scientists
have realized the geneticists have
realized it's all code and that as
opposed to be a binary code work like
quadratic code and that's all humans are
and in fact you can distill almost all
life forces down to code and it's like
okay
you know and therefore you can solve it
in different ways so there's a lot
coming at us and it all seems terrifying
but you can either fear change or
embrace it you actually don't find it
terrifying uh I was gonna ask you like
when you think about the rise of AI
genetic editing
um
ceasing to be uh biological matter and
instead you know migrating more towards
silicon or whatever it's going to be
does that is that like dark clouds and
wolves howling in the background or is
that like light and expansive for you it
just is
there's no way it's not going to happen
and you can say well governments aren't
going to allow it or whatever right
yeah but maybe in Israel they do allow
it
and if you can hear that you can live
another 20 years because some scientists
in Israel has done something you're
going to do it there is it's Unstoppable
you can ban AI in Europe
but if the Chinese are using it you're
at a massive strategic disadvantage and
they'll destroy everything take all of
your money
so you are Game Theory suggests that
it will go that way
which is the law of unintended
consequences
you never realize that this is what
Humanity will get to
and because we always thought of
ourselves as the kind of God creature
and we looked back
at all of evolution and said oh because
they were worse than us they were idiots
I mean the Brits did this back at the
peak of the British Empire they would
use they would say kind of British and
God were the same thing America has much
similar language
um and we would go to countries as
British well I'm a half Indian so that
was one of the countries they invaded
but they would they would say you know
we're kind of and Darwin had come about
and they would say we're kind of darwini
in the advantage by God
that we are the stronger people
I mean and so humans just didn't realize
that they're replaceable too much like
the dinosaurs were
um and that system doesn't happen
overnight it happens over time
so it just is Tom and you can't
I think some of it's light some of it's
dark
and I didn't think we'd think this
conversation was going to go here but it
did now I mean so this this is all that
interconnectedness for me of realizing
that the game of money is really just a
game of human psychology and if you
understand the psychology then you can
begin to I think go through the ups and
downs with less emotional volatility
volatility that to me I think is is a
really important part just to put a
Capstone on the what is the future I
agree with you that it just is it seems
so inevitable and when I first started
saying that to myself it sounded a
little nihilistic and so I was like okay
and I went through the same Journey yeah
because I didn't I don't think or feel
anything nihilistic I want to steer this
as well as it can be steered but because
it feels so inevitable then I just start
thinking about okay how do we navigate
this well and I think one if you've read
Fahrenheit 451 that explains the sort of
middle term part where you'll get a
bifurcation of society where some people
like me are going to embrace the
technology and want more AI in my life
and you know looking for ways to
leverage that and use it and understand
you know over time where that's going to
go and that it'll be tough to keep up
with and therefore one of the first
things I would want to do is either
I can right now get behind non-germ line
editing of the genetic code
but at a genetic code and or begin to
merge with technology I find that very
very interesting and maybe it doesn't
happen in my lifetime fair enough but
you know whether that's 200 years or
2000 years it's already happening Tom
look how many of your friends were an
Apple Watch or an aura ring or even
people that have a cochlear implant I
mean it's like getting real yeah even
you with those little Apple earpods in
right that is augmented Tom no doubt I
mean to think that you and I are
effectively speaking telepathically over
a huge distance it's really hits pretty
crazy yeah it is that to me is it's
exciting if you can embrace the
inevitability but I think before we get
there there's going to be a lot of
problems because of that bifurcation
knowing what I know about humans they're
going to collide very dramatically and
that's where like being aware of how
things will skew towards tyranny on both
sides that's where I get a little
worried so to the I agree and again you
and I have talked about depth about the
fourth turning this is exactly what it
is it's where kind of demographics meets
wholesale societal change and
technological change
that whole thing is terrifying exciting
anxiety creating
messy
confusing and we're right in the middle
of that we can all feel it written large
right yeah I wish we were in the middle
of it I have a very bad feeling that we
are right at the beginning and it
already feels this like oh like sparkly
and like oh there might be a powder keg
here
but yeah I think that you if
demographics are as uh difficult to
contend with as it seems like they are I
think then that if the birth rate
doesn't increase you know God bless Elon
for doing his best uh to both get people
to pay attention and just himself
populate the Earth uh if we aren't able
to contend with that fast enough and Ai
and Robotics really becomes the only way
that's obviously going to dramatically
accelerate that and I know there's no
ifs Tom Amazon Walmart
they've all done it they've flipped the
switch the changes happen there's no if
it's like and the more robots there are
the humans they'll be
because why would anybody want humans
when there's not enough jobs because of
the robots so it's it is demographics is
Destiny and there's not a damn thing you
can do about it particularly when you're
competing
against something that is cheaper
and that's you know why the Millennials
didn't have kids in the rate that their
parents did
is because they came into the workforce
competing with their parents for one
first generation history to do that
because the the Baby Boomers didn't have
enough money so they stayed in the
workforce longer and secondly they had
to compete against the Chinese workers
and thirdly that's compete against the
AI the computers and the robotics of
course the Millennials aren't going to
have kids yeah that's interesting but
they're not even having sex
and that one is there there's there's
this is so layered there are so many
different things going on like as I get
into that and I've started talking about
so I have a lot of millennial and gen Z
employees and
like even talking to them they have such
a different perspective on what life is
so I I think a lot in terms of frames of
reference right so baby boomers life
gave them one frame of reference I'm a
gen xer that gave me a different frame
of reference Millennials gen Z each have
their own frame of reference and it
seems to you self-evident that that's
the way the world is what I find
fascinating about social media is it
allows all these frames of reference to
like Clash and come together and so
everybody seems crazy to everybody else
and then you've got the algorithmic uh
Rabbit Hole effect where you're in Echo
Chambers and you only hear your own
thing so you're constantly around people
that share your frame of reference
really interesting man it's really
interesting
what do you think all this means for the
next 18 months like as you look forward
as a macro guy and you have to like try
to make some sense of this I know it's
to be true that the only answer to a
debt Laden aging population
is what I refer to as more cowbell
stimulus
stimulus is the status quo that's why
you like Bitcoin because you can sense
that stimulus is the status quo the
debasement of currency it's the only way
because G if GDP growth doesn't grow as
fast as debt growth your income is not
covering your payments right that's it's
as simple as that
and the only way of juicing GDP growth
in that formula is death
so debt needs to grow the economy needs
to grow fast enough that it pays it off
but now each unit of debt lowers the the
uh each unit of debt gives you less GDP
than it did so it's now
three dollars of debt gives you one
dollar of GDP growth and it's been going
like this
okay so if that is the construct within
which we live the truth
then
at some point if I look at the future
and say I'm going to live in nine months
in the future
is the Central Bank raising interest
rates
there's almost a zero chance
really
well because we've already got to the
Tipping Point where inflation is
starting to fall just the extrapolation
of interest rates mean that they will be
below the FED funds rate by about March
or April next year
so therefore and what the FED gonna go
to what 10 percent
what's left Rubble people writing in the
streets right you can't do it so you've
got to the point you're getting close to
the point where the rate of change
changes and in six to nine months time
the FED are likely to have stopped and
probably cut
because stimulus is the only way the
world works so they raise rates just to
lower them again correct so they lower
the rate of inflation but then it's like
oh [ __ ] we need to bring up GDP growth
because if not we all go bust
right we need asset prices to rise
because you can't let the collateral go
bust that's what's just happened in
crypto the collateral left TT token the
lunar token all this stuff went bust
end of game all the leverage gets blown
up so they can't allow that so
does that work in the same way so what
happened for people that don't know what
happened with uh FTX there were people
that wanted to sell their ftt and get
their money out and they couldn't and so
they just pause sorry or whatever you
had on their exchange because they were
off gambling it so you wanted to get
that back you couldn't because they had
used it somewhere else now I'm assuming
that we have that same problem of the
government always has to be able to buy
the people that want to cash out is that
the issue no it's even a bigger issue
than that Tom if you borrow
money to buy a house
and the valley of your house goes down
50 percent
you're insolvent only if I want to sell
though if I don't even sell I'm fine yes
that negative equity
means that the banks then become
massively
proactive in not doing any more Lending
that was 2008 the collateral went down
so where what else do we borrow against
we borrow against our future our jobs
oh you go to the bank or use a credit
card it's because you've got income
right you lose that that's your asset
your income that you generate right you
can't borrow money the whole system
blows up you can't pay any of your other
debts if you're
if the in the stock market in the
financial markets people borrow against
bonds and they borrow against
stocks and they borrow against all sorts
of other elements of wealth
if those things go down too much
then people stop asking for their money
back because the the collateral doesn't
cover the loan
[Music]
and that's the issue
the the society faces so it's at every
level here
um it can't happen so if your share
price goes down too much you probably
can't borrow money if you're a public
company because people then worry can
you pay them back if your income goes
down all this stuff so therefore I think
that as I said this is how the world
works is stimulus now in this particular
phase of the world and therefore looking
at nine months the probability is
knowing what we know about debt and
demographics that the central bank has
not only stop raising rates but it's
probably easing rates to try and balance
out as you talked about this is what you
want them to do right you want them to
try and just stop the worst part of the
collapse and the worst part of the Boom
so they'll be doing that the probability
is is that they will also be trying to
inject money into the economy because
there's no velocity of money because
these old people so that's quantity of
eating what does that do asset prices go
up again
so all roads lead to asset prices going
up over time
it's a trick because it's a they're
devaluing the value of the currency it's
a trick but then you've got
you've taken the BET and I've taken the
BET which is like we well we like crypto
because we think it not only offsets
this whole mechanism because it's a
fixed asset but it also is a technology
that we think unlocks the whole bunch of
other opportunities and therefore it's
valuable so that becomes a superior bet
and I can't get to a more Superior bet
and I've tried and I've gone through
everything I just write a huge long 100
60 page article about all of this in
global macro investor and I still can't
get to a position where
in this construct of the world
that Bitcoin ethereum just just don't
become even more and more dominant and
valuable how much do you think that it's
because it's all right Tom just to go
just to clarify that for people one of
the reasons it's so valuable is like
what you're doing you're building this
whole kind of nft metaverse projects all
involved in blockchain right you're
building an applications layer on top of
the of the ecosystem whether it's a
theorem or whatever you're using right
but basically you've realized that you
want to build in this ecosystem that's
making ethereum or whatever you're doing
more valuable
and so it goes on yeah and I that's one
of those things that uh especially right
now
There's real opportunity for Builders
for sure I'm actually really glad I'm
heartbroken for all the people that have
lost but I'm very glad that in my corner
of the blockchain world that the
gamblers and the people that were just
there for the money have been wiped out
it no longer feels like a Sound
Investment for them which is good
because it shouldn't be treated like an
investment it should be treated like you
would treat uh an interaction with
Disney right it should be emotion based
it should be connection with the IP
anyway so that is very interesting but
even I like I'm ultimately I'm chain
agnostic so right now we're building on
ethereum so I wonder is it Bitcoin or is
it something that mimics digital gold is
it ethereum or is it some other thing
that has the same kind of properties but
better adoption you know I don't know
and I don't care is the answer like
because you'll move as you see it
happening yeah I'm agnostic too you know
just because I think that eth has the
superior benefits because you're
building on Ethan where real vision of
building rnft community on Heath now
whether you use polygon in the middle or
not doesn't really matter
but you know I see people doing it on
Solana okay that's interesting there's
not a lot of people doing it on some
chains and Bitcoin nobody's doing it on
at all because you can't because no
smart contracts at scale
but Bitcoin has this other value
proposition that's cool too but
um
yeah I'm I'm agnostic but you know our
game I want to manifest My Future Self
my game is to back the right horse which
is what you're exactly doing with your
Bitcoin bet is you're saying you know
what this probably adds to my real
estate and the businesses I'm building
and will help me
deliver to myself my promises now what
do you think about what Zuckerberg is
doing with meta do you think that's just
insane the amount of cash flow that he's
pouring into it or do you have a
different take he didn't have a choice
human interaction is going into the
metaverse
what that means to different people is
different things but it's going to be a
more immersive 3D like experience
doesn't have to be VR could be ar could
be even just more 3D render browser
rendering kind of stuff
that ability to interact with humans in
this new very digital age I mean this is
a very 2D experience for us
and if there was a way that was a little
more 3D and we could have people
gathered around us listening in the same
room and we could see their faces
um or their pfps okay it feels more
human
even though it sounds non-human it's
actually more humanistic
I think he realized that
that you are going to adapt or die so he
has to go through the s-curve moment and
take the big bet
I think he'll pull it off what does that
mean
because people again immediately jump to
this dystopian Black Mirror Mark
Zuckerberg owns this whole metaverse
world it's not
you know you and I will have probably
calls like this maybe in his version of
the metaverse or another one and it it's
like you use one email server I use
another app I don't know what you use I
don't really care you know you might use
Gmail and I use Outlook you know it's
we will just use whatever is suitable
and they will make tools that are going
to work really well for large
corporations people at scale people in
third world countries that don't get
access and so I think the probability of
success for him is is high and I think
the market is mispricing that
probability because what they've done is
taken cash flow out now to invest in the
future later
and the investors like I don't know if
this is going to work Amazon went
through the same with AWS everyone's
like what the [ __ ] are you doing you're
doing Cloud Server when you you're a
retailer
and they're like not really you know we
think there's a big opportunity and they
were right so
um Apple's doing the same bet with ar we
just don't see it yet but they've been
plowing money into it and Google have
been doing this forever with AI you know
they've all played they're all taking a
different path for this exponential age
and placing their bets at scale
um because if not they're out of the
game yeah I agree with that what what
will be very interesting to see is given
sentiment given going back to what you
said at the beginning of the episode
that you've never seen a sentiment like
this and seeing how negative people are
in crypto when FTX blew up I was like oh
my God like this is really like
sentiment was already bad but this is
really gonna get people just screaming
that this is all a scam and all that and
I was like okay as a builder I just keep
coming back to my thesis on what the
technology allows me to do and every
time I look at that I'm like part of me
is excited that so few people believe in
it because I'm just going to keep going
keep building and as long as we can
cross the chasm because you need to find
ways to invite people into that world
and if they're like you know so averse
to it that you can't even get them to
look at you you have a problem I think
that will be short term measured and
call it three to five years
but long term
I agree that I think that this is where
people are going it is the most logical
outcome knowing what I know about humans
and what the technology is going to be
able to do and watching Mark navigate
this will be really interesting because
he's getting pummeled by Wall Street
they don't like what he's doing he's
lost a tremendous amount of value but he
has voting control so it's a question of
is he going to stay that course and keep
building and is somebody building in
that same space I am so grateful for
what he's doing and I don't understand
other people in the space I mean I
suppose it's what you're saying about
they're worried about a black mirror
version of the world where you know some
big problems are really noticeable thing
and I see it because I was the macro guy
who was always looking for the downside
because I just make money out of it like
change my my thesis based on what I was
seeing in technology and and all of
these things and this is probably the
solution
and what I got back was a response that
I did not expect which was anger hmm
not debate not yeah I'm not sure if
you're right anger
and it took me by surprise
and I realized that
change is happening too fast
and it's happening too fast for the
investors in Facebook they can't assess
it
so they either turn they you either do
what we're doing which is like we're
just going to embrace it we're just
going to move forwards let's see where
this crazy journey goes
and others look back and go I want those
white picket fences and my Mustang with
18 liter Mustang and I want that
because I can't deal with this they are
angry
because their American Dream
again it's the psychology of human self
has been shattered
they're still saying my future is it
lies ahead
but so if remember we talked about at
the peak and at the bottom humans over
extrapolate with emotion I'm now totally
bust on now I'm the richest man in the
world
and so this societal change is doing the
same thing
and people just think this is the end of
the society that they understood the
American dream that they were given and
they don't want anything to do with it
and the rest of us are going actually
maybe
that's a new exciting place and I could
both make money out of it and enjoy it
and go along for the ride and see that
and that is played out in Twitter all
day every day but it's it's an amazing
emotional anger
that I think is based on around the
mentality of a fixed Pie versus a
growing pie an infinite pie and those of
us have started to look forward and now
firm Believers in the pie is probably
infinite
depending how you address it yeah talk
to me more about that I have a guess
that this is going to go back to what
you're saying about Robotics and Ai and
that you're getting more energy or more
GDP out of uh each kilojoule or I forget
the exact way that you said okay so let
me let me go through this the fix versus
the the growth mentality the fixed
mentality is if you dare use another
source of energy
you're going to rob us of the fossil
fuel jobs and stuff that we have
and that is bad as opposed to
oh well if it evolves we can probably
get more energy
than we you know per kill we can get
more kilojoules out of a unit of energy
if we don't use fossil fuels that's
probably net big for society because you
could build more stuff and do more stuff
with it
the fixed mindset is no
you can't replace fossil fuel with solar
it doesn't work the equation doesn't
work
and I'm like you don't have to replace
it all
we can have both
but if it's not such a large part and we
can create cheaper
or more efficient energy elsewhere
netnet the pie grows
is it I mean the central banks don't
like like to see their pie changing and
their pie is well there's crypto
it's a whole new system of money it's
like no no how high was this you can't
just come in with this new pie but and
we have that's exactly what's happened
yeah 2022 feels like the rate of change
has really accelerated
and I've started telling people hey
plant the flag in your mind 2022 was the
year that AI became really usable and
like a day-to-day person's life have you
seen the interview I did with Ahmed
mostac on real Vision tell me more oh my
God it's probably the best interview
I've ever done
um he's an old mates of mine he was a
global macro investor subscriber hedge
fund manager macro guy
he had done some other stuff and he's
been on rovision a few times in his old
guys I saw him on Twitter talking about
AI
so I'm like what the [ __ ] are you up to
come and talk to me on real vision
and then he releases he'd been kind of
private what he was doing
and he's just built stability diffusion
and stability AI which is the large in
Source open AI project in the entire
world because I've seen some of the uses
of that it's crazy so he compressed
every image that ever existed
on the internet down to a two gigabyte
file what
and he's doing it with music he's doing
it with video he's doing it the written
word so
open AI is one of them Google has got
their other version deepmind and his is
the open source version which is
terrifying because it means it's
Unstoppable but it's it's mind-blowing
so you've got to watch the interview
because
like you I kind of thought I had a
handle on how fast this is moving my
whole interview again emad e-m-a-d
mustac
m-o-s-t-a-q-u-e he's a Brit hedge fund
manager not the guy you'd imagine is
going to do this he's just raised his
first 100 million dollar rounds
he's only been going for two years Tom
well he built his own super computer and
he wasn't the richest dude in the world
he was just an ordinary guy
in two years
and even Sergey Brin and everybody went
to his launch and everyone's Jaws to the
floor saying
holy [ __ ] this has just changed
everything um
yeah so obviously I follow what people
are using Ai and media for we've
actually started using it here at impact
Theory to amazing results and I've
started seeing people showing oh we're
using stable diffusion here's what we
got but I didn't even know what stable
diffusion was I didn't know I knew it
was AI but that's all I know about it
and the results are astonishing and as a
creative
What it lets you do dude when I think
back even 10 years let alone 20 years
bro when I was in film school we edited
on steenbecks it was a gigantic metal
contraption that you cut like with uh
basically scissors and taped it back
together like I'm not that old so the
fact that we've come that far to now
seeing people do stuff with stable
diffusion and turn literally instantly
turn like a person moving into an
animated cartoon it's
unbelievable so as a creative I love it
two years old Tom he's like we barely
started
and what he did the clip trick that he
did that the others didn't do the others
all went this is too powerful a
technology we're not going to give it
out to everybody so we'll give bits of
it Allied gbt3
and he's like it's too fat powerful a
technology not to give it to everybody
so then you've got 10 000 people
building already on top of what he's
built
so it's just going to be like a virus
now it's just gonna explode and now to
think through that one is we are I'm
this is what I've been begging on
Twitter we are in urgent need for
digital ID blockchain driven digital ID
because this interview can be done by AI
it just ingests all of your interviews
all of my interviews and say hey get Tom
and rail to talk about the societal
collapse or whatever it is right I've
already did you hear the Rogan and yeah
jobs interview I mean look it's
obviously early days but
how well they captured the vocality
especially of Rogan where when he would
be like trailing off the AI would Trail
off now my only beef with AI in its
current Inception is that they always
feel like they're about to make a point
but they never quite make the point but
I mean if that's where we're at now
where are we going to be in 20 years
it'll be insane insane
and so think of societal stress
when you don't know a single thing what
is true and what is not um right and
that is not happening in five years time
or ten years time that's happening next
year
you know gpt4 comes out next year
and gbt3 is so powerful anyway
I hate to think what gpt4 is like
so
nothing we read nothing we watch nothing
we hear
is verified from a source of Truth any
longer
so we so urgently need a system of
authentication so anything that appears
with you will have the token that I can
scan or do whatever checking my browser
to know yes this is authentic Tom or
this is AI Tom and maybe you've got your
own AI Tom and that's okay but you need
to know what authentic Tom wants AI Tom
in two years time we're going to break
Society unless we do this because we
need to go through the elections in the
United States with AI
dude so this to your point the other day
Lisa came over my wife and I was showing
her my Tick Tock feed and I was like hey
do you think this guy's attractive and
she's like yeah and I he was probably
like 25 something like that and I said
would you believe me if I said that he
was 35 years old and she's looking
closely and she's like I guess and I
said would you believe me if I said
that's not a human that's Ai and she was
like what she had no idea she's looking
right at him trying to like judge his
age and had no idea he's not real and
this was a video man it wasn't even a
still it was a video of him speaking and
she didn't realize that it was AI I was
like oh my God like this is yeah to your
point we're gonna need something to
authenticate and also it's just as again
somebody that builds a media company the
thought of being able to create
characters where I can like give them
backstory motivation all that and then
another character backstory motivation
all that and then put them together and
they will react in a way that surprises
me
now it's like you can get into creating
these very rich surprising experiences
yeah but you know what that leads to
right you give a character a backstory
and it lives now of course it right now
we're not at the point where it's
conscious but it lives enough
that it writes its own story yeah
and all the characters write those
stories where does that story go we
don't know we've already seen that
Microsoft AI that they tried to put on
Twitter and it became a Nazi within a
week
and they were like oh dear we need to
stop so it's just it's
it's fascinating right so what you're
creating now
literally could have a life of its own
yeah I mean look as a writer that's
always the fantasy now do I want them to
become conscious beings I don't know
about that but for them to be able to
surprise me that would be I mean that
dude what if they get their own
followers they don't have to be
conscious they just have to be AI um
and they have their own followers and
they start developing a political
opinion based on their interaction with
followers and before you know it they're
they've now got a million followers
they're more powerful than Tom and
they're now trying to influence
elections
it is crazy it's crazy I mean so I I
think it sounds crazy but it's it's
gonna happen right it will you'll be
able to put guard rails in and so this
is where now of course some people
aren't going to and they're going to
have ai That Goes Bananas 100 there's no
doubt and there are going to be some
people that like that they're AI so it's
not even like oh well people know it's
Ai and they will ignore them no they
won't so for sure there's no doubt but
to the double-edged side of that sword
as a creative somebody thinking about
making immersive worlds it it
I I am now completely in your Camp I've
never thought about it as a Renaissance
but you're absolutely right before this
all the counter Peg explodes
it's going to be pretty amazing
so here's another thing for you is my
strong belief is that Elon Musk did not
buy Twitter because he wants to own
social media
once you see AI you cannot unsee it
once you see the robots you cannot unsee
them so he's built cars with
self-driving AI right
and it's still obviously developing but
it's developing fast he then is
developing the Optimus robot yet again
everyone's saying it's never going to
happen of course it's going to happen
how many things does a guy have to do
before people go wow he's really capable
of pulling things off and even if he
doesn't do it somebody else will
so what is the next step right your
character your building your characters
right how do you give him personality
the biggest way of having a robot that
can make you tea or do whatever or you
Center Mars and it can be building up
civilization in Mars
is by feeding it Twitter
because you've got all of humanity
losing its mind loving hating scamming
all of humanities there and then the
next thing he says is what I'd love to
do is add video well because Tick Tock
has been doing this they've been
scraping the AI
for the Chinese state so it appears
for facial recognition and human
understanding and AI tools and the other
thing he talked about is I'd love to get
long-form content we like all of those
things video long form content short
form what he gets is all elements of
humanity
to train AI from
I'd pay if you were the richest man in
the world and you're building Ai and
you're building robots and you're
building all this stuff would you pay 44
billion
for
the largest proprietary data pool in the
world should you want it if you know how
to monetize it for sure
well and I think he's he's going to go
even farther than that he's I mean this
is one of those when people tell you
what they're doing it's probably best to
believe them especially when they have a
track record like that he's I'm going to
create the ultimate payment platform I'm
gonna make the WeChat of the West
and if he can pull that off it becomes
so much bigger than what it's been thus
far it'll be very interesting to watch
and we also the
um the other thing is that he
has just fired got rid of that 90 of the
stuff yeah people don't realize I can
see people saying well well Twitter
won't be here tomorrow it's not like
Twitter is people peddling behind the
scenes
it's technology it actually doesn't need
the humans to run it on a day-to-day
basis apart from to fix a few bugs but
it's not like it bugs every day so it
gets to rebuild it anyway that was a lot
longer than we thought as a chat wasn't
it right there as always man I so enjoy
this where can people follow you uh at
Raul
r-a-o-u-l-gmi on Twitter uh and if you
go to my profile there's a pretty
newsletter that's macro one go that go
to our YouTube channel uh the real
version I think it's called real Vision
Finance YouTube channel go and watch
that interview with myself and Robert
Breedlove I think you'll like that and
if not you can check out more details on
realvision.com I love it boys and girls
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