Bond Market Is Blowing Up, But No One’s Telling You Why! | Nik Bhatia

Nik Bhatia is the founder of The Bitcoin Layer, a macroeconomic research firm focused on Bitcoin and global finance. He’s also the best-selling author of Layered Money, a CFA charterholder, a former U.S. Treasuries and money markets trader, and now teaches at USC’s Marshall School of Business. In this episode, Nik breaks down the chaos in today’s markets with rare clarity—from volatility patterns to the future of the dollar. We dive into the truth behind Treasury market turmoil, why 7-sigma events are happening more often, the potential collapse of weak global currencies, and how trade wars, tariffs, and de-dollarization efforts are reshaping the global order. Nik also unpacks the “Mar-a-Lago Accord” theory and what it might mean for BRICS, the Eurodollar system, and financial warfare between the U.S. and Europe.

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Episode Transcript

Speaker 1 (00:00):
A seven sigma event is something that's only supposed to
happen one every thousand years. We're getting seven sigma events
every seven years, and they're getting even closer to each other.

Speaker 2 (00:10):
So what does it mean.

Speaker 1 (00:12):
It means that what is being sold right now are
ten plus year treasuries. There are three things that we
can see to determine just how specific this selling is.
Number one. Number two is that the move has come
from The third is.

Speaker 2 (00:30):
That are collapsing.

Speaker 1 (00:32):
The supply of money is a liability deposits M two.
That's a liability that is supply. So of course supply
of money will go up when the assets go up,
but liabilities not the way that we measure it the
way that I feel like liabilities or M two. It's
a trailing liquidity index. If bitcoin can just be that

(00:55):
generational money, like cash and like real estate is today,
then people can think, oh, yeah, it can go to ten.

Speaker 2 (01:02):
Million dollars in the future.

Speaker 1 (01:04):
I suggest that bitcoin will be at one million dollars
in the next several years. To give people that taste
of the potential growth that you're not late, you're still
early in this asset class. You give them the proper
context for that the price of a home in the
last ten years has gone from one thousand bitcoin to
five bitcoin. That trend will continue. They have to understand

(01:25):
the long term mindset.

Speaker 3 (01:29):
Man, Nick, we have so much to go through. I
always love talking to you because you are a wealth
of a knowledge and you are sort of specifically positioned
to talk about what's going on in the world today.
Right former US Treasuries and money market trader. So we're
talking about we're going to talk about bonds today, Professor
of USC Marshall School Business. I love that because a
video I made earlier today was like in this world

(01:51):
of theory, but in the real world. So you can
understand the business side. Do you understand the treasury side.
We're gonna talk about money. We're talking about your new book,
so so much stuff there. But we could say that
maybe since the Trump administration announced the tariff plan, it's
triggered all types of chaos. Stocks, bond market, treasure yields

(02:13):
whips on back and forth. It's been super volatile. People
on x are whispering about a Bretton Woods agreement. Would
you say this at the beginning of the end for
the FIAT system or just another panic in an already
chaotic decade.

Speaker 1 (02:25):
Well, it's not the end of the Fiat system in
my opinion. What it is it's an attempt to realign
the world and re order the world. So I think
that we've been under a regime of globalization for the
last few decades, and a big part of that has
been the US consumer reliant on the Chinese exporter for

(02:50):
cheap goods and the US government reliant on the Chinese
surplus for financing. That relationship has been going on for
quite some time.

Speaker 2 (03:01):
It's a two way streets.

Speaker 1 (03:06):
Yes, you can say that that China has risen up
and take advantage of the US in this situation, but
it is a two way street. However, the President has
made it very clear himself, his Treasury secretary, his Commerce Secretary,
and the chief of his Council of Economic Advisors, all
of them have made it very clear that that.

Speaker 2 (03:29):
Era has ended.

Speaker 1 (03:31):
Tariffs are one of the first steps on the path
to re ordering and to figuring out the new regime.
What are we going to be in now that we've
declared the old regime null and void or that that's
what we are attacking.

Speaker 2 (03:48):
So that's the way I see it.

Speaker 1 (03:50):
Yes, that the market is experiencing an enormous amount of
volatility off of uncertainty. And that's what volatility is. Volatility
comes from options prices, as you know, and option prices
imply volatility. So when market makers are uncertain they step
away from the writing of options, it gaps out implied volatility.

(04:12):
By definition. That is where you know volatility comes from.
It comes from uncertainties. People don't understand fully what is
the plan obviously, because even the president is a negotiator,
he's not even laying out all of the things that
he's going to do, just the ones that he needs
to get his way. And in that we are in

(04:35):
that world. Now we live in President Trump two point
zero world, and we are if you want to play
by the rules, you have to understand that volatility is
probably going to be the name of the game.

Speaker 3 (04:48):
Yeah, I want to talk about that plan. We were
saying how you kind of have to read every single
word they're laying it out, but you have to listen
to it. But before that, so you talk about the volatility,
we can look at the sentiment in the market as well,
and there are like readings that we haven't seen since
the global pandemic when like the whole world was literally
shut down and everyone was going to die, or like
the global financial crisis, when the whole banking system shut down.

(05:12):
I mean, do you think that amount of negative sentiment
and volatility is warranted? I mean, is it as bad
as the whole world dying and shutting down in twenty twenty.

Speaker 1 (05:20):
So this goes back to one of the core parts
of my new book Thesis, which is, you know, the
book is called Bitcoin Age, and it's not just about
bitcoin mark It's about the credit system that's the backdrop
for our world. And that credit system is it dies
if it can't continue to expand.

Speaker 3 (05:42):
Because we're in a debt based monetary system.

Speaker 1 (05:44):
That's correct, and in a debt based monetary system, the
increase year over year in debt is necessary for the survival.
And the banks that are controlling this credit system have
in instituted a political and economic system around them, including government,

(06:06):
government regulation, central banks, and international trade agreements that allow
for these banks to receive a bailout or to receive
the support from the people actually extract the people's future president,
future earnings and tax revenue for the benefit of this system.

(06:28):
All in the name of that system provides jobs for
the world, and so they use the scare tactic of
contraction to avoid it. So, because we live in that system,
it's gone. It's contracted and expanded so many times that
the leverage is so large in the system that what

(06:49):
you get during these times of volatility are my mentor
taught taught it to me in these words, he goes,
a seventh sigma event is something that's only supposed to
happen one every thousand years. We're getting seven sigma events
every seven years, and they're getting even closer to each other.

(07:10):
So what does it mean. It means that the perceived
normal distribution of returns doesn't exist. It returns are not
normally distributed. Neither are volatility events. Volatility events that are
supposed to happen once every thousand years are happening every
few years. So statistically it's supposed to be impossible. However

(07:34):
we're experiencing it. And I believe the volatility events that
are happening so often are simply a symptom of our
credit system being so based on a lot of thin air.

Speaker 3 (07:49):
Basically, yeah, the leverage in the system magnifies the volatility
that's right. It's like if I had four or five
books in my hand, I could balance it. If I
have four or five hundred books, the thing swinging wildly. Yeah.

Speaker 1 (08:02):
And if we think about the volatility and the expected returns,
you all of these portfolios are built on models, and
so when the expected volatility spikes like that, the AI
which runs a lot of these portfolios, it doesn't know

(08:23):
what to do, right, and it literally aerrs out and
for cells. So that's actually what you're witnessing is it's
a computerization. It's an algorithmic dominance of financial markets. All
of these are components that lead to these large moves,
but it doesn't I think you need to understand that

(08:43):
that is part of the market structure, as opposed to
take each volatility event as something that should be taken uniquely,
meaning that in the pandemic, what you had is the
largest contraction ever in GDP, the quickest largest contraction ever GDP,
and the quickest expansion from monetary and fiscal.

Speaker 2 (09:06):
That you ever saw.

Speaker 1 (09:07):
That's just another example of what I'm talking about, is
that when it contracts, you have to expand it. So
that was another magnified one we're just experiencing these now
more and more.

Speaker 3 (09:16):
Yeah, so let's get back to the plan. You said,
So we're sort of in Trump's world. We have to
know what Trump's plan is. You're paying attention to all
these words that are being said, so you can understand that.
Let's look at it from a historical basis for a minute, right,
because we were kind of talking about earlier where like
a lot of people are saying like Trump doesn't shouldn't
do this, He doesn't have the right to do this.

(09:37):
Who is he to crash the markets? These types of things.
But presidents do these things. And so we can look
back just through a couple so like the Brettonwood's Agreement,
the Plaza Cord, and in nineteen eighty five. And what's
interesting about those is it sort of seems like they
were trying to fix the same problem, which is trade imbalances. Right,
So that's what I think nineteen forty four is about.

(09:59):
I think that's what the Plause cordabouts. So you sort
of have this free market. The world realigned and pegged
back to the dollar in nineteen forty four, and then
the imbalances grew nineteen eighty five, we had to kind
of bring it back in and then today we're talking
about trade and balances.

Speaker 1 (10:13):
Again what the President's chief of his chief economic advisor
has said, we are living in this world where the
Chinese exporting has hollowed out US manufacturing. It seems very
cliche to talk about it because it's that's a theme

(10:34):
that's been with us for quite some time, a few decades,
but now they're ready to address it. It also seems
cliche to say that a strong economy has to have
strong manufacturing when the US, which is the world's largest economy,
has hollowed out manufacturing.

Speaker 2 (10:50):
So people they're.

Speaker 1 (10:51):
Unable to see necessarily that we need the manufacturing back
to survive on the long term because in the short term,
all of these technology services that we provide as a
nation are consumed by everyone across the world. So it
is keeping our economy going right. The whole IT sector

(11:12):
and technology sector, even social media. When you think about
where are all the social media companies based and where
have they come from? All the strong internet companies over
the last few decades, they're all United States based. So
why do we need manufacturing? They are saying that, yes,
we do need it, and it is to address this
permanent trade deficit that we are in. It creates a

(11:36):
permanent capital account surplus, and that's one of the keys
if you have the If you have this huge capital
account surplus, it means that the world, the rest of
the world, is holding your debt and that makes you
subject to them also in a way. So all of
these things are trying to be addressed here.

Speaker 3 (11:56):
Do you think I want to get to the manufacturing back,
But like, let's just talk about the trade and bud
lence is for a minute, right, because Trump's talked about
trying to close those trade and balances and obviously talked
about the tariffs for each nation that we have that
and some of them look ridiculous, like the trade and
balance maybe with Vietnam for example, right, but it doesn't
include to the point that you just made, right, that's

(12:17):
like what are we exporting to Vietnam? Like what can
they buy of ours? But it doesn't seem to include
what we really export what you said, or the tech sector.
So we have so we've grown our way from making
textiles like one hundred years ago, and we've moved a
higher level things. So now we produce science, medicine, technology,
and we export the technology and so they receive that technology,

(12:39):
but that doesn't show up in those trade balances.

Speaker 1 (12:42):
Well, what they and that's what they're trying to address
with tariffs is they're trying to make them pay for
some of those things coming in so that there's.

Speaker 2 (12:48):
More of a balance.

Speaker 1 (12:49):
They're also trying to make sure that I'm sorry, what
they're trying to do with their protective tariffs, like in
a Vietnam, if they have protective tariffs, they are preventing
US goods from coming in. Those technology products are tax
doubles so that they might go and get them from China,
for example. Those are the some of the things that

(13:10):
are trying to be addressed in terms of exporting to
a country like Vietnam. But what they've said, part of
this dual public good that the United States provides to
the world, one of them is defense. The other is
US dollars and US treasuries. The defense side seems to
be something that they want to make sure the trade

(13:33):
deficit is closed with the rest of the world, because
if you simply buy more US weaponry, that will shrink
the trade deficit. And what you're doing is that you're
doing a couple things at the same time. You're lowering
the amount of money that you have to spend as
the United States on protecting the world because your ally

(13:58):
is now going to build up army, but not opposed
to you, but in alliance with you. So that foreign
country buys weapons from the United States, that gives us,
you know, a balance of trade in our favor. And
if so we're buying if we're buying things from them,
it is more balanced if they're buying weapons from US.

(14:20):
So that does seem to be part of the agenda.
So I expect, I expect a big boost to the
demand for US the US military industrial complex.

Speaker 3 (14:32):
Yeah, well, I mean that's part of the uh that
was my kind of thesis of this Amazon prime, which
is what would would Trump has been saying, how with NATO,
each countrys supposed to pay a percentage of the GDP
towards security. That was the agreement. They haven't done yet.
So what you're saying is the big push is him
to do that. So if these countries were to take
two percent four percent of the GDP back towards military,

(14:54):
that could help offset that trade and balance.

Speaker 1 (14:56):
Yeah, and we've been talking here about China. We've been
talking about Vietnam. Before we started, we were talking about
the potential for a deal with India and how is
it going to look with Russia with the United States,
are that were going to go into more of an
alliance with them and try to pull them away from China.
Europe is an entirely different theater of this reordering, and

(15:21):
you know, to talk about Europe and the role of
NATO and all that it is, it starts to be
a different conversation than what we're talking about with China
hollowing out the US manufacturing or trying to find ways
to get non China and non Europe countries to pay
more of their fair share.

Speaker 3 (15:38):
Right. We were talking about how when you start connecting
a lot of dots, you can see that. One of
the things Trump did when he first came in was
he threatened the bricks. So the tons of videos I've
talked about, it's been all over the bricks. The bricks,
the bricks their own currency, golback currency, they're growing power,
et cetera, et cetera. And he sort of warned the bricks, hey,
if you try to launch your own currency, one hundred

(16:00):
percent tariffs against you. Anyone who moves away from the dollar,
and so the bricks is this coalition, this trading block,
and the sea in bricks is China, which is the
big one. So in one way you can see that
was one of his focal points. And it seems like
part of what he's trying to do then is sort
of reorg. Maybe the US doesn't have enough power against

(16:21):
China necessarily, but if we could pull some of that
trading block away from China, then the US could have
more power there.

Speaker 1 (16:28):
And you know, you can't dismiss what he's saying. You
have to listen to it because it's it's fascinating to
see the speed at which some of these things are
now happening. Listening to one of your recent episodes talk
about bricks, I what I realized that he's actually trying
to kill bricks in that he's trying to take the

(16:50):
sea China and isolate China. And to do that you
have to bring Brazil, Russia, India and South Africa and
the others like the United Arab Emirates, which who is
already announced over one trillion investment in the United States.

Speaker 2 (17:10):
That is maybe the big play here.

Speaker 1 (17:13):
It's the thesis for the last few years was Cana
Bricks alliance rise up as a trading block and threatened
the US dollar realm by using their own swap lines.
Now maybe Bricks is he's just trying to end that
alliance in one swift move and isolating China. And that's

(17:37):
what we saw with the ninety day pause.

Speaker 3 (17:40):
Is that exactly.

Speaker 1 (17:41):
You know, you go fifty percent even more on China
and you pause everyone else. But why because seventy five
countries called them and they're not making that up. We
have the bilateral confirmation. I don't know if seventy five
they always love to exaggerate, but doesn't matter. The calls
came in, the deals are already penciled in, the meetings

(18:04):
are being set, all of those tariffs are coming down. Maybe,
And so that's part of you know, your four chest.
There's so much going on and we just have to
do our best. Yes, I teach at USC but unless
you're a student, and I know you're reading history left
and right, mark every day. Unless you're a student.

Speaker 2 (18:24):
You can't. You won't be able to keep up.

Speaker 3 (18:26):
Yeah, because the history is what gives you the perspective.
So again back to nineteen forty four or eighty five,
where the world did come together and did agree to
repeg back to the dollar, and did agree to reset
the trading balances, and did agree to allow the US
to devalue its currency right each of those times. And
so then you start to go, well, I guess every

(18:47):
you know, a couple decades, we just do this thing whatever,
we just do it again, right, And you get that perspective.
I think, you know, when the bricks started, it made
sense saying a little small trading block whatever. But now
China is big enough to rival the US, and I
think then it's sort of is like danger, we have
to kind of do that. I think also the you know,
the global supply or I say, the global pandemic and

(19:08):
supply chains breaking down really put the world on notice
as to especially in the United States, like, shoot, we
couldn't even go to war with China. We don't even
have medicine. And I think the Ukraine War even put
that more on blast, where NATO couldn't even produce enough
ammunition to keep up with Russia. And so I think
it's important to think about that. Back to Europe, for example,
I think it was interesting where Vonderland from the EU

(19:32):
was like we'll retaliate against the US. But then like
maloney from Italy is like, I'm gonna come over and
talk to you, and you know, like Germany might need
the US to buy its BMW's and Audi's and Volkswagens,
and you start thinking about then, well, the EU wants
to play you know, hardball, but then what about Germany
and what about you know, Italy and like the implications

(19:53):
of potentially breaking apart the EU. So seems like there's
some big moves being made and we don't know obviously
the world. This is a complex system and unintended consequences
will prevail, but it seems somewhat likely to work out.
What do you think.

Speaker 1 (20:08):
I've been watching the you know, politics in the EU
to the best of my ability, and my opinion is
that if you are to see some grand reordering within
Europe because of this idea that Trump is looking for
more alliances and the EU as a block doesn't appear
to be allied with the United States. In this effort,

(20:31):
a lot of the agendas are opposed to each other.
That Italy will be the one that leads its way
out and can establish, you know, a bilateral relationship with
the United States, that protects Italy in its effort to leave. Now,
I'm not making the prediction, but that's the way I'm

(20:51):
thinking about it, Mark, So I'm thinking, I'm looking at
Italy and I'm watching their politics because it's the it's
the only country that is showing any hint of it,
and so that's the one that we have to watch.

Speaker 3 (21:07):
Yeah, I mean, you're gonna have countries that I think
need it. They're hinting at it, countries that maybe need it,
like I said, Audi's and BMW's and Mercedes, and then
some countries need security. I want to talk about the
currencies we talked about, maybe some currencies not surviving, maybe
the sort of groundwork that's been laid with currencies, and
then obviously we're going to get into thesis of your book,
but let's just spend a minute talking about the treasury

(21:28):
market and the bond market. It's been super volatile. You
know a couple things about this, So I'm curious as
of the time of this recording, which is April eleventh,
today we see like it seems like a massive sell
off in the treasury market, which people are pegging back
to Europe. Speculation is potentially Europe is fighting against the US,

(21:53):
doesn't want the US to sort of break apart, or
potentially China has a bunch of treasuries in Europe. What
would you make of the situation?

Speaker 1 (22:02):
So one to to your later point, China has treasuries
all places. So I've I used to face when I
was on the bond desk. I used to face Citadel,
which faced Safe sa Fe, which is the Chinese basically

(22:24):
their treasury portfolio. So I got to hear some stories,
and yes, China has treasuries around the world, different in
different parts including I believe it's Belgium and or Luxembourg.
So but what's happening in treasuries? Is there financial warfare
going on with Europe? I don't actually know. I've seen

(22:47):
some early research, but I haven't done enough work on
that because I just saw that this morning. So it's
something I'm going to be looking at. What is happening
in the treasure market is fascinating because it appeared to
be very, very focused selling. And the reason that I
say that is what is being sold right now are

(23:11):
ten plus year treasury so ten twenty and thirty year
treasuries and treasuries along that part of the curve. There
are only so many of those treasuries. Now, yes, it's
dragging yields up, but the price action, if we look
into it, there are three things that we can see
to determine just how specific this selling is. Number One,

(23:37):
the yield curve has dramatically steepened. Means that the front
end of the yield curve is not behaving in this
way at all, that it's all a steepening move, okay,
So meaning those that hold twos, threes, fives around the
world are not exhibiting any of this behavior.

Speaker 2 (23:57):
That's one.

Speaker 1 (23:57):
Number two is that the move has come from real yields.
So if we look at the market for a ten
yure treasuries at about four and a half percent today,
that can be decomposed into two components, the real yield,
which you can get in the market through the tips yield,
and then the difference, which is called the inflation break even,
which is a number that you back into. So the

(24:18):
real yield is a compensation for owning treasuries, and the
inflation component is a kicker what you get after the fact,
basically the plus CPI component. And so that calculation, the
inflation component is not moving. All of the move is
from real yields.

Speaker 2 (24:36):
It don't.

Speaker 1 (24:37):
It means it's not an inflation scare. Okay, okay, So
that's the second. The third is that swap spreads are collapsing.
And this is what people are talking about with the
Basis trade, where investors were long treasuries and short derivatives
against it, trying to arbitrage a small amount of profit.

(24:57):
Swap spreads have collapsed, which means that the selling is
being done on the cash instrument, which is treasury securities
ten twenties and thirties, and the buying to unwind the
trade is being done in derivatives. So the original position
was long securities and it's now selling the securities. So
whoever was long the Basis trade was financing treasuries in

(25:20):
the rebol market. They own all these treasuries. They're not
long the full risk because they are hedged on the
other side. So when rates move together, their trade doesn't change.
They just capture that difference over time. But now it
moved against them. What they were short was going down

(25:42):
faster than what they were long, right in the risk
off move, So this actually started.

Speaker 2 (25:48):
I don't know who.

Speaker 1 (25:49):
Owns this trade. And who's financing it and who's blowing up.
But what I see is that with swap spreads collapsing,
that means that the selling is so localized in these
ten twenties and thirties, it's very dramatic. I've only seen
this type of price action once and that was February

(26:09):
of twenty twenty when the pandemic was when that uncertainty
of what was happening and yields were actually collapsing, going
all the way to zero, and then after a certain
point the thirty year yield started gapping up in a
way that I mean, that's what we actually saw this time,
is that it was triggered by a bull move right.

(26:32):
It's wild, Mark, It's so crazy to watch. It's dynamic.
And instead of trying to predict, which I know everyone's
trying to say, who did this or who's blowing up,
I don't know, So instead of trying to speculate, which
I'm doing also, I'm just trying to understand the mechanics
and explain that to you my readers as well.

Speaker 3 (26:52):
What would the psychology or the game theory behind this
tell you.

Speaker 1 (26:58):
Potentially that's more in the speculative, So there's a theory
out there that, Yeah, there's a theory out there that
which I think is it's so close to the mar
A Lago acord that we're talking about, which is that
the credit system that I talk about in my book,

(27:19):
I explain that the dollar system is no longer a
US sovereign phenomenon. It's a global banking phenomenon, and they've
leveraged the country's currency to expand around the world. And
that is the euro dollar system, an offshore dollar system
that functions outside of the regulations of the United States.

(27:43):
They go by their own regulations, the Basel Accords, and
that world is allowing part of Steve Myron, the Council
of the White Houses main economic advisor, this dual public good,

(28:03):
one of them is the US dollar in US treasure securities.
So perhaps what they're saying with that dual public good
is that, hey, this euro dollar system that you're using,
you're using it free of charge. We're not agreeing with
you using it to that free of charge. Maybe we'll
let you still use it, but you have to pay

(28:25):
in some way. Maybe that action is triggering a financial
war between Europe and the United States. The European banks
specifically that utilize this euro dollar system. Who and if
it's happening, I'm not sure, but that's a theory that

(28:46):
I'm trying to work with right now.

Speaker 2 (28:49):
And speck out.

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(29:44):
Then we have so you talk about the dollar, the
dollar systems. Then we have the currencies and so as
this is all trading, and then we sort of get
into that, and we had talked about, you know, I
had thrown out the comment which you seem to agree on,
that there's a handful of currencies around the world that
probably won't make it out of this year. Obviously this
pushes inflation out. Currencies are inflating. You seem to agree

(30:07):
with that. Tell me your view on potentially why some
currencies won't make it out this year.

Speaker 3 (30:11):
Yeah.

Speaker 1 (30:12):
So in my first book, Layered Money, I explain how
money used to be this relationship between commodity money and
credit money, and without that relationship anymore, the United States
dollar and US Treasury specifically rises to the top of
the pyramid of money in this world in the absence

(30:33):
of gold. And who's even above the US Treasury security
It's the US government, right, because they are the ones
that promise to pay US treasuries.

Speaker 2 (30:43):
The dollar is simply.

Speaker 1 (30:46):
What is accepted or what the Treasury decides to pay
out on its debt. That's what defines the dollar. And
that's the theoretical way to think about it. And so
if that is the case, leverage on top of leverage
on top of leverage for countries that don't have a
lot of real assets or things that underpin it makes

(31:09):
it so that in a world with bitcoin present and
US treasuries and the US government continuing to be strong,
you can envision currencies won't survive. Non US dollar currencies
won't survive in the long term. So I could think
about that a lot five years ago, but now we
are in a rapid reordering, as we've discussed, and in

(31:31):
that rapid reordering, you can quickly imagine that in the
next Mara a Lago accord, some currencies will just say
we'll do dollar stable coins and we'll figure out a
way to finance our own activity. That is something that
a currency is a national tool. So to get a

(31:53):
country to give up their currency, they're going to have
to get something in return because they need flexibility.

Speaker 2 (31:59):
That it's a key here.

Speaker 1 (32:01):
However, there is a path to non dollar countries now
taking the dollar and reorienting their financial system in an
alliance with the United States to avoid their perpetual devaluation.
So you mentioned Lebanon and you mentioned Turkey. These are

(32:21):
two countries that have had currencies that you know, the
chart just looks like a waterfall, and so you can't
even see actually the chart anymore. When you zoom out
what's happening. That's how much it's collapsed.

Speaker 2 (32:32):
So it's it's much.

Speaker 1 (32:36):
It's possible now in a way that maybe it was
more much more speculative before.

Speaker 3 (32:42):
Well we've seen it to the point that you mentioned
a couple and probably these things accelerate that. Right. So,
like if these countries now have tariffs and they have
to come up with some trade balance, maybe instead of
retaliating they try to sort of work around it. Maybe
they're subsidizing some of their industries things like that. Well
that just means more hyperinflation for them. And then part
of maybe this marlawocord is similar to the Plaza Accords,

(33:05):
was allowing the US to devalue, which then pushes more
inflation in their way as well. Right, so both of
those things put a lot of pressure on their currency
which causes it to collapse.

Speaker 1 (33:13):
Yes, So what we haven't talked about yet is the
currency aspect of it, of the trading, a side of
the equation. So that that's why tariffs are only one
part of it. Because if you put tariffs on a
let's say, of Vietnam, and then they cheapen, they say, okay,
we'll get rid of our tariffs, so you get rid
of your but then they cheapen their currency. That strengthens

(33:34):
the dollar, and that makes the agreement back to being
not fair. And so the protection against currency devaluation is
part of it, which means that the Mara a Lago
accord is part of this plan. That is where they
have to go, because if you agree, then you have

(33:55):
to say, okay, the tariffs are gone, and we agree
to fix our currency at this price and not manipulate it.

Speaker 2 (34:02):
It is that it is part of the equation.

Speaker 1 (34:05):
You can't actually discuss the tariff without the currency manipulation
side of it. They call it the non tariff cheating.
That's what the administration is calling it. If you address
that as well as the tariffs, then you can achieve
your goals of capping the dollar, which has been a
theme of ours.

Speaker 3 (34:24):
And just for again for everyone listening, if you don't
understand history, like this is just what happens. This is
what happened in forty four, is what happened in eighty five,
and it's pegging back to the dollar and allowing the
dollar to devalue. And so these things start to accelerate
that and then you mentioned stable coins. You know, I
had talked about in this video I did, which you saw,
which was sort of some of the groundwork that Trump

(34:44):
had laid before even going into this reorg whatever you
want to call it, the new deal that he's trying
to push through, but it was pushing through some stable
coin bills. And we've seen, you know, you and I
in the bitcoin space, in the cryptospace, you've seeing the
stable coins, US dollar stable coins really and the gain acceptance.
And you have these other countries where their currencies are inflating, rapidly, inflating,

(35:05):
hyper inflating, and the people want to get into dollars,
but the countries don't allow them capital controls, and so
the stable coin has been a way for them to
sort of get around that. And so you have this
deal where I think partly the US and Trump wants
to strengthen the dollars role in the world. Number two,
you need to sell more and more treasuries. And on

(35:25):
the other side, you have people who want dollars, and
so if we can get them stable coins, we can
increase the dollar strength, and then we can make those
stable coin companies by US treasuries. So it's a pretty
good combo but then what that seems to do is
then accelerate their own native currencies, going into even faster
and faster hyper inflation.

Speaker 1 (35:43):
And that's the wild card, because, like I just said
in my previous response, the currencies are a tool for
the countries. So if you go and shake down another
country and you say, hey, you have to addrop the dollar,
you don't get your own currency. You can't print my
when you go into a crisis, you can't come up

(36:03):
with a new deal for yourselves because you can't finance
it unless you go to our banks.

Speaker 2 (36:11):
Is that is that fair?

Speaker 1 (36:12):
And so I don't know the answer to your question.
I don't know how if you get the countries on
a dollar stable coin standard, how they're able to finance their.

Speaker 3 (36:26):
Own What happened after forty four and after eighty five
when the country is sort of repegged back.

Speaker 1 (36:31):
To the days, Well, what happened for fourteen years in
Europe is that you didn't have any free movement of
capital have you had capital controls And so the euro
dollar system actually started for many reasons, but one of
them is that the FX desks opened up for the
first time in fifty eight in the city of London,

(36:51):
in the late fifties. I discussed this in the book.
Now that you had currencies trading against each other for
the first time, or any exchange where a bank could
actually do it and make the market, then you got
currency cross currency arbitrage trades for the first time. And
that was because the City of London banks could raise

(37:13):
deposits in dollars in Europe, basically taking that surplus that
was over there and saying, hey, give us some of that,
we'll make a market in this currency, or we'll invested
in pounds and create and capture an arbitrage. So when
I think about the capital controls of nineteen forty four
to fifty eight, Breton Woods didn't just make it so

(37:36):
that every country could be exchanged for dollars, and dollars
could be exchanged for gold really easily, and that's what
kept a stable system. In fact, France in the sixties
said we don't want these dollars, we're taking the gold back.

Speaker 3 (37:51):
But that was after decades of manipulation and inflating the dollar,
of course. So then we go to the next level,
which is then back sticking on the currencies for a minute.
Then we have potentially three hundred and three hundred fifty
trillion dollars of US dollar denominated debt in the world
with about eighty to one hundred trillion dollars of currency.
So then there's this massive demand or shortage for dollars.

(38:13):
And then you have the US, which aggressively, especially after
twenty twenty, has like opened up swap lines with all
these countries, And so is that another tool to sort
of reorient the world where it's like, hey, you need
the dollars for your debt, even China has given you
dollar denomenated debt, you want swap lines with US, maybe
you come over.

Speaker 1 (38:31):
And the swap line is the formal extension of the
euro dollar system. And so when the swap line is
put on with the United States and another country, what
they're saying is that your dollar system, or if your
banks hold dollars, are oper eight dollars, we recognize that,
and we're going to arrange something so that you can
make sure that you access us. It actually started the

(38:54):
other way in when the dollar swap line started back
in the sixties. They were so that the US could
bring dollars back, right because dollars were piling up abroad,
so we wanted a way to actually pull those dollars back. Now,
the euro dollar system in theory and per two thousand

(39:16):
and seven, the crisis, they rely on dollars going out
in a crisis, and so those dollars going out in
a crisis in the swap line.

Speaker 3 (39:25):
They need the dollars out to them because there's so
much debt. They don't have the dollars to repay the debt,
so we need to give them more dollars.

Speaker 1 (39:31):
Their banks have issued dollar debt, and so if their
liquidity drives up, they need a source, they need a
funding source. And so that's what the swap line is
used for today, and it can and will be used
potentially as a political tool that you only get the
swap line if your banking system adheres by our new euro.

Speaker 3 (39:50):
Dollar rules in our trading block.

Speaker 1 (39:52):
Of course, yeah, that's part I mean, yes, that's the accord.

Speaker 2 (39:56):
Right.

Speaker 1 (39:56):
You have to get the trade in a way where
you're buying more American or you're building the factory here.
As you mentioned the Germans. There BMW factories in South Carolina,
so they're doing it. He'll just say make all of
them here, or you have to make ninety percent of
the stuff here. You have to ssemble it all here,

(40:17):
and so each country will have their own way of
paying for.

Speaker 2 (40:22):
The dual public good.

Speaker 3 (40:24):
Mark.

Speaker 1 (40:24):
Some of it will be buying the weapons straight up,
and some of it will be through this multitude of tariffs,
reshoring manufacturing, restricting access to swap lines, and putting a
lid on their euro dollar systems within that part of
the world.

Speaker 2 (40:38):
Yeah, fascinating, it is.

Speaker 3 (40:40):
It's so fascinating. It seems like, I mean, we have
no idea how this turns out, obviously, but when you
live from a historical perspective and then you start to
see the game board starting to sort of be laid
out by listening to them and reading their papers and
things like that, it seems clear where we're going. It's
what does the path from here to there look like?
It's like we're in a jung We can see the

(41:00):
mountain top, but we don't know every twist and turn
we're gonna have along the way. So it's pretty interesting.
I want to I want to pivot into the old
system and now into the new system. So sort of
what your book is written about this new age, the
Bitcoin age and something that you know, I still haven't
got my head around, you're maybe still trying to figure
it out. We all are is sort of we have

(41:21):
gold and bitcoin being forced into the world. And when
I say forced into the world, I mean bitcoin specifically
because the United States has agreed to or decided to
have a strategic bitcoin reserve. They're talking about a sovereign
wealth fund, so sort of maybe forcing that into the world.
But then we also have them allowing gold to really
maybe take off, if you will. Obviously there's been a

(41:43):
lot of talk coming out of the Trump administration about
revaluing gold things like that. So we have these two
other assets that seem to be almost maybe contradictory to
the dollar remaining a dominant store value like they seem
to want it to be, with treasuries and whatnot.

Speaker 1 (41:59):
So when we talk about the layered money pyramid, US
treasuries at the top, US government is above that and
so what they use.

Speaker 3 (42:08):
By the way, for everybody listening, Nick has written two books.
So the first book was Layered Money, the next one
is the Bitcoin Aid. So we're talking about both, but
he's referencing the layered money, so you might want to
read that book to you.

Speaker 1 (42:17):
That's right, And so at the top of the pyramid.
We have the US government above US treasuries. So if
the US government owns gold and bitcoin marked to market it,
what it does is it gives a way to guarantee.
It's a guarantee on the liability. So the way that

(42:41):
a capital structure works is that you have assets that
are funded by debt and equity. Well, if there's equity
in the country, and the country has a lot of equity, right,
the United States government itself has a lot of equity. Right,
all of that equity shows up as assets as long

(43:03):
as there's not a leverage against it and borrowing.

Speaker 3 (43:07):
Also, that's mine's liabilities.

Speaker 2 (43:09):
That's right.

Speaker 1 (43:09):
And so in a in a liquidation scenario, obviously, in
a corporate liquidation scenario, the liabilities have a claim on
the assets of the entity. And so if you have
all these US treasuries and you have the government with assets,
obviously you can't convert a treasury to bitcoin in the future.

(43:32):
And I'm not projecting that at all. But if the
countries go back to more of an equity based system
in their own mentality, even where the assets of other countries,
it's not just US treasuries, but it's US treasuries, golden bitcoin,
that there's real equity that's non credit based that can

(43:54):
anchor so bitcoin. What gold did for the world for
centuries was it sets an anchor so that you can
devalue your currency versus gold. It gives them that flexibility.
So in the future, if you want to devalue your
currency versus the dollar or something, you might have to
have real assets on your balance sheet for the US

(44:16):
to even let you access the swaplan or let you
do something or take bitcoin or gold as tribute, because
that's something that we've seen all throughout history, is that
to participate in our system, you have to pay into
the system.

Speaker 2 (44:31):
So maybe the tribute to.

Speaker 1 (44:35):
Be part of the club like Amazon Prime is you
have to pay in gold or bitcoin. So when I
think about the future and then setting up a strategic
bitcoin reserve, is it possible that the strategic Bitcoin reserve
is simply the receive address for the United States government?

Speaker 3 (44:54):
Possibly yes, and country is paying tribute in bitcoin the
received address going in that way, that's correct. Yeah, there's
a lot of talk about the strategic Bitcoin reserve. Is
it necessary? Is it not necessary? I made a video
recently talking about China's second fatal mistake, and I was
referencing it back to China's first what I called fatal

(45:15):
mistake was in eighteen seventy three when silver was demonetized.
The world moved to a gold standard, and China said,
we got a ton of silver, We're not going to
the gold standard. And that's fine. Everyone comes at the
price they deserve, right, So China decided not to, but
then silver got devalued. They lost about thirty percent of
their purchasing power. They eventually capitulated, however, that sort of

(45:36):
knocked them out of the world order. So a lot
of people think, with the strategic biccoin reserve, it's not necessary.
Why should the government use our tax dollars to buy
things like that? Is it really strategic, because like it's
not like oil, like we need oil, it's just bitcoin.
But in that frame, you see like if China or
another country decides to come over in five years or
ten years, do they get twenty third percent devaluation? Does

(45:57):
it repeat again?

Speaker 1 (45:58):
So I think that that the I want to bring
up one thing about Trump again. One of the first
things that he said was we're gonna go to Fort Knox.
We're gonna go see if the gold is there, and
do you think that that's just Trump randomly saying something. No,

(46:19):
that's part of the plan. And so we talk about Bessent.
What a student of history he is. He mentioned gold
and bitcoin together in the same sentence on the all
in pod. Yeah, so you have to take their word
for it that they're thinking about it. So then I
would argue that to people that say it's not strategic,

(46:43):
why would they need strategic It's not like oil, I
would argue that that is completely not the case. If
we are going into a Breton Woods too, mar a
Lago and they've hinted that golden bitcoin are things that
they're thinking about, and it's not just thinking.

Speaker 2 (47:03):
They said we're going to go to Fort Knox and.

Speaker 1 (47:05):
They did a they created a strategic bitcoin reserve, so
they're on the policy side of it already. What they
are saying is that bitcoin is a strategic part of
the maral Lago Accord.

Speaker 2 (47:21):
Digital currency. The digital Currency Executive Order came before the
bitcoin order.

Speaker 1 (47:27):
Yep, the stable coin stuff came before the bitcoin order.
So they see bitcoin as an anchor to digital currency, right,
Because this is what I wrote about this in Layered
Money bitcoin to stable coin swap atomic swap is the
new is the new agreement, And I'm just realizing it

(47:51):
right now. Actually that that is, I mean, that's that
is the future, the bitcoin to stable coin atom swap,
setting the market for currencies and for the dollar, and
having the ability to swap stable coins for bitcoin through

(48:12):
a market maker, but being able to do that anchors
the world. Re anchors the world in a whatever period
of economics.

Speaker 2 (48:22):
You want to take.

Speaker 1 (48:23):
The gold standard, the gold exchange standard, the Breton Woods Agreement,
they all have an anchor. They all attempt to have
an anchor. They all need something at the top of
the monetary pyramid. That is the science of monetary hierarchy.

Speaker 3 (48:39):
That's what the goldbugs would say, is that only gold
can work because what happens is when via currencies inevitably
blow up, which they always do because of human intervention,
you need to relaunch them. But they must be anchored
to something. And so that'suppose I hear from the gold bugs.
And even when you look at even like say Zimbabwe,
they would relaunch but anchor to the dollar. But you
need to anchor to something. And I think that's the

(48:59):
point you're saying so maybe in this new world is
anchoring to gold and bitcoin.

Speaker 1 (49:03):
Yeah, that is the world that I see unfolding today, the.

Speaker 3 (49:08):
Interim step the process that we're going through.

Speaker 1 (49:10):
Right, And so if you just observe the price action
of each of these two assets over the last fifteen years,
that's what you're witnessing in many ways, And when you
look at currencies versus gold and bitcoin, it really helps
to look at non dollar prices too, because then you
can really see where the devaluation is happening.

Speaker 3 (49:31):
Yeah, I want to go back to something you said,
Trump randomly saying things. It looks like he randomly says something,
and that's what the media narrative is. I would reference
back to again you were saying earlier, and I agree.
You have to go and listen to these people in theministration.
You have to listen to all the things that they're
saying because they're telling us. But there was an interview
with Lutnik on the All In podcast and he was like,

(49:53):
I've known Trump for thirty five years. We grew up
in New York. We used to go to all these
things together. He's like, I've known for thirty five years,
and he said he never says things off the cuff.
He always and gets goes gets all the research first,
and he knows exactly what's going on, and then he'll
only start talking about it after that point. So to
the meeting because he kind of like throws things out randomly.

(50:15):
You think he's talking randomly, but per Lutnik, thirty five
years they've been working together, he's like, he never does that.
He's like these trump thing or I'm sorry, the tear
off things. He's like, he's been talking about that since
the eighties. He's like, it wasn't like I brought that
to him. I started working for him, He gave it
to me. And so I think that's just an important piece.
We don't know if that's wrong or right, but take
it from someone who's been knowing him for thirty five years,

(50:36):
and then I think for me, that adds a little
bit more gravity to the things that he's saying. To
your point, like when Biscent talks about golden bitcoin together
at the same time, like we should certainly be listening.

Speaker 1 (50:46):
He was talking about Japan dumping in nineteen eighty eight,
and that you can you can take the string right
from that comment about Japan in the late eighties to today.

Speaker 3 (51:00):
Yeah, I want to get into the core thesis of
your book, the Bitcoin Age, and how really it talks
about all of this, But I just want to go
into one more topic first, because one thing that's talked about,
just at least I've talked quite a bit and sort
of it's gaining more momentum is global liquidity. Michael Howell
has been talking about it, you guys the Bitcoin Layer,
which by the way, is maybe my favorite newsletter to

(51:24):
keep me up the date on things. I try to
curate my news sources because it's hard to stand on
top everything. The Bitcoin Layer. We'll link to that down below.
Nick Nick and his team does an amazing job with that.
But you've created your own global equity layer. I like
that you actually told us how you created it. Unlike
Michael Hole it's like this black box. Ralph Paul Real
Vision's got one as well. But it seems that back

(51:45):
to we were talking, I think before we start recording,
Stanley druck and Miller the greatest of all time. He
realized early in his career was liquidy moves assets. You
measure global liquidity. We can get into, you know, bitcoin
moves off of global equity with an eight to twelve
week lag all those things. But my bigger question is,
in light of all of this, with the tariffs and

(52:05):
the trade wars and the angling for dollar supremacy and
all that, what does that do to global liquidity in
the short term.

Speaker 1 (52:13):
In the short term, it hits it hard because one
of the main components of our index is bond volatility.
And so we were just talking about market maker stepping
back from the options market, basically saying I'm not going
to write you any options because I don't know what's
going to happen. When they do that, it makes the
whole system less able to create new money.

Speaker 3 (52:36):
Why does it make the system less able to make
new money?

Speaker 1 (52:40):
Yeah, so it comes down to collateral. When we think
about the way that our index is structured, we use
the asset side liquidity approach, and that's something that it
really sets us apart. I think that if people are
interested in liquidity as a concept, and people that have
liquidity indices, they need to understand are you using a

(53:00):
liability based metric or an asset based metric. That's the
first thing people that quote global M two or any
sort of M two based liquidity even when we think
about FED liquidity, which is you know, when the Treasury
General account goes up or down, or reverse repo goes
up or down. Those are all liability based metrics. Okay,

(53:23):
liabilities in the system today are deposits and shadow money
like repo, So an M two isn't going to capture
shadow money. And it's also the result of credit creation,
which can come from assets. So that's why we use
an asset based measure. We got that inspired by Michael

(53:46):
house Global Liquidity Index. I basically picked his brain over
the course of the last couple of years trying to
ask him, Hey, what's in it, how do you make it?
And without trying to ask him what the formula is
really trying to underst so people can read his book
Capital Wars and understand where that liquidity based metric comes from.

(54:08):
What you said earlier, about three hundred trillion in US
dollars denominated debt but only one hundred trillion in cash.
That is why we use asset based liquidity because the
asset side needs to get funded and the asset side
has to roll its money based off of only one

(54:30):
hundred million in liquidity out there.

Speaker 2 (54:32):
And so.

Speaker 1 (54:35):
The reason that we measure assets and collateral is that
if you have treasuries, treasuries are the asset base of
the financial system. When they go up in price, it
makes banks more able to create new money because mark
to market, the whole portfolio goes up in price, and
you multiply that throughout the rest of the financial system.

(54:58):
Falling interest rates which means rising bond prices, falling dollar
which means the ability for foreign countries to borrow more easily,
and falling bond volatility. All of those things boost the
size of the asset base of the banking system, and

(55:20):
that in itself allows liabilities liability money, whether it's deposits
or shadow money, or the printing of trades, to just
interest rate swaps when they get created out of thin air.
They do that because the bank is confident that its
asset base is fine, not that rates are rising, volatility

(55:42):
is spiking, and the dollar is spiking. All of that's
going to hit their ability to create money. So sorry
for the long answer, but that's what we're constructing.

Speaker 3 (55:52):
Not just the monetary supply liquidity going up. It's even
the ability to create that's correct.

Speaker 1 (55:58):
It's not the supply of money. The supply of money
is a liability deposits M two. That's a liability that
is supply.

Speaker 2 (56:07):
It's not.

Speaker 1 (56:08):
Of course, assets and liabilities match, so of course supply.

Speaker 2 (56:13):
Of money will go up when the assets go up.

Speaker 1 (56:16):
But liability is not the way that we measure it,
the way that I feel like liabilities or M two.
It's a trailing liquidity index. The leading one are bond
prices today, volatility today. That doesn't show up in M
two today. But we want to know what's happening today
in the market. Why did stocks crash today because bond

(56:39):
volatility exploded. When bond volatility explodes, market makers step back,
they stop printing trades. Liquidity seas is up, somebody has
to sell somebody's margin called then it's tight, and you
see how that happens. So we want to know what's
happening right now, and that's what we're trying to build.

Speaker 3 (56:57):
So that's so right now now we're in high volatility,
and so that means the global equity takes a little
bit of a hit. That's in the short term? Is
that to us centric? So back to maybe the second
goat of all time, George Soros. He has something he
called the imperial circle. Right, So then you have basically
money flows around the world and specifically when you're looking

(57:18):
at global assets like bitcoin or other commodities for example. Right, So,
like that's certainly US centric, But what about these other
countries that are forced to start debasing their currencies right now?
We had obviously in Europe and Germany specifically, we talked about,
you know, increasing five hundred million dollars of debt to
build up their military. You have China dealing with their
own problems over there, trying to inflate their currency. So

(57:39):
how does that affect globally? I mean, is it just
you just extrapolate that to the globe or are we
looking at that to US centric there?

Speaker 1 (57:45):
Yeah, you know, over the last few years, Mark, I've
joked around that gold is old, and you know, just
this whole idea that gold is old. Right in a
bitcoin world, it's it's exciting to think about the future
and a bitcoin standard. Well, gold is no longer old
in the Mara a Lago era, it's not.

Speaker 3 (58:06):
We making it sexy again.

Speaker 1 (58:08):
Well, if you think about the breakout, we flagged it
at the bitcoin layer when it broke out twenty two hundred,
we said, you know, three thousands a lock here, and
that was about I think one year ago. We could
see so the market was already telling us something was
happening with gold. And so the answer to your question
the devaluation, the bond volatility, what is hitting What is

(58:32):
bond volatility hitting. It's hitting stocks, it's hitting corporate bonds,
and it's bitcoin far less than I thought it might
have in this type of event. Bitcoin is held in
really well, but it's still ticking most of the time
with a stock market. But gold is at an all
time high. So bond volatility is not affecting gold in

(58:53):
a negative way.

Speaker 2 (58:54):
It's it's potentially doing what it's supposed to do.

Speaker 1 (58:58):
It's potentially happening at the same time in the same portfolios.
So that's what it's really hard to wrap my head around.
But I'm a price action analyst, so I'm watching. Yeah,
I watch daily returns, but I watch I watched five
minute candles because in less, you're so crazy unless you're

(59:20):
I and I only do that when it's volatile. Yeah,
sometimes I won't look sometimes I won't even look at
anything besides a daily or a weekly candle for weeks
or months, even but when it's moving like this, I
move to the five to fifteen minute candles that tick
charts because I want to know who's buying and selling what.
At the same time, I want to know what the

(59:41):
correlations are. I want to know, And it's it's one
of those things where right now, if you watch the
gold price action reaching all time highs, the last three
candles have been all time high candles on gold where
above three thousand and two hundred today as of this recording.
It's doing this with all the bond volatility. It's doing this.

(01:00:05):
It's not like stocks have bounced back way up. They
bounced a little bit, yeah, and are still chopping around.
It's all within the range of you know, the current
volatility index. So it's it's it's amazing to watch gold
re emerge right now as potentially the anchor of the
financial system until we get the Marlago cord.

Speaker 3 (01:00:27):
Would you say that's in contrast to like in two
thousand and eight or twenty twenty, when the you know,
s and P five hundred dropped, gold dropped with it.
And so now what we're seeing to what you're saying, now,
we're watching stocksdrop, but gold is going up.

Speaker 1 (01:00:38):
That's why I watch correlations and in the minute stuff.
If you watch everything, you know, risk off, everything dumping,
you don't get golds pump until the QI is announced later.
You don't get it on the volatility event. So that's
exactly the point here and why I do switch into

(01:00:59):
those five minutes candles when we're in volatile times.

Speaker 3 (01:01:03):
Now. You had said earlier, back to your book the Bitcoin,
the Bitcoin Age, you had talked about how it's not
just about Bitcoin, it's about this whole age of the
financial system that we're in right now. So tell us
the thesis of the book and how that particularly fits
into this sort of world that we're seeing sort of
unravel right now.

Speaker 1 (01:01:20):
Bitcoin has established itself as a decentralized store of value
for the next Internet generation. I believe that the Bitcoin
age started sometime around twenty sixteen, when it became clear
that it would be officially part of the financial system

(01:01:41):
in twenty sixteen.

Speaker 2 (01:01:42):
And so that.

Speaker 1 (01:01:43):
Event where was the CME coming out and saying bitcoin
futures and the indexing of bitcoin's price based off of
actual bitcoin exchange data, not just some derivative, but the
physically settled price at a certain time. On a bitcoin

(01:02:03):
exchange linked into the financial system. We got futures that
went live in twenty seventeen. Obviously ETFs in twenty twenty
four as an echo.

Speaker 2 (01:02:11):
Boom of that future.

Speaker 1 (01:02:13):
The ETF approval was simply an echo boom of twenty seventeen.
So that is really why I use that twenty sixteen
moment as the graduation. Before that Bitcoin is a rising star,
and after that Bitcoin is certified. But it's just it
takes time for people to see it.

Speaker 3 (01:02:33):
Right.

Speaker 1 (01:02:34):
We get events like the Strategic Bitcoin Reserve which make
people much more aware, but the process had been building
for quite some time.

Speaker 3 (01:02:43):
It still continues to amaze me. I mean, I was
in bitcoin in twenty sixteen. It wasn't clear to me,
and I remember obviously that happening, and it still seemed
like layer ones we're up for grabs in twenty seventeen,
twenty eighteen. But you know, every time one of these
things happens, it becomes more cemented, and even today, to
your point, with the strateg Bitcoin Reserve, one of the
biggest things we would always hear, at least for me,

(01:03:04):
would be but what if the governments make it illegal
and it's like that's gone. Now. Yeah, there's so many
people that just still don't believe in this future. But
so it's a legitimate asset. Does it expose sort of
what I should say maybe the other way, does the
more this mariologal accords that I should say, the need
for these types of mariologal coords really expose the current

(01:03:27):
existing financial system for what it is and really the
flaws of it and always need to be reset. And
how these trade imbalances when specifically around the credit sort
of gets out of whack over time, and does it
really like expose itself and then at the same time
highlight Bitcoin.

Speaker 1 (01:03:41):
Well, I think that the system can survive if it
rains in the leverage, because then you know, fractional reserve
banking can operate in a responsible way. And I don't
think that that's a I don't think that that's a
thesis because we actually saw fractional reserve banking for millennium.
I mean, the idea that money is only commodity money

(01:04:05):
and expands when credit is based off commodity, it's not
historically true. Credit and the extension of credit is what
we need to let our economies function. If you restrict
the access of money to commodity money, you prevent human

(01:04:25):
exploration and expansion. I mean, if gold or bitcoin are
growing at three percent or one percent a year, you're
saying that we can only have four percent money growth forever,
and that you're limiting the amount of productivity for the world.
Buy simply your ability to get better plus the four percent,

(01:04:46):
and the world has put a referendum on that. I
believe in the last hundred years they say, no, we
want to grow now. We want to create money now,
borrow from the future, and and extend now. For the
last fifty years since we went off the gold standard,
and even in the decades before, with the advent of

(01:05:09):
the Euro dollar system, fractional reserve banking expanded and expanded
in a way where now it's like this nine sigma
events happening every few years. It's completely unsustainable at the
current level. So I believe mar Alago accord the attempt
is to rain in some of it, to re establish

(01:05:29):
an equity component to it, and in that way extending
the life now. Don't I can't project after that or
but I can see what they're trying to do and
whether it will work or not, and whether fractional reserve
banking can be operated in a responsible way in the future.
I don't know, but if you have an equity component
and you have less non tear of cheating currency devaluation abroad,

(01:05:53):
then maybe it does progress toward that.

Speaker 3 (01:06:00):
I agree with that. I think there's always gonna be credit.
We probably had barter and then credit before we had currency.
Right it was like I know you here, I'll give
you the wheat. I know you're good for the cow
or the wheat or whatever it is.

Speaker 1 (01:06:11):
And Mark, I want to say that, you know I
I'm now starting to understand that that's not anthropologically based,
that the idea of barter. It's actually the idea of
iowe you and you owe me. It's not that we
have to trade right now. You give me what you
have and maybe next week I'll give you what I have.

Speaker 3 (01:06:31):
So maybe it was credit first before barter.

Speaker 2 (01:06:33):
That's what that was.

Speaker 3 (01:06:33):
I mean, we're, you know, as a family, like hey,
I'll give you this, Okay, you give me that or
give it back to me later. Maybe it happened simultaneously.

Speaker 1 (01:06:40):
Money is what will settle the debt, and so that's
why money could be you know, in history it could
be bronze, or it could be auxen, or it could
be anything that you know was accepted. So money is
what's accepted. So today, right now, dollars are accepted, many
people accept bitcoin, few or accept gold online. Right it's

(01:07:02):
not something that people accept, but people accept it to
transferm wealth to themselves in the future. So whatever is
accepted is money. It doesn't mean money has to be commodity,
or it has to be credit or a credit type
of money like a dollar deposit. All of that stuff
can be used as money. What exists is the human

(01:07:23):
desire to produce, to explore, and to expand and exchange
and exchange, and in that way they'll figure out the system.
But how do you ultimately say, okay, it's time to
settle up, pay me now. In the future it might
be in treasuries, in dollar deposits, in gold, and bitcoin,

(01:07:46):
and today it honestly is all of those things, just
at varying degrees. So that's why all of those things
can be considered money. And in the future the balance,
obviously I believe, changes to weigh a little bit more
to bitcoin relative And so you ask about the thesis
of the book, Bitcoin can be compared to one hundred

(01:08:07):
trillion in cash and three hundred trillion in real estate.
Those are the two asset classes that bitcoin can compare
itself right now to obviously gold.

Speaker 3 (01:08:16):
But why only real estate? Yeah? Why not gold? Or
yeah so on market or why not collectibles or fine art.

Speaker 1 (01:08:21):
I talk about gold in the first book and how
bitcoin can and should rise to gold on a historical basis.
So historically gold is the best neutral money Bitcoin should take,
that should capture that, but the market for it is
much bigger than gold, and the reason it's cash and
its real estate. These are two ways that money is

(01:08:42):
stored over time, some of it for temporary some of
it for a long term fixed income equity. These asset
classes are part of the financial system. Some of it's
used for production, some of it's used to lend money
to production, and some of it in both of those
asset class.

Speaker 2 (01:09:00):
This just uses wealth storage.

Speaker 1 (01:09:01):
But I want to explain to people that bitcoin at
two trillion is still very small relative to what people
are holding in cash and real estate. I feel like
bitcoin and equities compliment each other. One is savings and
one is investing in production. So I don't want to

(01:09:22):
suggest that bitcoin just starts eating all of these asset
classes at once, even though it will take part of equity,
part of fixed income, and it is and part of gold.
I want to give people that really high ceiling to
where Bitcoin can expand to. If bitcoin can just be
that generational money like cash and like real estate is today,

(01:09:46):
then people can think, oh, yeah, it can go to
ten million dollars in the future. And that's what I
want people to walk away. I suggest that bitcoin will
be at one million dollars in the next several years
in the book to give people that taste of the
potential growth that you're not late, You're you're still early
in this asset class.

Speaker 2 (01:10:07):
You give them the proper context for that.

Speaker 3 (01:10:08):
Yeah. Yeah, I think about it like that's sort of
like a venture capital frame, which is like uber Okay,
what asked what markets is disrupting? What is the total
addressable size of that market? What percentage do we think
we can capture from that market? And so when you
think about you know, bitcoin disrupting just store of value assets,
you know, Michael Sailors talked about this nine hundred trillion
dollars of store bias. That's where like, what are things

(01:10:31):
people are storing their wealth in And so to your point,
you know, equities and stuff, some of that is productive
capital being loaned to those companies, are being raised by
those companies, et cetera. But one thing that I worked out.
I gave this talk at Bitcoin Mina a couple months
ago in Abu Dhabi, and it's like that nine hundred
trillion sailor says maybe half of it is store value,
half of it's productive, but whatever you want to call that.

(01:10:52):
But based off of the rate of growth from twenty
ten to twenty twenty and from twenty twenty to twenty
twenty four, twenty from twenty five now, based off the
CBO projections, the deficit of spending, et cetera, et cetera,
that basket continues to grow. So just at the rate
it's on, by twenty thirty, that should be like one
point three quadrillion. By twenty forty, that should be like

(01:11:12):
three and a half quadrillion. So then the question is
what percentage of that basket do we capture by twenty
thirty or by twenty forty. Right, And so to your point,
I what one hundred percent agree with you? Like, obviously
you're not going to eat the whole basket. But by
twenty thirty, if you get one point twenty five percent
of the basket, it gets it to that twenty one
trillion dollar market cap would be on par with gold
and Uber and airbnab captured ten percent of their market

(01:11:33):
shares in less than ten years. So one point two
five percent is totally conservative and realistic if it is
a better asset, which we think it is.

Speaker 1 (01:11:42):
Yeah, you know, when I think about where bitcoin can
go and that one million dollar price and twenty one
trillion market cap, I want people to understand that that is.

Speaker 2 (01:11:56):
My view over the.

Speaker 1 (01:11:57):
Coming years, not not something that I will have to
wait for, right, right, And so it is based on
math and.

Speaker 2 (01:12:08):
That relative addressable market.

Speaker 1 (01:12:13):
And unless you have those numbers and that frame of work,
you might not be be able to imagine one million
dollar bitcoin because that's just a random number. Actually, the
number that matters is the market cap relative to other
assets market caps.

Speaker 3 (01:12:30):
So, Nick speaking, if you're going to speak to, just
stick to the average person, the average you know, working,
middle age, working person saving dreaming of this better future,
but you're feeling anxious because you see all this volatility
and you're hearing about the system being reset, and you're
looking at your portfolios moving up and down, the whole

(01:12:51):
monetary system being reset. What would you tell them specifically
and then tell them about the time to get into
bitcoin now.

Speaker 1 (01:13:00):
Yeah, So in the book, I explain how the average
price of an American home has gone from twenty five
thousand to over four hundred thousand in the last fifty years,
and incomes have only gone up from nine to eighty thousand,
and so you would have needed two and a half
times your earnings back then. Now you need five times

(01:13:22):
your earnings to buy a home. So prices are expanding,
but in a non equitable way, really in a distributed way.
That works for some people and it works against many people.
So in that way, the credit system is built to
work against a huge segment of the population, especially those
that aren't able to actively borrow and invest from that

(01:13:47):
credit creation system, so that disadvantages people.

Speaker 2 (01:13:51):
And that.

Speaker 1 (01:13:53):
The price of a home in the last ten years
has gone from one thousand bitcoin to five bitcoin. And
to explain to people that that trend will continue, they
have to understand the long term mindset. Bitcoin is super volatile,
as we explain, it's subject to bond volatility, and it's

(01:14:17):
subject to these one in a thousand year events happening
every few years, and so that can create a lot
of fear. It can also create a roller coaster.

Speaker 2 (01:14:28):
So you know, I love the fact that.

Speaker 1 (01:14:33):
When we lead with research, what we can do is
express our opinion and lay it out for people to
the best of our ability. I'm lucky that I don't
have to trade other people's funds, you know, and time
and time the market, because even if a client comes
to you and say I'm ready to buy bitcoin and
then they experience a forty percent and you say, oh,

(01:14:54):
you know, just hold on, and then they pull their
money out, you've impaired their portfolio, though they were the
one who timed it and timed it on the way out.
So people have to take that long term mindset. And
I would also tell people that the United States of
America has the best property law in the world, and

(01:15:15):
so United States domiciled corporations broadly speaking, are investments that
are relatively good compared to other things, and so bitcoin
for savings and a long term mindset us production, those
are the areas that I feel safe to operate in

(01:15:39):
as an individual, And those are asset classes. I think
that complement each other and our positioned for the future.

Speaker 3 (01:15:48):
Great. We're gonna end it with that Nick Botia the
Bitcoin Layer, Like I said, one of my main newsletters
I read, will link to that down below The Bitcoin Age.
Get that. I'm just gonna say, get that book. And
the reason why is because of what Nick just said.
If you just try to buy a bitcoin but you
don't understand it, even done the work, even the research,
you don't have any conviction, you're borrowing Nick's conviction or
my conviction. Gets your own. We'll link to that down below.

(01:16:10):
Anything else you want to say.

Speaker 1 (01:16:11):
Uh, you guys can catch everything we're doing at the
bitcoin layer dot com, the links to my books and everything.

Speaker 2 (01:16:17):
Mark, I appreciate you having me all right.

Speaker 3 (01:16:19):
Thank you,