November 20, 2025 • 49 mins
CJ Konstantinos, founder of People’s Reserve, joins to explore why the U.S. dollar is trapped in a debt death spiral and why Bitcoin isn’t a competitor to the dollar but its necessary complement. From the dollar’s role as a medium of exchange to Bitcoin’s design as engineered money and absolute digital scarcity, CJ explains how pairing the two could extend the life of the dollar while creating a foundation for sound capital. Drawing from his own experience of buying a home with 100 bitcoin, he unpacks the painful lessons of opportunity cost and why holders need tools to unlock purchasing power without selling their BTC.
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Speaker 1 (00:00):
We have a really big problem right now with the dollar.
Speaker 2 (00:02):
We're able to print trillions of dollars, spend it into
the economy, and.
Speaker 1 (00:06):
See debt to GDP go up.
Speaker 2 (00:08):
If we don't figure out a way to strengthen our
financial position, we will get to a point where people
will not even want to use the dollar as a
medium of exchange. So what the United States needs to
do if they want to strengthen the dollar is to
take some of the money that they're printing and buy bitcoins.
In twenty nineteen, I bought my first home, a small
single family home, for one hundred bitcoin, and today I
(00:31):
look at the price of bitcoin and could have twelve
million additional dollars on my balance sheet. Instead, I have
a house that I'd be lucky to get five hundred
thousand dollars for. It makes sense when people understand where
we are and the adoption curve, you do not want
to be giving up ownership of your bitcoin. So what
we need are tools that allow people to unlock their
(00:51):
purchasing power without giving up ownership, which are financial tools
that allow you to bar against bitcoin. What does that
look like, Yeah, I think, so let's.
Speaker 3 (01:01):
Jump into it.
Speaker 1 (01:02):
CJ.
Speaker 4 (01:02):
So I'm gonna start off with a big question here,
set you up, and then we'll dig into this. So
you've said that we're in the final stages of this
currencies life cycle and we're facing a debt death spiral.
But yet when I look around, we see the stock
market as a near all time high. The official narrative
is basically a very strong economy. So what would you
(01:23):
say the vast majority of people, even savvy investors, are
completely missing right now.
Speaker 1 (01:28):
Yeah, and that's a that's a great question mark. And
first of all, thanks for having me on. I'm not
sure you.
Speaker 2 (01:33):
I know you don't remember because you're so popular, but
I actually met you at a Rebel Capitalist Live event
conference and it was really cool meet you. So it's
great to be on this side of the camera. It's
it's fun. But yeah, I think I think we are
in the middle of what would be considered a debt
death spiral and most investors are missing. Funny enough, the basics,
(01:53):
and the basics are come down to the difference between
money versus currency.
Speaker 1 (01:58):
We don't get it taught in school.
Speaker 2 (02:00):
If you go for accounting and finance, you'd think you'd
learn something like that, but you don't, So you really
have to do some deep digging into some alternative economics
before you figure out, oh wait a second, the dollar
is a currency, it's not a money. Okay, well, what's
the difference. A money is a store of value and
a currency is a medium of exchange. So a lot
of people look at bitcoin as being a competitor to
(02:20):
the dollar. A lot of people who misunderstand bitcoin investors
in the marketplace think bitcoin is trying to compete with
the dollar. I think they're complementary. And the dollar is global,
it's worldwide, it's the reserve asset. Why in the world
would you try to compete with a medium of exchange
technology that has already captured pretty much one hundred percent
(02:41):
of the global economy. It doesn't really make that much sense.
But what we know about the dollar is that it's
not a store of value. It's really bad store of
value because it can be issued at infinum and ever
since twenty twenty, we've seen that peak up dramatically, which
is waking people up to the fact that a money
is a store value, and to be a store value,
(03:02):
you can't increase the supply at ridiculous rates. Now we
have a natural money in gold, which through its cost
of production, limited its supply expansion. But with Bitcoin, we
have not just a natural money, we have an engineered money.
We have something that, through computer code, introduces the concept
of absolute digital scarcity. For the first time in human history,
(03:24):
we have a monetary asset that supply cannot be expanded.
That's a really hard pill to swallow, and it's really
hard to understand that the only way to get the
increase of supply and bitcoin, the only way to get
the circulating bitcoin to increase is to get the price
to go up.
Speaker 1 (03:42):
So because of that, I believe that that was.
Speaker 2 (03:44):
A strategic design, and therefore I call it engineered money.
So we have this savings technology that you can use
along with spending technology being the dollar, and some magic
happens when you do that. So I look forward to
getting into barring against bitcoin with dollars dollars being the
best way to spend your bitcoin without giving up ownership.
(04:06):
But the wild time we're moving into right now, and
I do think many are missing it.
Speaker 4 (04:11):
So what you just said I think is then bitcoin
is this new engineered type of money that's solving a
different need or a different purpose than what the fiat
currency is doing.
Speaker 3 (04:21):
But again, so is the FIA.
Speaker 4 (04:24):
Currency at the end of the final stage of its
life cycle or it's sort of run the course and
now we need something else to complement it.
Speaker 2 (04:31):
Well, I think that we were in a position to
where the currency itself could somewhat serve as a store
of value. So I do believe that if the currency
system wasn't abused, and the amount of dollars wasn't expanded
at the rapid rate that we see today at least
two trillion dollars in our ongoing deficit, then theoretically the
(04:55):
dollar could maintain its value. And if credit was not
extended at infinum and the supply of dollars declined, perhaps
a dollar could even gain value theoretically. So it has
the ability to actually function that way. But because we
have put ourselves in this position, because we have allowed
ourselves to conform to the idea that something is too
(05:18):
big to fail, we now find ourselves in this situation.
See with bitcoin, when we went through all of the
rehypothication scheme of version one of bitcoin lending, with Genesis
and FTX and block Fi and Celsius, and we had
this big rehypothecation period, and when it collapsed, we couldn't
print the bitcoin, so we failed. But that failure is
(05:38):
a critical part of the business cycle. And in the
traditional markets, we don't get that part of the business cycle.
We print over it because it's too big to fail.
And when you don't allow companies to fail, what you're
doing is you're creating zombie companies. And I think we've
gone so far now that these these zombie companies have
(05:59):
effect the economy, and we have a zombie economy, and
that's why we're able to print trillions of dollars, spend
it into the economy and still see debt to GDP
go up, still see our financial position become less and
less healthy. So we have a really big problem right
now with the dollar. And if we don't figure out
a way to strengthen our financial position, then yeah, we
(06:24):
are at the end.
Speaker 1 (06:25):
Of our life cycle.
Speaker 2 (06:26):
We will get to a point where people will not
even want to use the dollar as a medium of
exchange because if they don't spend it immediately, they're going
to be able to buy less and less stuff over time.
And we're seeing that ramp up since twenty twenty, and
people are paying attention, but we haven't gotten to that
hyper inflationary point. But the only difference between inflation and
hyper inflation is trust. So if we continue to abuse
(06:50):
the printer and abuse the trust of we the people,
then we will get to a point where dollars will
end up worthless on the street. And I don't want that,
and I don't think anybody in right mind really wants that.
Speaker 4 (07:02):
So would you say that then because of this endless
money printing, the monetary debasement, which I agree they say
there's only two things and certain in life, death and taxes,
And I would also probably put money printing there, since
that is not scheduled to end anytime soon, and it's
pushing this to the final stages.
Speaker 3 (07:19):
As you're saying.
Speaker 4 (07:20):
Also, most people at this point know that they shouldn't
be trying to save their wealth in dollars. There with
that meme of Michael Saylor saying something about we have
a word for them, we call them poor. I think
it was something like that. I'm sure you thought, which
is why then, as I said, at the same time,
we see stocks making new all time highs. But I
think what you're saying, though, is that because the dollar
(07:41):
is being printed to infinity.
Speaker 3 (07:44):
The debasement is continuing to go on.
Speaker 4 (07:46):
If we continue down this path, nobody's going to want
to use it a loss of trust, hyperinflation. But then
are you saying that potentially bitcoin could help extend the
runway in the life of the dollar.
Speaker 2 (07:57):
Yeah, absolutely, because what we're doing right now is we're
printing those dollars and we're investing them into the economy.
But we're printing a dollar with interest called a dollar
four principle being a dollar four cents being the interest,
and we're investing it. And the return on investment, depending
on the tax bracket of the vertical you're investing in,
(08:18):
is really maybe thirty to fifty percent. So we're investing
a dollar, we're only getting back thirty to fifty cents.
We need to get back more than a dollar four.
And because we're not getting back more than a dollar
four through that investment, the debt continues to grow, the
unfunded liabilities continue to grow, the debt to GDP continues
to grow. We become in a weaker and weaker position,
(08:40):
and I consider this a matter of national economic security.
If you look at El Salvador, they have some of
the best performing traditional bonds in the world. Number one
because Bukelly is cleaning up the country, but number two
because they put bitcoin on their balance sheet, and what
that does is it strengthens their financial position. So if
something were to go wrong, could tap into that twenty
(09:01):
four seven three sixty five liquid marketplace that bitcoin is
to fix that problem. So what the United States needs
to do if they want to, I think strengthen the dollar,
is to take some of the money that they're printing
and buy bitcoin. Because when you put bitcoin on the
balance sheet, if you take that dollar you invest it
into the economy, you're not getting back principle plus interest.
(09:21):
If you invest it into bringing out natural resources, it's
going to take significant investment and time to actually see
any revenues from that. Now, I'm pretty sure nobody wants
to sell Alaska to Russia. So we're limited on how
we can monetize the asset side of our balance sheet,
and we're limited on what assets we can invest in
to amplify the performance of the assets side of our
(09:42):
balance sheet. And then here comes this magic internet money bitcoin,
but it's absolutely digitally scarce, and it's engineered money, and
it was strategically designed to store value over space and time,
and when we take that dollar and invest it into bitcoin,
yes there will be ups and downs, but in the
long run, one bitcoin's five year compounding annual growth rate
is over sixty percent. It's ten year compounding annual growth
(10:05):
rate is over eighty percent. Where the adoption rates are
following that of the Internet, and we're at the very
beginning of it. Everything here, all the signals are telling
us if we print some money and buy bitcoin, or
if we use budget neutral strategies to accumulate bitcoin and
we get it on the asset side of our balance sheet,
for the first time in a very long time, we
(10:26):
have a chance for the asset side of our country's
balance sheet to outgrow, or at least the growth of
the asset side to outpace the growth of the liability side.
Right because we have over one hundred trillion dollars of
unfunded liabilities over the next generation, we're going to have
to pay those bills, We're going to have to fulfill
those promises. We need an asset that can keep up
with the spending that we've promised to do. And if
(10:49):
we don't find that, the only option is dilution. So
it's a catch twenty two because you know, if the
FED lowers interest rates, and I know Pal's got his
Jackson Hole meeting this weekend, I'm sure he's going to
have a fun time paying back Trump for visiting him
on his Federal Reserve construction site. So I don't think
anything friendly is going to be coming from this meeting
(11:09):
this weekend. I think Pal's mission is probably to get
bitcoin back under one hundred thousand dollars. But if he
lowers interest rates, there's seven trillion dollars sitting in money
market funds right now, of which over three trillion of
those dollars is retail. So just like that, retail money
and corporate money left the banks when they were getting
(11:31):
no interest because the banks were holding those treasury bonds
because they were forced out the risk curve from ZERP.
When they move back out of the money funds, where
are they going to go. They're going to go into bitcoin,
real estate, stocks, and other goods and services. We're going
to get an influx of demand against a limited supply
of goods and services and hard assets, and prices are
(11:51):
going to go up. But what if he raises interest rates, Well,
then at the same time. If you raise interest rates,
the interest expense is going to go up. And when
the interest expense go up, you have to print that
money to service the debt. So no matter which way
he pulls this, we have to print money. But when
we print that money, if we take a little bit
of it and we put it in bitcoin and we
allow bitcoin to do what it was engineered to do,
(12:13):
we can actually salvage the dollar at least buy some
more time to fix the real problems, to address the
problems in a truthful way, and try to move forward
rather than just kick the can.
Speaker 3 (12:24):
Yeah.
Speaker 4 (12:24):
So at the time of this recording, it is August twentieth,
twenty twenty five.
Speaker 3 (12:28):
Just so yeah, everyone can understand what he's talking about
the upcoming meeting.
Speaker 4 (12:32):
As of today, I looked earlier on the CME the
odds of a rate cut are now eighty five percent,
So by the time you're listening to it will probably
be on the side of that. So we'll see how
things shook out. But I think one way or another,
whether it's happens at this meeting or the next meeting
or not. Until Trump gets pal out and replaces him,
rates are coming down.
Speaker 3 (12:51):
That is almost a certainty.
Speaker 4 (12:53):
Every day we see headlines about inflation and dead and
diminishing control.
Speaker 3 (12:57):
Over our own money.
Speaker 4 (12:59):
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(14:10):
it's for generations.
Speaker 2 (14:12):
Well, let's remember they've tried to lower rates and the
market didn't necessarily agree with them. So I think one
of the biggest risks is the Fed comes out even
if Pal doesn't do it, and next May he gets
replaced by Trump's appointing, and you know that's going to
be a pro Trumper who's going to push rates down.
Even if they state the federal funds rate down, which
(14:34):
is the front end of the yield curve, it's really
going to be the free market on how they treat
the two year. So if the two year and the
ten year don't participate and don't get anchored down by
the stating of the front end of the yell curve,
lower all the rest of the interest rates, like your
mortgage rates are not going to follow down the federal
funds rate. It's an anchor rate, but it's an interbank
(14:56):
lending rate. The regular people are not banks, so we
don't have access to an inner bank lending rate. Now
it is an anchor rate, so everything's supposed to come
down because of the arbitrage opportunities that are created between
institutions and the products that they have access to at
the Federal Reserve, like the repo market. But that doesn't
mean just because they say the rate goes down that
(15:17):
the rate is going to come down. And if they
state the rate down and the rate doesn't come down,
they have a really big problem. I think that's why
they've been so hesitant. They'd tried the lower it a
couple times. The free market didn't agree. The free mark
is saying, look, you're diluting I'm lending you money. You're
giving me cash equivalent collateral while I'm holding this collateral.
(15:37):
You're printing two trillion more units of this collateral every
single year. The collateral is being diluted too fast. I
cannot lend you this money at a lower rate. I
am demanding this rate so that I can at least
break even. And I think at this point, real interest
rates are negative, So the cost of cash flow is
a negative real rate of return at this point, and
(15:59):
that dynamic I think, and I think sophisticated investors understand that.
But most investors do not understand that at all, which
is exactly why we see market prices where they are today.
Speaker 4 (16:11):
Yeah, certainly, so, you know, I have a bitcoin savvy audience,
most of them, most of the people here are already
probably buying bitcoin, owning bitcoin, things like that. And to
the point that you're making, I mean, bitcoin's down a
little bit off of it's all time high from just
a couple of days ago at the time of this recording.
Maybe it'll come down a little bit more, maybe it won't.
We don't know what's going to happen the next couple
of days. But to the point that you're making, we
(16:32):
sort of know the direction it's going over the next
months and quarters and certainly years ahead as that endless
debasement kind of continues. Regardless of which way that works out.
Like you said, damned if you damn damned if you don't,
if rates come down or they don't, either way, more
money printing is coming on the back of that. Bitcoin
is the most sensitive asset to global liquidity, and so
of course it goes up the most. Now for a
(16:53):
lot of my audience who's already been listening to this
for a long time, they've been dollar cost averaging into
bitcoin for a long time. Maybe they've seen, hopefully they've
seen a lot of appreciation in that bitcoin stack.
Speaker 3 (17:03):
I've seen that happen a lot, But a lot of
people end up in the dilemma. Jack Malers called it
the Hoddler's dilemma. So I bought bitcoin. I did what
I was supposed to do. I held like I was
supposed to.
Speaker 4 (17:16):
I have a lot of wealth, supposedly on paper, but
my life hasn't gotten any improvement. Michael Saylor says, you
never sell your bitcoin, So how does a bitcoiner solve
that problem?
Speaker 2 (17:28):
Yes, well, Mark, no one knows it better than not.
Welcome to our lives right Bitcoin since twenty thirteen, and
the number on the screen keeps going up. But life
doesn't change until you can leverage that wealth, so you
can unlock that purchasing power. And that's exactly what we
do at People's Reserve. We're designing bitcoin power finance products
(17:49):
that enable the responsible savor of bitcoin to unlock the
purchasing power of their bitcoin without giving up ownership. And
the whole idea behind People's Reserve really started with it's
my own failure, my own mistake, and that was in
twenty nineteen. I bought my first home, a small single
family home, for one hundred bitcoin, and yes, yes, I
(18:10):
knew it was a bear market, but my wife was
pregnant and relative to my overall bitcoin savings, if I
didn't do it, she would kill me. So I had
to buy that house, you know. And today I look
at the price of bitcoin, and you know, I could
have twelve million additional dollars on my balance sheet. Instead,
I have a house that I'd be lucky to get
five hundred thousand dollars for. So it makes sense when
(18:31):
people understand where we are in the adoption curve. Right
we talk about that S curve. At adoption, we are
at the bottom of the S curve. There's an ongoing
transfer of wealth and it is about to accelerate right now.
You do not want to be giving up ownership of
your bitcoin. It is the most valuable asset on your
balance sheet by far, It has the greatest potential by far,
(18:54):
and if you're in a position where you have to
give it up, that could.
Speaker 1 (18:56):
Cause long term pain.
Speaker 2 (18:59):
In my case, you know, I could have twelve million
additional dollars that I don't have access to now. Luckily
I was a responsible saver of bitcoin for a long
time and it made sense. But not everybody's in that position.
So what we need are tools that allow people to
unlock their purchasing power without giving up ownership, which are
financial tools that allow you to bar against bitcoin. But
(19:19):
the biggest thing, the biggest risk in this, and again
this is from another one of my failures. So it's
funny how in life we end up learning most from
our failures. You know, and I'm sure a lot of
your listeners may have been in a similar position. But
going into twenty twenty, going into what was COVID, we
were also going into the Having. So as someone who
had been part of two cycles, I figured this is
(19:40):
a no brainer. So of course I'm on bitmex. I'm
levered up, baby, We're going into the having.
Speaker 3 (19:45):
Let's go lever up.
Speaker 1 (19:46):
This is going to be fun.
Speaker 2 (19:48):
Yeah, And then we have a liquidity crisis, right, and
then we have COVID and price falls from ten to five,
and I'm getting margin calls and I'm posting a little
bit of extra margin. I don't know how much lower
can go, you know, fifty percent in such times very
is a lot, right, Bitcoin's volatile, it'll bounce back up. Well,
no overnight went below thirty eight hundred dollars, liquidating forour
er bitcoin gone. So again another experience I had where
(20:12):
it's just a horrible experience to see bitcoin go from
ten thousand to blow thirty eight, lose a portion of
your bitcoin that you had leveraged and borrowed against, and
then a couple months later it's right back where it was,
right back at the ten thousand point dollar point. But
it gave me the idea of for our products at
People's Reserve, specifically our bitcoin powered mortgage product, that there
(20:33):
is the ability, there is the chance to eliminate liquidation risk.
So in that same COVID like scenario, if you came
to People's Reserve to get a bitcoin powered mortgage, what
we do is we cross collateralize the real estate with
the bitcoin, and by doing that we can eliminate liquidation risk.
So as the price of bitcoin goes down, every ten
(20:54):
percent it goes down, you your interest rate goes up
fifty basis points or half of one percent. So during
the COVID example, you go from ten thousand down to
five thousand, that's five deviations or fifty percent. That's two
and a half percent. So for a couple of months,
you would have paid an interest rate that was two
and a half percent higher than your starting rate. But
as bitcoin recovered and rebounded, for every ten percent price gain,
(21:18):
you get those points back. So by the time you
know two months later, your rate back at your original terms,
plus you.
Speaker 1 (21:24):
Had no liquidation risk.
Speaker 2 (21:25):
You bought your new home, and you can actually sleep
in your new home because you don't.
Speaker 1 (21:29):
Have to worry about getting liquidated.
Speaker 2 (21:31):
This is something that we're really excited to offer to
the marketplace and to innovate with.
Speaker 4 (21:35):
So I have bitcoin, I've been holding bitcoin. I have
option A, which is to sell my bitcoin and buy
the house, which, by the way, you know, lost opportunity
costs is what it is. And to your point, you
could have had twelve million dollars study of half a
million dollar house. That being said, what you have is
you've had a house for your family for the last
(21:56):
however many years, and it's priceless. Right at the end
of the day, I just want to just lay this
out for everybody. At the end of the day, we
don't want money. We don't want money, we want the
goods and services that money buys us. And so if
you have a family, you got kids, you want to
support them. I mean, it's worth more than than the bitcoin.
(22:16):
The last last couple of years, I built the beach
house down in Mexico.
Speaker 3 (22:19):
We've dreamed about it forever, my wife and my kids,
and my kids.
Speaker 4 (22:22):
Are getting older, and we built the We built the house,
and I had to pay cash for the house, and
it was very expensive, and so many bitcorners are like,
why would you put all that cash into a house.
Don't you know how in five years how much that
bitcoin will be worth? And I'm like why, So one
day I can buy a beach house, right, So I
do just want to kind of put this into people's minds,
like we want money to get things.
Speaker 3 (22:43):
It's a means, not an end.
Speaker 4 (22:44):
But that being said, so let's talk about how this
works for you. So you, uh, we're in.
Speaker 3 (22:50):
We're in. We're in this scenario.
Speaker 4 (22:51):
Today, we have the bitcoin. We think that it could
run to five hundred thousand million dollars in the next
five years. I don't want to sell right now at
one hundred thousand, one hundred and ten twelve whatever it
is and then miss out on that but I want
to buy the house. Now you're saying that you could
give me a loan against the bitcoin to buy the house,
or you give me the house against the bitcoin.
Speaker 3 (23:14):
But the interest rate is.
Speaker 4 (23:15):
Variable based off of where the collateralization is, what the
loan to value is.
Speaker 2 (23:20):
Yes, that's correct, and what we do is we don't
count the house is actually serving as collateral to. So
the loan is secured by the property and by the bitcoin,
and the rate is adjustable based on the value of bitcoin.
Speaker 1 (23:35):
So if you.
Speaker 2 (23:37):
Get into a scenario where you default on your payment,
because you can't get liquidated based on price volatility, but
if you default on your payment, the goal of us
would be instead of going through a foreclosure and eviction process,
which could add up to over a year and a
lot of costs from the lender side, we'd rather just
give you a call and say, hey, we've liquidated the
portion of your bitcoin to close your loan. Congratulations, you
(23:59):
now own your home free and clear. And what you
said earlier I absolutely agree with. I raised my family
in that home. I went from one kids to having
four kids in that home. So I have a lot
of great memories in that home, and I wouldn't trade
it for anything, So it is important for your listeners
to understand that. But at the same time, for those
who haven't been involved in the marketplace for a very
(24:21):
long time and are just now starting to experience the
benefit of bitcoin's price appreciation and getting the opportunity to
deploy that purchasing power using a product like this, I
think makes a lot of sense because we've taken all
the steps that we can to learn from the failures
of version one of bitcoin lending, So no rehypothication. We
(24:45):
actually have a self custody option. If you do custody
it with us, it's held in our fund, which serves
as a special purpose vehicle. So the bitcoin is not
on people's reserves balance sheet. It's separate, so there's no
way that we can hold it. There's no way that
we can leverage it or rehypothecate it. Just little things
like this that we've learned over time. A lot of
(25:07):
these fiat finance mechanics don't really work in bitcoin, but.
Speaker 1 (25:11):
At people's reserve.
Speaker 2 (25:12):
You know, I say that we're bitcoin maxis building for
Bitcoin maxis, which means we want to self custody our bitcoin.
We want proof of reserves, we want guarantees of no rehypothecation,
and we want low interest rates. It does not make
sense to me and to people's reserve that a bitcoiner
who holds the most pristine form of collateral in the
(25:32):
world and who and many times is over collateralized. Right,
Like in one of our loans, if you're gonna buy
a five hundred thousand dollars house, you have to put
up at minimum five hundred thousand dollars of bitcoin, While
with other lenders you'd like to shoot for a fifty
percent LTV, you're gonna put up a million dollars of
bitcoin to get that five hundred thousand.
Speaker 4 (25:51):
So you're saying you might do one hundred percent LTV.
Speaker 2 (25:52):
Loan, absolutely, because it's cross collateralized with the real estate.
So the value of the home is securitizing the loan
as well, and that gives them.
Speaker 4 (26:01):
How would the rate be set and how does that vary?
Because typically you look at you know, nobody buys the house.
They don't buy five hundred thousand dollars house. They buy
a monthly payment, and that monthly payment is typically from
the credit worthiness of their monthly income. And so a
lot of times most people are probably maxing out what
they can afford on a monthly basis, so that if
(26:21):
that payment jumps a couple points, it could be detrimental.
So I'm curious, like, how do you set that rate
on the low end? And then is there caps on
how high or how low it can go?
Speaker 2 (26:30):
Yeah, So we are a US based company, so the
usury rates are our caps. We cannot commit usury against
our borrowers. But our whole thesis is that bitcoin, as
pristine collateral, is the lowest risk collateral. So when you
work with us, we actually don't care about your credit score,
we don't care about your income. As long as you
(26:51):
can post the bitcoin, you can get the financing. Also
worked into our contract is a grace period, so if
you default on your payment, depending on what state you're in,
you have somewhere between ninety and one hundred and twenty
days to cure your default. So it's not an immediate liquidation.
It's not DeFi like a smart contract where it's like, oh,
this number was breached and boop, it automatically happened, then
you're done. No, it's a contractual agreement. It's a handshake.
(27:14):
We're going to look you in the eyes and shake
your hand and give you the best chance that you
can have to benefit. The other thing is is maybe
you lose your job. Maybe you have a good income,
but you lose your job, you're going through a tough period,
or you're relocating, you got to find a new job. Well,
you can pay your monthly payment from your bitcoin collateral,
and since you're initiating the loan with a one to
one ratio, you can pay quite a bit of payments.
(27:36):
You can make almost all of the payments as long
as the price of bitcoin stays stable without having to
produce any cashflow to make those payments, and that allows
bitcoin to compound its value over time and at the
end of it, even if you make from those payments,
with bitcoin's compounding annual growth rate being so high sixty
over sixty percent in a five year period, if even
(27:56):
that gets cut in half to thirty percent or even
more down the fifteen percent, the rate at which that
bitcoin equity will grow over the life of the loan
will allow you to make the payment from the collateral
and then still have leftovers at the end of the loan.
We would and recommend that that because the goal is
to hold as much bitcoin as you can, right, but
if you're in a tough spot, there's no reason the
default make a small payment from your existing collateral.
Speaker 3 (28:19):
I love that. That's a good idea. What about where
does the rate get set? I mean, are you going out?
Speaker 4 (28:23):
You talked earlier about the FED set in the rate
and then people market in that episode is at prime plus.
Speaker 3 (28:27):
A couple points.
Speaker 4 (28:28):
And then you said, you know it goes up if
I think you said if the LTV comes down, then
the rate goes up and it oscillates.
Speaker 3 (28:35):
So where does it start? What are you measuring off of?
How high does it go, how to load does it go,
et cetera.
Speaker 1 (28:41):
Yeah, and fantastic question.
Speaker 2 (28:42):
And this is one of the things we're most excited
about because we're going to offer the best rates in
the industry. I believe Bitcoin Power Finance will redefine the
risk free rate and redefine the risk free borrower. It
is no longer going to be the entity who has
the power of the printer who is known as the
(29:02):
risk free borrower. Just because you can print more of
that collateral and pay it doesn't mean it's a pristine collateral.
So because of that, we are using multiple strategies, including
a fund LP strategy to where we are not partnered
with people who practice fractional reserves. So what that means
for us is that we do not have to marry
(29:23):
our business model to the traditional yield curve. And what
you see in traditional bitcoin lending is that the lender
will be partnered with a banking partner, they will have
a line of credit at a certain rate, and therefore,
in order for the business to be profitable, they will
have to arbitrage the difference between their borrow rate and
their customer's borrow rate. So if you're prime rate now
(29:44):
is seven and a half, if you're at prime plus
fifty basis points, because you have a good relationship and
you're at eight percent, you have to turn around to
the bitcoiner and say, I'll let you borrow at ten percent,
twelve percent, fifteen percent. In order to make any profit
with people's reserve. Our cost of capital is zero because
we've sourced it from LPs who understand that it's time
to get some diversification within your lending portfolio. Yes, you
(30:07):
can lend to the government for risk free borrowing. You're
going to get your capital back. Yes you can lend
to the municipalities to generate risk free cash flow. But
you have systemic risk, you need systemic diversification. You should
lend to bitcoiners. And the light bulbs going off because
of the abuse that we've seen since twenty twenty. Now
I say all that to say this, we don't want
(30:28):
to be as a longtime bitcoiner and free money maximalists.
You can't have free market money when there's a small
group of men who tell you the price of the money.
It goes against free market concepts. A free market money
means that you need free market price of money. And
the price of money is the interest rate. So the
interest rate should be determined by the supply of money,
(30:49):
the demand for loans, and the counterparty risk. That's how
you price money. Stating the rate and anchoring the rate
and doing federal Open market committee exercises and executions to
balance a rate or to force a rate like you
see what ye'l curve control in Japan is not free
market money. So at people's reserve the starting interest rate.
(31:09):
To finally answer your question, sorry about that, but to
finally answer your question, the starting interest rate a people
deserve is ten and a half percent and what we
allow you to do is either through the appreciation of
bitcoin going up in those ten percent increments.
Speaker 1 (31:23):
Or by over collateralizing.
Speaker 2 (31:25):
So if you borrow five hundred thousand, you can max
over collateralized by two hundred percent, which means you're going
to post one point five million dollars worth of bitcoin.
And we allow you to buy back percentage points, so
you can knock off a total of four percentage points
from that ten and a half percent starting rate, and
you can get a six and a half percent rate
with a bitcoin power mortgage. That's Prime minus one right now.
(31:48):
So that's the best rate in the bitcoin industry, and
it's a very competitive rate when you consider where the
trap fi market is. But mark that is at our
basic loyalty level. We have different loyalty levels through our
loyalty token, and if you qualify for our Diamond level,
which means you own ten percent in our loyalty token
of your loan value. So if you have a five
(32:09):
hundred thousand dollars loan to buy your home, you're going
to own fifty thousand dollars of our peering loyalty token.
Your starting rate is actually seven and a half percent,
and then if you over collateralize and knock off that
same four percentage points, you're going to borrow at three
and a half percent. That means you're going to have
access to the lowest cheapest cost of capital for any
home buyer in the world. You're actually accessing capital for
(32:32):
cheaper than the government. And we're able to beat that
sofa rate because we're not partnered.
Speaker 1 (32:39):
With money printers. We have sourced our capital.
Speaker 2 (32:42):
We have sourced through LPs who are looking through that diversification,
understand the cracks that we see within the system, and
they want systemic diversification. And the best part about it
is if something goes wrong in our product, you're not
getting back printed dollars and then rushing in to an
asset that you're going to buy a smaller home, crappier car,
less stock or equity. You're actually defaulting into bitcoin and
(33:05):
real estate, the two assets that you really want.
Speaker 3 (33:07):
Yeah.
Speaker 4 (33:08):
I was having a conversation with an investor buddy this morning,
and we were talking about this exact sort of conversation,
which is what is the free what is the free
market price of money right now? And he was trying
to explain to me how his home should be token eyes,
and real estate should be token eyes, and they get
greater liquidity and then loan pools and this that, and
I disagreed with that, but he's like, Mark, you don't understand, Like,
(33:30):
you know, I have this home on the beach and
it's worth millions of dollars, and you know I can't
get an equity line of credit because I run my
own business.
Speaker 3 (33:37):
And da da da da, I said.
Speaker 4 (33:39):
I said, look, there's hundreds of hard money lenders that
will give you a loan against the equity asset based loan.
Speaker 3 (33:45):
I'm not going to pay those rates.
Speaker 4 (33:47):
And you know what the loans are, and da da
da da, I said. I said, listen, that's the free
market rate of money. Though you have to understand, like
mortgages and auto loans are both basically manipulated or subsidized
by the government or the automakers, which is by the government, right,
So it's like auto loans and mortgages are basically subsidized.
So hard money is the rate at the market.
Speaker 3 (34:07):
And I said, I have this question.
Speaker 4 (34:08):
You know, this question come up all the time with
people borrowing against bitcoin, where they're.
Speaker 3 (34:11):
Like twelve percent, fifteen percent. Are you out of your mind.
Speaker 4 (34:13):
But it's like, that's the cost of free market capital
right now. And I said, what the flip side Again,
he's a wealthy investor. I said, how much would you
loan me cash for? You're going to want minimum ten
or twelve percent? Right, And so I think I think
it is important for people to sort of understand that
we are in this world, as you said, where the
(34:34):
price of money is set by the government, and so
government backed subsidized push loans like autos and residential mortgages
sort of they're manipulated, and so it sort of distorts
our view of what the fair market price of money is.
Speaker 2 (34:48):
But the existing hard money is tied to that yield curve,
and that's the problem.
Speaker 3 (34:54):
Because it's tied to the yield curve.
Speaker 4 (34:56):
But it's also based off of demand. So a lot
of hard money that's going out to asset back loans
is private money.
Speaker 3 (35:02):
I used to be involved in that industry.
Speaker 4 (35:03):
I was for it and risk and risk and risk certainly,
but it's also demand, like I want to get the
most the market will bear.
Speaker 3 (35:11):
So hey, you'll you'll loan the.
Speaker 4 (35:12):
Guy at twelve percent, all right, I'll give you eleven
point five I'll knock off a point, right, And so
it's it's whatever the market will bear, plus what I'm
willing to put it out there, the risk and willing
to take, et cetera.
Speaker 1 (35:22):
Anyway.
Speaker 2 (35:23):
And the advent of bitcoin as pristine collateral, I would
I would posit it is negative risk. And and and
so when you post bitcoin as collateral, because it has
because it's engineered money that was strategically designed to accumulate
value over time, when you post it as collateral, you
become de leveraged.
Speaker 1 (35:42):
Right.
Speaker 2 (35:42):
So when you when you buy your car and you
drive it off the lot, it loses value. And the
more you drive it, the more wear and tear it
loses value. This is why it needs to be subsidized,
much like a home, because there's a fifty.
Speaker 4 (35:54):
Thousand dollars loan on the car, but the car is
only worth forty thousand now.
Speaker 2 (35:58):
Yeah, and it becomes more and more risky alone over time.
The opposite is true with bitcoin, and that's only with
bitcoin over bitcoin, because of its engineer design, it auto
de leverages the borrower. It is the advent of negative risk.
You cannot plug negative risk into trap fi risk models.
(36:18):
It's like going into a power Excel sheet and putting
in the wrong information. All the error codes come up,
like you mess something up somewhere, something in some cell
is wrong.
Speaker 1 (36:27):
I can't calculate this.
Speaker 2 (36:29):
That's what happens when you try to plug negative risk
into trap fi credit models. Bitcoin is the advent of
negative risk, and therefore we're going to be able to
beat the interest rate in any marketplace because of.
Speaker 1 (36:41):
The lack of risk.
Speaker 2 (36:43):
Risk is the factor that has been mitigated through subsidies,
subsidies through the government. But in the free market, how
do you mitigate risk by the quality of the collateral?
Speaker 4 (36:54):
Right now, I've heard you talk about sal pain in
a future based on how Finny's vision. How Finnie being
one of the originators, one of the first couple people
that help work on the Bitcoin protocol, we're entities like
micro Strategy become a central bank of the Internet economy.
Speaker 3 (37:11):
Fast forward like ten years.
Speaker 4 (37:12):
What does that mean?
Speaker 3 (37:13):
What does that look like?
Speaker 2 (37:14):
Yeah, I think that there's going to be two competing
systems as we transition into the future of finance. And
you know, one system will be the stated and anchored
system where the rate is controlled by central banks, and
the other system will be more of a free market system.
I like to call it the Internet economy, as you said,
(37:35):
because it's the only economy in the world that is
debt free.
Speaker 1 (37:39):
It's the only economy in.
Speaker 2 (37:40):
The world that can't be outcompeted by any one economy
because it's an aggregated economy of everybody, and it's the
only economy in the world that can't be controlled by
any one person or power. And because of that, this
is where decentralized finance has really flourished. And this is
why a lot of capital you see black rock rushing
in too, stable coins, you see stable coin legislation going through.
(38:04):
A lot of that is getting access to the opportunity
in DeFi where we actually have a free market rate.
When you look at funding rates within the Internet economy,
where people are using leverage just to make bets on bitcoin,
the annualized rate on that could be anywhere between depending
on how hot or cold the market is, between ten
and upwards of thirty and forty percent.
Speaker 1 (38:25):
You can't get that.
Speaker 2 (38:26):
Kind of rate of return in anything that you would
see in travify without significant risk. You can get that
with a delta neutral position in the Internet economy. So
what we're seeing here is a move from I bought
a cash equivalent, I bought a treasury I'm holding on
my balance sheet. I'm earning four percent. Yeah, but you
know what, Now I can create a liability in the
(38:49):
form of a stable coin. I can deploy that stable
coin into decentralized finance, and then I can compound my earnings.
I'm still getting paid the four and a half percent
on my cash equivalent, I'm earning an additional four or
five percent by providing stable coin liquidity in the Internet economy.
And that Internet economy, that alternative system is growing and
(39:11):
it's flourishing, and the Genius Act and other things I
think are going to accelerate that growth that we see.
And micro strategy plays a big role, and I think
even people's reserve will play a big role in the
long term because we hold the reserve asset of the
Internet economy. The United States is the most important global
financial leader because it's their currency that is actually the
(39:34):
reserve currency of the world. Well, the reserve currency, or
I should say the reserve money. The reserve asset of
the Internet economy is bitcoin, and the entities that hold
bitcoin will be the futureal central banks, and I think
for most of your listeners, central banks as it should
probably has a derogatory meaning behind it. But in the future,
I think bitcoin bankers who are more free market oriented
(39:58):
maybe can salvage the reputation of what it means to
be somebody who's playing a role in discovering the price
of money. The rate at which people's reserve borrows from
micro strategy on an overnight basis will be the rate
that is equivalent to the current federal funds rate or
the front end of the yield curve. Then bitcoin powered
financial products like a five year bitcoin powered mortgage or
(40:21):
a five year bitcoin bond all the way out the
yeld curve to ten and twenty years, those will be
the instruments that the free market looks at to understand
the price of money in the free market internet economy. Meanwhile,
you're still going to have to wake up and check
the two year and the ten year to understand the
price of money in the traditional finance world. So we're
splitting into two worlds, and there's going to be different
(40:43):
entities who control the reserve assets of those worlds who
rise to the top and have extreme influence in the prices.
Speaker 4 (40:52):
We're split into two worlds, but then at the same
time they're crossing and converging and overlapping at the same time.
So you mentioned Blackrock earlier. They've taken a US Treasury,
which is the bedrock of the global financial system today.
TRADFI taking the US Treasury put into a fund and
then tokenize the fund buildle and then those tokens of
that fund are now trading on crypto dot com and
(41:14):
dare a bit in the cryptoeconomy, so tokenize US treasuries.
But then on the other side you have micro Strategy,
which has now created the preferred chairs. The latest one
they've created, which is called stretch STRC, is basically a
stable coin. It's like a central bank stable coin that
they try to keep pegged around one hundred dollars par
(41:36):
and then they increase or decrease the rate to keep
the price stable, sort of like what.
Speaker 3 (41:41):
The FED does, raising and lower in the rates to
keep the price stable.
Speaker 4 (41:45):
So you have sort of like the bitcoin cryptoeconomy doing
this that's crossing the TRADFI and TRADFI crossing over, and
so it's pretty interesting to see sort of how these
separate systems parallel systems will eventually merge and we'll kind
of see that convergence happening there.
Speaker 2 (42:00):
And I think you know what really drives that convergence
is the fact that you know, and I love Michael Sailor,
he's opened the Pandora's box to financial engineering. Even at
People's Reserve, we're building on top of his shoulders, and
you know, we've taken notes from a very long time
ago watching what he's done. But what it really boils
down to is problem solution. There's a real world problem,
(42:25):
and that problem is that real interest rates are negative.
So a nine percent rate backed by billions of dollars
of bitcoin equity is a really important tool because when
you can only get four and a half from the government,
or four from the government, or in the near future
one or two from the government, yet the rate of
inflation or the increase in prices is going up at six, seven,
(42:49):
even ten percent, you can't eat that negative return, right,
You can't have a real rate of negative return. That's
a big problem, especially for businesses. So you need a solution.
And what we're seeing right now, this is what all
engineering is. Engineering is creating a solution to a real
world problem, and because of the cracks within the traditional system,
(43:10):
these problems are becoming bigger and bigger, and bitcoin is
providing a way to solve that problem. And whether it's
micro strategy or people's reserve, we are taking bitcoin and
we are fusing it into financial tools in order to
solve these real world problems. And by solving people's problems,
you deliver value. And that's what bitcoin's all about. It's
about value delivery instead of a fiat mindset which is
(43:33):
based on value extraction. And these value extraction schemes have
created such big problems that we now need a foundational
layer built on equity rather than debt in order to
solve these problems. And as you said, it's very interesting
to see how fast these worlds are coming together. I
do not think investors anticipated that we would see bitcoin
(43:54):
working in tandem with the dollar to create cash flow
products to solve interest rate issues issues.
Speaker 1 (44:00):
But here we are.
Speaker 2 (44:01):
Today with brand new products the world has never seen
before that are now solving these problems.
Speaker 4 (44:07):
Yeah, and it certainly makes me think about the quote
from Bill Gates saying, you know, most people underestimate or
overestimate what they can do in a year. But underestimate
what they can do in a decade. And to your point, like,
on one hand, these things seem to be moving extremely fast,
but then so many people are like, but bitcoin's down
this week.
Speaker 3 (44:23):
It's like, stop.
Speaker 4 (44:24):
Anticipating what's going to happen this week and think about
what's gonna happen over the next couple of years. I mean,
the entire world is literally shifting, but you kind of
have to zoom out.
Speaker 3 (44:31):
A little bit to get a different perspective. Let's wrap
it up.
Speaker 4 (44:34):
I got a big question for you to kind of
wrap this up. You've talked about like the fiat mindset
you just said that right now, and sort of how
bitcoin sort of has changed some of that thinking from
a fiat mindset, a debt based mindset, to an equity
based mindset. What would you say, beyond the finance and technology,
what's the single most profound change that occurs in a
(44:56):
person when they shift their unit of account from a
debt instrument to bitcoin an equity instrument.
Speaker 2 (45:03):
Yeah, that's I love that question because they have that
famous saying you don't change bitcoin. Bitcoin changes you. Well,
governments don't change bitcoin. Bitcoin changes governments and business doesn't
change bitcoin. Bitcoin changes business, and that's what I'm most
excited about moving into the future because those changes are
based on an extraction mechanism versus a value delivery mechanism.
(45:26):
And I think the biggest change you see in bitcoiners
who have been responsible savers of it and benefactors of
increased purchasing power, is that once you remove the financial
stress that the current system exudes on almost everybody except
the very one percent who have a large, disproportionate amount
(45:47):
of the wealth, you're how do I say this, your
motivations change. I think a good example is here in Florida.
We have a big services industry. Right We have a
lot of vacationers who come here and we have a
big services industry. As a matter of fact, the whole
country has a big services industry. But I went out
(46:09):
to dinner the other night with my family and I
got bad service and it was just I was I
was thinking to myself and I was and I told
my wife on the way home, I'm like, you know,
you can't blame them because they're serving and they're they're
getting you know, they're making more money, but they're doing
less stuff. So these people are trapped within this inflationary
problem where the rate of dilution of the dollar is
(46:33):
so fast and the slowness of the increase in wages,
it creates frustration. And for any listener that's in that
situation right now, keep working hard, keep delivering value to
the economy, and do it with a smile on your face.
And save in bitcoin. Utilize bitcoin savings technology to get ahead,
because when that stress is released from you, when you
(46:56):
when you have financial freedom, how you look at the
person next to you, how you treat the person next
to you changes, and when it's like the butterfly effect,
if you do one thing nice thing for one person,
they might turn around do a nice thing for another person,
who might do a nice thing for another person, and
that nice thing might save that next person's life. But
in the FIAT world, you know who cares. I got
(47:20):
I got my own problems. I gotta worry about me
first before I can serve you. Right, you're here on
the airplane, put your own mask on first, before you
put your kids mask on, because if you don't put
your mask on, you might not be able to breathe,
and put their mask on and you both die. And
FIAT forces you to look at yourself first before you
look to others. But when you embrace bitcoin and you
have financial freedom, you're able to look at others first,
(47:42):
and you're able to serve others. And it's it's very
it's a Christian mindset, I believe you know, Jesus came
here as the king of kings and lord of lords.
But he washed his disciples feet and Peter said, Lord,
I'm not going to wash your feet. And he said,
if you don't wash my feet, if I don't, if
you don't let me wash your feet, you have no
part in my kingdom. And he said, then please go ahead.
But in this world we flip that upside down. We
(48:05):
want to be the served, we want to be the king,
we want to be in charge. And that's a fiat mindset.
Bitcoin comes in, gives you that financial freedom and says, wow,
you know, life is great, this is amazing, this is
a miracle. This is what we want. We want the
goods and service and services in exchange for the money.
We want the experiences, and we want to take these
experiences and leverage them to bless others and give them
(48:28):
good experiences. And that's really the most powerful thing about
bitcoin and I think we're going to see it not
only in personal and business and government, but it could
change the whole dynamic of human relationship. That's how important
money is at a foundational level.
Speaker 4 (48:44):
Wow, that's big and I see it as you said, right,
it changes everything everyone and I love the biblical reference
to serve and not be served. That's the purpose. But unfortunately,
you know Maslow's hierarchy of needs. We care of those
base layer of needs and bitcoin allows most people to
do that.
Speaker 3 (49:04):
If you take advantage of it.
Speaker 4 (49:05):
You don't have to wait for the government to add
a strategic Bitcoin reserve as.
Speaker 3 (49:08):
You kind of alluded to in the beginning.
Speaker 4 (49:10):
You can just adopt it as a reserve today and
so you can take care of those base level needs,
so then you can be more of a servant in
a good way, not a bad way. Awesome, man, so
much good stuff here. I appreciate taking the time to
come talk to me today. What should people to be
you know, watching following to kind of pay attention to
what you're doing.
Speaker 1 (49:29):
Well, thank you so much for having me mark. It
is an absolute pleasure.
Speaker 2 (49:32):
And you can just go to People's Reserve dot com
to learn more about People's reserve. Of course, follow us
on x at People's Reserve, and if you want my
macro input, you can follow me on x at CJ. Constantino's.
And thanks again for having me. It's been great.
Speaker 3 (49:47):
Yeah, thank you so much,
We have a really big problem right now with the dollar.
Speaker 2 (00:02):
We're able to print trillions of dollars, spend it into
the economy, and.
Speaker 1 (00:06):
See debt to GDP go up.
Speaker 2 (00:08):
If we don't figure out a way to strengthen our
financial position, we will get to a point where people
will not even want to use the dollar as a
medium of exchange. So what the United States needs to
do if they want to strengthen the dollar is to
take some of the money that they're printing and buy bitcoins.
In twenty nineteen, I bought my first home, a small
single family home, for one hundred bitcoin, and today I
(00:31):
look at the price of bitcoin and could have twelve
million additional dollars on my balance sheet. Instead, I have
a house that I'd be lucky to get five hundred
thousand dollars for. It makes sense when people understand where
we are and the adoption curve, you do not want
to be giving up ownership of your bitcoin. So what
we need are tools that allow people to unlock their
(00:51):
purchasing power without giving up ownership, which are financial tools
that allow you to bar against bitcoin. What does that
look like, Yeah, I think, so let's.
Speaker 3 (01:01):
Jump into it.
Speaker 1 (01:02):
CJ.
Speaker 4 (01:02):
So I'm gonna start off with a big question here,
set you up, and then we'll dig into this. So
you've said that we're in the final stages of this
currencies life cycle and we're facing a debt death spiral.
But yet when I look around, we see the stock
market as a near all time high. The official narrative
is basically a very strong economy. So what would you
(01:23):
say the vast majority of people, even savvy investors, are
completely missing right now.
Speaker 1 (01:28):
Yeah, and that's a that's a great question mark. And
first of all, thanks for having me on. I'm not
sure you.
Speaker 2 (01:33):
I know you don't remember because you're so popular, but
I actually met you at a Rebel Capitalist Live event
conference and it was really cool meet you. So it's
great to be on this side of the camera. It's
it's fun. But yeah, I think I think we are
in the middle of what would be considered a debt
death spiral and most investors are missing. Funny enough, the basics,
(01:53):
and the basics are come down to the difference between
money versus currency.
Speaker 1 (01:58):
We don't get it taught in school.
Speaker 2 (02:00):
If you go for accounting and finance, you'd think you'd
learn something like that, but you don't, So you really
have to do some deep digging into some alternative economics
before you figure out, oh wait a second, the dollar
is a currency, it's not a money. Okay, well, what's
the difference. A money is a store of value and
a currency is a medium of exchange. So a lot
of people look at bitcoin as being a competitor to
(02:20):
the dollar. A lot of people who misunderstand bitcoin investors
in the marketplace think bitcoin is trying to compete with
the dollar. I think they're complementary. And the dollar is global,
it's worldwide, it's the reserve asset. Why in the world
would you try to compete with a medium of exchange
technology that has already captured pretty much one hundred percent
(02:41):
of the global economy. It doesn't really make that much sense.
But what we know about the dollar is that it's
not a store of value. It's really bad store of
value because it can be issued at infinum and ever
since twenty twenty, we've seen that peak up dramatically, which
is waking people up to the fact that a money
is a store value, and to be a store value,
(03:02):
you can't increase the supply at ridiculous rates. Now we
have a natural money in gold, which through its cost
of production, limited its supply expansion. But with Bitcoin, we
have not just a natural money, we have an engineered money.
We have something that, through computer code, introduces the concept
of absolute digital scarcity. For the first time in human history,
(03:24):
we have a monetary asset that supply cannot be expanded.
That's a really hard pill to swallow, and it's really
hard to understand that the only way to get the
increase of supply and bitcoin, the only way to get
the circulating bitcoin to increase is to get the price
to go up.
Speaker 1 (03:42):
So because of that, I believe that that was.
Speaker 2 (03:44):
A strategic design, and therefore I call it engineered money.
So we have this savings technology that you can use
along with spending technology being the dollar, and some magic
happens when you do that. So I look forward to
getting into barring against bitcoin with dollars dollars being the
best way to spend your bitcoin without giving up ownership.
(04:06):
But the wild time we're moving into right now, and
I do think many are missing it.
Speaker 4 (04:11):
So what you just said I think is then bitcoin
is this new engineered type of money that's solving a
different need or a different purpose than what the fiat
currency is doing.
Speaker 3 (04:21):
But again, so is the FIA.
Speaker 4 (04:24):
Currency at the end of the final stage of its
life cycle or it's sort of run the course and
now we need something else to complement it.
Speaker 2 (04:31):
Well, I think that we were in a position to
where the currency itself could somewhat serve as a store
of value. So I do believe that if the currency
system wasn't abused, and the amount of dollars wasn't expanded
at the rapid rate that we see today at least
two trillion dollars in our ongoing deficit, then theoretically the
(04:55):
dollar could maintain its value. And if credit was not
extended at infinum and the supply of dollars declined, perhaps
a dollar could even gain value theoretically. So it has
the ability to actually function that way. But because we
have put ourselves in this position, because we have allowed
ourselves to conform to the idea that something is too
(05:18):
big to fail, we now find ourselves in this situation.
See with bitcoin, when we went through all of the
rehypothication scheme of version one of bitcoin lending, with Genesis
and FTX and block Fi and Celsius, and we had
this big rehypothecation period, and when it collapsed, we couldn't
print the bitcoin, so we failed. But that failure is
(05:38):
a critical part of the business cycle. And in the
traditional markets, we don't get that part of the business cycle.
We print over it because it's too big to fail.
And when you don't allow companies to fail, what you're
doing is you're creating zombie companies. And I think we've
gone so far now that these these zombie companies have
(05:59):
effect the economy, and we have a zombie economy, and
that's why we're able to print trillions of dollars, spend
it into the economy and still see debt to GDP
go up, still see our financial position become less and
less healthy. So we have a really big problem right
now with the dollar. And if we don't figure out
a way to strengthen our financial position, then yeah, we
(06:24):
are at the end.
Speaker 1 (06:25):
Of our life cycle.
Speaker 2 (06:26):
We will get to a point where people will not
even want to use the dollar as a medium of
exchange because if they don't spend it immediately, they're going
to be able to buy less and less stuff over time.
And we're seeing that ramp up since twenty twenty, and
people are paying attention, but we haven't gotten to that
hyper inflationary point. But the only difference between inflation and
hyper inflation is trust. So if we continue to abuse
(06:50):
the printer and abuse the trust of we the people,
then we will get to a point where dollars will
end up worthless on the street. And I don't want that,
and I don't think anybody in right mind really wants that.
Speaker 4 (07:02):
So would you say that then because of this endless
money printing, the monetary debasement, which I agree they say
there's only two things and certain in life, death and taxes,
And I would also probably put money printing there, since
that is not scheduled to end anytime soon, and it's
pushing this to the final stages.
Speaker 3 (07:19):
As you're saying.
Speaker 4 (07:20):
Also, most people at this point know that they shouldn't
be trying to save their wealth in dollars. There with
that meme of Michael Saylor saying something about we have
a word for them, we call them poor. I think
it was something like that. I'm sure you thought, which
is why then, as I said, at the same time,
we see stocks making new all time highs. But I
think what you're saying, though, is that because the dollar
(07:41):
is being printed to infinity.
Speaker 3 (07:44):
The debasement is continuing to go on.
Speaker 4 (07:46):
If we continue down this path, nobody's going to want
to use it a loss of trust, hyperinflation. But then
are you saying that potentially bitcoin could help extend the
runway in the life of the dollar.
Speaker 2 (07:57):
Yeah, absolutely, because what we're doing right now is we're
printing those dollars and we're investing them into the economy.
But we're printing a dollar with interest called a dollar
four principle being a dollar four cents being the interest,
and we're investing it. And the return on investment, depending
on the tax bracket of the vertical you're investing in,
(08:18):
is really maybe thirty to fifty percent. So we're investing
a dollar, we're only getting back thirty to fifty cents.
We need to get back more than a dollar four.
And because we're not getting back more than a dollar
four through that investment, the debt continues to grow, the
unfunded liabilities continue to grow, the debt to GDP continues
to grow. We become in a weaker and weaker position,
(08:40):
and I consider this a matter of national economic security.
If you look at El Salvador, they have some of
the best performing traditional bonds in the world. Number one
because Bukelly is cleaning up the country, but number two
because they put bitcoin on their balance sheet, and what
that does is it strengthens their financial position. So if
something were to go wrong, could tap into that twenty
(09:01):
four seven three sixty five liquid marketplace that bitcoin is
to fix that problem. So what the United States needs
to do if they want to, I think strengthen the dollar,
is to take some of the money that they're printing
and buy bitcoin. Because when you put bitcoin on the
balance sheet, if you take that dollar you invest it
into the economy, you're not getting back principle plus interest.
(09:21):
If you invest it into bringing out natural resources, it's
going to take significant investment and time to actually see
any revenues from that. Now, I'm pretty sure nobody wants
to sell Alaska to Russia. So we're limited on how
we can monetize the asset side of our balance sheet,
and we're limited on what assets we can invest in
to amplify the performance of the assets side of our
(09:42):
balance sheet. And then here comes this magic internet money bitcoin,
but it's absolutely digitally scarce, and it's engineered money, and
it was strategically designed to store value over space and time,
and when we take that dollar and invest it into bitcoin,
yes there will be ups and downs, but in the
long run, one bitcoin's five year compounding annual growth rate
is over sixty percent. It's ten year compounding annual growth
(10:05):
rate is over eighty percent. Where the adoption rates are
following that of the Internet, and we're at the very
beginning of it. Everything here, all the signals are telling
us if we print some money and buy bitcoin, or
if we use budget neutral strategies to accumulate bitcoin and
we get it on the asset side of our balance sheet,
for the first time in a very long time, we
(10:26):
have a chance for the asset side of our country's
balance sheet to outgrow, or at least the growth of
the asset side to outpace the growth of the liability side.
Right because we have over one hundred trillion dollars of
unfunded liabilities over the next generation, we're going to have
to pay those bills, We're going to have to fulfill
those promises. We need an asset that can keep up
with the spending that we've promised to do. And if
(10:49):
we don't find that, the only option is dilution. So
it's a catch twenty two because you know, if the
FED lowers interest rates, and I know Pal's got his
Jackson Hole meeting this weekend, I'm sure he's going to
have a fun time paying back Trump for visiting him
on his Federal Reserve construction site. So I don't think
anything friendly is going to be coming from this meeting
(11:09):
this weekend. I think Pal's mission is probably to get
bitcoin back under one hundred thousand dollars. But if he
lowers interest rates, there's seven trillion dollars sitting in money
market funds right now, of which over three trillion of
those dollars is retail. So just like that, retail money
and corporate money left the banks when they were getting
(11:31):
no interest because the banks were holding those treasury bonds
because they were forced out the risk curve from ZERP.
When they move back out of the money funds, where
are they going to go. They're going to go into bitcoin,
real estate, stocks, and other goods and services. We're going
to get an influx of demand against a limited supply
of goods and services and hard assets, and prices are
(11:51):
going to go up. But what if he raises interest rates, Well,
then at the same time. If you raise interest rates,
the interest expense is going to go up. And when
the interest expense go up, you have to print that
money to service the debt. So no matter which way
he pulls this, we have to print money. But when
we print that money, if we take a little bit
of it and we put it in bitcoin and we
allow bitcoin to do what it was engineered to do,
(12:13):
we can actually salvage the dollar at least buy some
more time to fix the real problems, to address the
problems in a truthful way, and try to move forward
rather than just kick the can.
Speaker 3 (12:24):
Yeah.
Speaker 4 (12:24):
So at the time of this recording, it is August twentieth,
twenty twenty five.
Speaker 3 (12:28):
Just so yeah, everyone can understand what he's talking about
the upcoming meeting.
Speaker 4 (12:32):
As of today, I looked earlier on the CME the
odds of a rate cut are now eighty five percent,
So by the time you're listening to it will probably
be on the side of that. So we'll see how
things shook out. But I think one way or another,
whether it's happens at this meeting or the next meeting
or not. Until Trump gets pal out and replaces him,
rates are coming down.
Speaker 3 (12:51):
That is almost a certainty.
Speaker 4 (12:53):
Every day we see headlines about inflation and dead and
diminishing control.
Speaker 3 (12:57):
Over our own money.
Speaker 4 (12:59):
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(14:10):
it's for generations.
Speaker 2 (14:12):
Well, let's remember they've tried to lower rates and the
market didn't necessarily agree with them. So I think one
of the biggest risks is the Fed comes out even
if Pal doesn't do it, and next May he gets
replaced by Trump's appointing, and you know that's going to
be a pro Trumper who's going to push rates down.
Even if they state the federal funds rate down, which
(14:34):
is the front end of the yield curve, it's really
going to be the free market on how they treat
the two year. So if the two year and the
ten year don't participate and don't get anchored down by
the stating of the front end of the yell curve,
lower all the rest of the interest rates, like your
mortgage rates are not going to follow down the federal
funds rate. It's an anchor rate, but it's an interbank
(14:56):
lending rate. The regular people are not banks, so we
don't have access to an inner bank lending rate. Now
it is an anchor rate, so everything's supposed to come
down because of the arbitrage opportunities that are created between
institutions and the products that they have access to at
the Federal Reserve, like the repo market. But that doesn't
mean just because they say the rate goes down that
(15:17):
the rate is going to come down. And if they
state the rate down and the rate doesn't come down,
they have a really big problem. I think that's why
they've been so hesitant. They'd tried the lower it a
couple times. The free market didn't agree. The free mark
is saying, look, you're diluting I'm lending you money. You're
giving me cash equivalent collateral while I'm holding this collateral.
(15:37):
You're printing two trillion more units of this collateral every
single year. The collateral is being diluted too fast. I
cannot lend you this money at a lower rate. I
am demanding this rate so that I can at least
break even. And I think at this point, real interest
rates are negative, So the cost of cash flow is
a negative real rate of return at this point, and
(15:59):
that dynamic I think, and I think sophisticated investors understand that.
But most investors do not understand that at all, which
is exactly why we see market prices where they are today.
Speaker 4 (16:11):
Yeah, certainly, so, you know, I have a bitcoin savvy audience,
most of them, most of the people here are already
probably buying bitcoin, owning bitcoin, things like that. And to
the point that you're making, I mean, bitcoin's down a
little bit off of it's all time high from just
a couple of days ago at the time of this recording.
Maybe it'll come down a little bit more, maybe it won't.
We don't know what's going to happen the next couple
of days. But to the point that you're making, we
(16:32):
sort of know the direction it's going over the next
months and quarters and certainly years ahead as that endless
debasement kind of continues. Regardless of which way that works out.
Like you said, damned if you damn damned if you don't,
if rates come down or they don't, either way, more
money printing is coming on the back of that. Bitcoin
is the most sensitive asset to global liquidity, and so
of course it goes up the most. Now for a
(16:53):
lot of my audience who's already been listening to this
for a long time, they've been dollar cost averaging into
bitcoin for a long time. Maybe they've seen, hopefully they've
seen a lot of appreciation in that bitcoin stack.
Speaker 3 (17:03):
I've seen that happen a lot, But a lot of
people end up in the dilemma. Jack Malers called it
the Hoddler's dilemma. So I bought bitcoin. I did what
I was supposed to do. I held like I was
supposed to.
Speaker 4 (17:16):
I have a lot of wealth, supposedly on paper, but
my life hasn't gotten any improvement. Michael Saylor says, you
never sell your bitcoin, So how does a bitcoiner solve
that problem?
Speaker 2 (17:28):
Yes, well, Mark, no one knows it better than not.
Welcome to our lives right Bitcoin since twenty thirteen, and
the number on the screen keeps going up. But life
doesn't change until you can leverage that wealth, so you
can unlock that purchasing power. And that's exactly what we
do at People's Reserve. We're designing bitcoin power finance products
(17:49):
that enable the responsible savor of bitcoin to unlock the
purchasing power of their bitcoin without giving up ownership. And
the whole idea behind People's Reserve really started with it's
my own failure, my own mistake, and that was in
twenty nineteen. I bought my first home, a small single
family home, for one hundred bitcoin, and yes, yes, I
(18:10):
knew it was a bear market, but my wife was
pregnant and relative to my overall bitcoin savings, if I
didn't do it, she would kill me. So I had
to buy that house, you know. And today I look
at the price of bitcoin, and you know, I could
have twelve million additional dollars on my balance sheet. Instead,
I have a house that I'd be lucky to get
five hundred thousand dollars for. So it makes sense when
(18:31):
people understand where we are in the adoption curve. Right
we talk about that S curve. At adoption, we are
at the bottom of the S curve. There's an ongoing
transfer of wealth and it is about to accelerate right now.
You do not want to be giving up ownership of
your bitcoin. It is the most valuable asset on your
balance sheet by far, It has the greatest potential by far,
(18:54):
and if you're in a position where you have to
give it up, that could.
Speaker 1 (18:56):
Cause long term pain.
Speaker 2 (18:59):
In my case, you know, I could have twelve million
additional dollars that I don't have access to now. Luckily
I was a responsible saver of bitcoin for a long
time and it made sense. But not everybody's in that position.
So what we need are tools that allow people to
unlock their purchasing power without giving up ownership, which are
financial tools that allow you to bar against bitcoin. But
(19:19):
the biggest thing, the biggest risk in this, and again
this is from another one of my failures. So it's
funny how in life we end up learning most from
our failures. You know, and I'm sure a lot of
your listeners may have been in a similar position. But
going into twenty twenty, going into what was COVID, we
were also going into the Having. So as someone who
had been part of two cycles, I figured this is
(19:40):
a no brainer. So of course I'm on bitmex. I'm
levered up, baby, We're going into the having.
Speaker 3 (19:45):
Let's go lever up.
Speaker 1 (19:46):
This is going to be fun.
Speaker 2 (19:48):
Yeah, And then we have a liquidity crisis, right, and
then we have COVID and price falls from ten to five,
and I'm getting margin calls and I'm posting a little
bit of extra margin. I don't know how much lower
can go, you know, fifty percent in such times very
is a lot, right, Bitcoin's volatile, it'll bounce back up. Well,
no overnight went below thirty eight hundred dollars, liquidating forour
er bitcoin gone. So again another experience I had where
(20:12):
it's just a horrible experience to see bitcoin go from
ten thousand to blow thirty eight, lose a portion of
your bitcoin that you had leveraged and borrowed against, and
then a couple months later it's right back where it was,
right back at the ten thousand point dollar point. But
it gave me the idea of for our products at
People's Reserve, specifically our bitcoin powered mortgage product, that there
(20:33):
is the ability, there is the chance to eliminate liquidation risk.
So in that same COVID like scenario, if you came
to People's Reserve to get a bitcoin powered mortgage, what
we do is we cross collateralize the real estate with
the bitcoin, and by doing that we can eliminate liquidation risk.
So as the price of bitcoin goes down, every ten
(20:54):
percent it goes down, you your interest rate goes up
fifty basis points or half of one percent. So during
the COVID example, you go from ten thousand down to
five thousand, that's five deviations or fifty percent. That's two
and a half percent. So for a couple of months,
you would have paid an interest rate that was two
and a half percent higher than your starting rate. But
as bitcoin recovered and rebounded, for every ten percent price gain,
(21:18):
you get those points back. So by the time you
know two months later, your rate back at your original terms,
plus you.
Speaker 1 (21:24):
Had no liquidation risk.
Speaker 2 (21:25):
You bought your new home, and you can actually sleep
in your new home because you don't.
Speaker 1 (21:29):
Have to worry about getting liquidated.
Speaker 2 (21:31):
This is something that we're really excited to offer to
the marketplace and to innovate with.
Speaker 4 (21:35):
So I have bitcoin, I've been holding bitcoin. I have
option A, which is to sell my bitcoin and buy
the house, which, by the way, you know, lost opportunity
costs is what it is. And to your point, you
could have had twelve million dollars study of half a
million dollar house. That being said, what you have is
you've had a house for your family for the last
(21:56):
however many years, and it's priceless. Right at the end
of the day, I just want to just lay this
out for everybody. At the end of the day, we
don't want money. We don't want money, we want the
goods and services that money buys us. And so if
you have a family, you got kids, you want to
support them. I mean, it's worth more than than the bitcoin.
(22:16):
The last last couple of years, I built the beach
house down in Mexico.
Speaker 3 (22:19):
We've dreamed about it forever, my wife and my kids,
and my kids.
Speaker 4 (22:22):
Are getting older, and we built the We built the house,
and I had to pay cash for the house, and
it was very expensive, and so many bitcorners are like,
why would you put all that cash into a house.
Don't you know how in five years how much that
bitcoin will be worth? And I'm like why, So one
day I can buy a beach house, right, So I
do just want to kind of put this into people's minds,
like we want money to get things.
Speaker 3 (22:43):
It's a means, not an end.
Speaker 4 (22:44):
But that being said, so let's talk about how this
works for you. So you, uh, we're in.
Speaker 3 (22:50):
We're in. We're in this scenario.
Speaker 4 (22:51):
Today, we have the bitcoin. We think that it could
run to five hundred thousand million dollars in the next
five years. I don't want to sell right now at
one hundred thousand, one hundred and ten twelve whatever it
is and then miss out on that but I want
to buy the house. Now you're saying that you could
give me a loan against the bitcoin to buy the house,
or you give me the house against the bitcoin.
Speaker 3 (23:14):
But the interest rate is.
Speaker 4 (23:15):
Variable based off of where the collateralization is, what the
loan to value is.
Speaker 2 (23:20):
Yes, that's correct, and what we do is we don't
count the house is actually serving as collateral to. So
the loan is secured by the property and by the bitcoin,
and the rate is adjustable based on the value of bitcoin.
Speaker 1 (23:35):
So if you.
Speaker 2 (23:37):
Get into a scenario where you default on your payment,
because you can't get liquidated based on price volatility, but
if you default on your payment, the goal of us
would be instead of going through a foreclosure and eviction process,
which could add up to over a year and a
lot of costs from the lender side, we'd rather just
give you a call and say, hey, we've liquidated the
portion of your bitcoin to close your loan. Congratulations, you
(23:59):
now own your home free and clear. And what you
said earlier I absolutely agree with. I raised my family
in that home. I went from one kids to having
four kids in that home. So I have a lot
of great memories in that home, and I wouldn't trade
it for anything, So it is important for your listeners
to understand that. But at the same time, for those
who haven't been involved in the marketplace for a very
(24:21):
long time and are just now starting to experience the
benefit of bitcoin's price appreciation and getting the opportunity to
deploy that purchasing power using a product like this, I
think makes a lot of sense because we've taken all
the steps that we can to learn from the failures
of version one of bitcoin lending, So no rehypothication. We
(24:45):
actually have a self custody option. If you do custody
it with us, it's held in our fund, which serves
as a special purpose vehicle. So the bitcoin is not
on people's reserves balance sheet. It's separate, so there's no
way that we can hold it. There's no way that
we can leverage it or rehypothecate it. Just little things
like this that we've learned over time. A lot of
(25:07):
these fiat finance mechanics don't really work in bitcoin, but.
Speaker 1 (25:11):
At people's reserve.
Speaker 2 (25:12):
You know, I say that we're bitcoin maxis building for
Bitcoin maxis, which means we want to self custody our bitcoin.
We want proof of reserves, we want guarantees of no rehypothecation,
and we want low interest rates. It does not make
sense to me and to people's reserve that a bitcoiner
who holds the most pristine form of collateral in the
(25:32):
world and who and many times is over collateralized. Right,
Like in one of our loans, if you're gonna buy
a five hundred thousand dollars house, you have to put
up at minimum five hundred thousand dollars of bitcoin, While
with other lenders you'd like to shoot for a fifty
percent LTV, you're gonna put up a million dollars of
bitcoin to get that five hundred thousand.
Speaker 4 (25:51):
So you're saying you might do one hundred percent LTV.
Speaker 2 (25:52):
Loan, absolutely, because it's cross collateralized with the real estate.
So the value of the home is securitizing the loan
as well, and that gives them.
Speaker 4 (26:01):
How would the rate be set and how does that vary?
Because typically you look at you know, nobody buys the house.
They don't buy five hundred thousand dollars house. They buy
a monthly payment, and that monthly payment is typically from
the credit worthiness of their monthly income. And so a
lot of times most people are probably maxing out what
they can afford on a monthly basis, so that if
(26:21):
that payment jumps a couple points, it could be detrimental.
So I'm curious, like, how do you set that rate
on the low end? And then is there caps on
how high or how low it can go?
Speaker 2 (26:30):
Yeah, So we are a US based company, so the
usury rates are our caps. We cannot commit usury against
our borrowers. But our whole thesis is that bitcoin, as
pristine collateral, is the lowest risk collateral. So when you
work with us, we actually don't care about your credit score,
we don't care about your income. As long as you
(26:51):
can post the bitcoin, you can get the financing. Also
worked into our contract is a grace period, so if
you default on your payment, depending on what state you're in,
you have somewhere between ninety and one hundred and twenty
days to cure your default. So it's not an immediate liquidation.
It's not DeFi like a smart contract where it's like, oh,
this number was breached and boop, it automatically happened, then
you're done. No, it's a contractual agreement. It's a handshake.
(27:14):
We're going to look you in the eyes and shake
your hand and give you the best chance that you
can have to benefit. The other thing is is maybe
you lose your job. Maybe you have a good income,
but you lose your job, you're going through a tough period,
or you're relocating, you got to find a new job. Well,
you can pay your monthly payment from your bitcoin collateral,
and since you're initiating the loan with a one to
one ratio, you can pay quite a bit of payments.
(27:36):
You can make almost all of the payments as long
as the price of bitcoin stays stable without having to
produce any cashflow to make those payments, and that allows
bitcoin to compound its value over time and at the
end of it, even if you make from those payments,
with bitcoin's compounding annual growth rate being so high sixty
over sixty percent in a five year period, if even
(27:56):
that gets cut in half to thirty percent or even
more down the fifteen percent, the rate at which that
bitcoin equity will grow over the life of the loan
will allow you to make the payment from the collateral
and then still have leftovers at the end of the loan.
We would and recommend that that because the goal is
to hold as much bitcoin as you can, right, but
if you're in a tough spot, there's no reason the
default make a small payment from your existing collateral.
Speaker 3 (28:19):
I love that. That's a good idea. What about where
does the rate get set? I mean, are you going out?
Speaker 4 (28:23):
You talked earlier about the FED set in the rate
and then people market in that episode is at prime plus.
Speaker 3 (28:27):
A couple points.
Speaker 4 (28:28):
And then you said, you know it goes up if
I think you said if the LTV comes down, then
the rate goes up and it oscillates.
Speaker 3 (28:35):
So where does it start? What are you measuring off of?
How high does it go, how to load does it go,
et cetera.
Speaker 1 (28:41):
Yeah, and fantastic question.
Speaker 2 (28:42):
And this is one of the things we're most excited
about because we're going to offer the best rates in
the industry. I believe Bitcoin Power Finance will redefine the
risk free rate and redefine the risk free borrower. It
is no longer going to be the entity who has
the power of the printer who is known as the
(29:02):
risk free borrower. Just because you can print more of
that collateral and pay it doesn't mean it's a pristine collateral.
So because of that, we are using multiple strategies, including
a fund LP strategy to where we are not partnered
with people who practice fractional reserves. So what that means
for us is that we do not have to marry
(29:23):
our business model to the traditional yield curve. And what
you see in traditional bitcoin lending is that the lender
will be partnered with a banking partner, they will have
a line of credit at a certain rate, and therefore,
in order for the business to be profitable, they will
have to arbitrage the difference between their borrow rate and
their customer's borrow rate. So if you're prime rate now
(29:44):
is seven and a half, if you're at prime plus
fifty basis points, because you have a good relationship and
you're at eight percent, you have to turn around to
the bitcoiner and say, I'll let you borrow at ten percent,
twelve percent, fifteen percent. In order to make any profit
with people's reserve. Our cost of capital is zero because
we've sourced it from LPs who understand that it's time
to get some diversification within your lending portfolio. Yes, you
(30:07):
can lend to the government for risk free borrowing. You're
going to get your capital back. Yes you can lend
to the municipalities to generate risk free cash flow. But
you have systemic risk, you need systemic diversification. You should
lend to bitcoiners. And the light bulbs going off because
of the abuse that we've seen since twenty twenty. Now
I say all that to say this, we don't want
(30:28):
to be as a longtime bitcoiner and free money maximalists.
You can't have free market money when there's a small
group of men who tell you the price of the money.
It goes against free market concepts. A free market money
means that you need free market price of money. And
the price of money is the interest rate. So the
interest rate should be determined by the supply of money,
(30:49):
the demand for loans, and the counterparty risk. That's how
you price money. Stating the rate and anchoring the rate
and doing federal Open market committee exercises and executions to
balance a rate or to force a rate like you
see what ye'l curve control in Japan is not free
market money. So at people's reserve the starting interest rate.
(31:09):
To finally answer your question, sorry about that, but to
finally answer your question, the starting interest rate a people
deserve is ten and a half percent and what we
allow you to do is either through the appreciation of
bitcoin going up in those ten percent increments.
Speaker 1 (31:23):
Or by over collateralizing.
Speaker 2 (31:25):
So if you borrow five hundred thousand, you can max
over collateralized by two hundred percent, which means you're going
to post one point five million dollars worth of bitcoin.
And we allow you to buy back percentage points, so
you can knock off a total of four percentage points
from that ten and a half percent starting rate, and
you can get a six and a half percent rate
with a bitcoin power mortgage. That's Prime minus one right now.
(31:48):
So that's the best rate in the bitcoin industry, and
it's a very competitive rate when you consider where the
trap fi market is. But mark that is at our
basic loyalty level. We have different loyalty levels through our
loyalty token, and if you qualify for our Diamond level,
which means you own ten percent in our loyalty token
of your loan value. So if you have a five
(32:09):
hundred thousand dollars loan to buy your home, you're going
to own fifty thousand dollars of our peering loyalty token.
Your starting rate is actually seven and a half percent,
and then if you over collateralize and knock off that
same four percentage points, you're going to borrow at three
and a half percent. That means you're going to have
access to the lowest cheapest cost of capital for any
home buyer in the world. You're actually accessing capital for
(32:32):
cheaper than the government. And we're able to beat that
sofa rate because we're not partnered.
Speaker 1 (32:39):
With money printers. We have sourced our capital.
Speaker 2 (32:42):
We have sourced through LPs who are looking through that diversification,
understand the cracks that we see within the system, and
they want systemic diversification. And the best part about it
is if something goes wrong in our product, you're not
getting back printed dollars and then rushing in to an
asset that you're going to buy a smaller home, crappier car,
less stock or equity. You're actually defaulting into bitcoin and
(33:05):
real estate, the two assets that you really want.
Speaker 3 (33:07):
Yeah.
Speaker 4 (33:08):
I was having a conversation with an investor buddy this morning,
and we were talking about this exact sort of conversation,
which is what is the free what is the free
market price of money right now? And he was trying
to explain to me how his home should be token eyes,
and real estate should be token eyes, and they get
greater liquidity and then loan pools and this that, and
I disagreed with that, but he's like, Mark, you don't understand, Like,
(33:30):
you know, I have this home on the beach and
it's worth millions of dollars, and you know I can't
get an equity line of credit because I run my
own business.
Speaker 3 (33:37):
And da da da da, I said.
Speaker 4 (33:39):
I said, look, there's hundreds of hard money lenders that
will give you a loan against the equity asset based loan.
Speaker 3 (33:45):
I'm not going to pay those rates.
Speaker 4 (33:47):
And you know what the loans are, and da da
da da, I said. I said, listen, that's the free
market rate of money. Though you have to understand, like
mortgages and auto loans are both basically manipulated or subsidized
by the government or the automakers, which is by the government, right,
So it's like auto loans and mortgages are basically subsidized.
So hard money is the rate at the market.
Speaker 3 (34:07):
And I said, I have this question.
Speaker 4 (34:08):
You know, this question come up all the time with
people borrowing against bitcoin, where they're.
Speaker 3 (34:11):
Like twelve percent, fifteen percent. Are you out of your mind.
Speaker 4 (34:13):
But it's like, that's the cost of free market capital
right now. And I said, what the flip side Again,
he's a wealthy investor. I said, how much would you
loan me cash for? You're going to want minimum ten
or twelve percent? Right, And so I think I think
it is important for people to sort of understand that
we are in this world, as you said, where the
(34:34):
price of money is set by the government, and so
government backed subsidized push loans like autos and residential mortgages
sort of they're manipulated, and so it sort of distorts
our view of what the fair market price of money is.
Speaker 2 (34:48):
But the existing hard money is tied to that yield curve,
and that's the problem.
Speaker 3 (34:54):
Because it's tied to the yield curve.
Speaker 4 (34:56):
But it's also based off of demand. So a lot
of hard money that's going out to asset back loans
is private money.
Speaker 3 (35:02):
I used to be involved in that industry.
Speaker 4 (35:03):
I was for it and risk and risk and risk certainly,
but it's also demand, like I want to get the
most the market will bear.
Speaker 3 (35:11):
So hey, you'll you'll loan the.
Speaker 4 (35:12):
Guy at twelve percent, all right, I'll give you eleven
point five I'll knock off a point, right, And so
it's it's whatever the market will bear, plus what I'm
willing to put it out there, the risk and willing
to take, et cetera.
Speaker 1 (35:22):
Anyway.
Speaker 2 (35:23):
And the advent of bitcoin as pristine collateral, I would
I would posit it is negative risk. And and and
so when you post bitcoin as collateral, because it has
because it's engineered money that was strategically designed to accumulate
value over time, when you post it as collateral, you
become de leveraged.
Speaker 1 (35:42):
Right.
Speaker 2 (35:42):
So when you when you buy your car and you
drive it off the lot, it loses value. And the
more you drive it, the more wear and tear it
loses value. This is why it needs to be subsidized,
much like a home, because there's a fifty.
Speaker 4 (35:54):
Thousand dollars loan on the car, but the car is
only worth forty thousand now.
Speaker 2 (35:58):
Yeah, and it becomes more and more risky alone over time.
The opposite is true with bitcoin, and that's only with
bitcoin over bitcoin, because of its engineer design, it auto
de leverages the borrower. It is the advent of negative risk.
You cannot plug negative risk into trap fi risk models.
(36:18):
It's like going into a power Excel sheet and putting
in the wrong information. All the error codes come up,
like you mess something up somewhere, something in some cell
is wrong.
Speaker 1 (36:27):
I can't calculate this.
Speaker 2 (36:29):
That's what happens when you try to plug negative risk
into trap fi credit models. Bitcoin is the advent of
negative risk, and therefore we're going to be able to
beat the interest rate in any marketplace because of.
Speaker 1 (36:41):
The lack of risk.
Speaker 2 (36:43):
Risk is the factor that has been mitigated through subsidies,
subsidies through the government. But in the free market, how
do you mitigate risk by the quality of the collateral?
Speaker 4 (36:54):
Right now, I've heard you talk about sal pain in
a future based on how Finny's vision. How Finnie being
one of the originators, one of the first couple people
that help work on the Bitcoin protocol, we're entities like
micro Strategy become a central bank of the Internet economy.
Speaker 3 (37:11):
Fast forward like ten years.
Speaker 4 (37:12):
What does that mean?
Speaker 3 (37:13):
What does that look like?
Speaker 2 (37:14):
Yeah, I think that there's going to be two competing
systems as we transition into the future of finance. And
you know, one system will be the stated and anchored
system where the rate is controlled by central banks, and
the other system will be more of a free market system.
I like to call it the Internet economy, as you said,
(37:35):
because it's the only economy in the world that is
debt free.
Speaker 1 (37:39):
It's the only economy in.
Speaker 2 (37:40):
The world that can't be outcompeted by any one economy
because it's an aggregated economy of everybody, and it's the
only economy in the world that can't be controlled by
any one person or power. And because of that, this
is where decentralized finance has really flourished. And this is
why a lot of capital you see black rock rushing
in too, stable coins, you see stable coin legislation going through.
(38:04):
A lot of that is getting access to the opportunity
in DeFi where we actually have a free market rate.
When you look at funding rates within the Internet economy,
where people are using leverage just to make bets on bitcoin,
the annualized rate on that could be anywhere between depending
on how hot or cold the market is, between ten
and upwards of thirty and forty percent.
Speaker 1 (38:25):
You can't get that.
Speaker 2 (38:26):
Kind of rate of return in anything that you would
see in travify without significant risk. You can get that
with a delta neutral position in the Internet economy. So
what we're seeing here is a move from I bought
a cash equivalent, I bought a treasury I'm holding on
my balance sheet. I'm earning four percent. Yeah, but you
know what, Now I can create a liability in the
(38:49):
form of a stable coin. I can deploy that stable
coin into decentralized finance, and then I can compound my earnings.
I'm still getting paid the four and a half percent
on my cash equivalent, I'm earning an additional four or
five percent by providing stable coin liquidity in the Internet economy.
And that Internet economy, that alternative system is growing and
(39:11):
it's flourishing, and the Genius Act and other things I
think are going to accelerate that growth that we see.
And micro strategy plays a big role, and I think
even people's reserve will play a big role in the
long term because we hold the reserve asset of the
Internet economy. The United States is the most important global
financial leader because it's their currency that is actually the
(39:34):
reserve currency of the world. Well, the reserve currency, or
I should say the reserve money. The reserve asset of
the Internet economy is bitcoin, and the entities that hold
bitcoin will be the futureal central banks, and I think
for most of your listeners, central banks as it should
probably has a derogatory meaning behind it. But in the future,
I think bitcoin bankers who are more free market oriented
(39:58):
maybe can salvage the reputation of what it means to
be somebody who's playing a role in discovering the price
of money. The rate at which people's reserve borrows from
micro strategy on an overnight basis will be the rate
that is equivalent to the current federal funds rate or
the front end of the yield curve. Then bitcoin powered
financial products like a five year bitcoin powered mortgage or
(40:21):
a five year bitcoin bond all the way out the
yeld curve to ten and twenty years, those will be
the instruments that the free market looks at to understand
the price of money in the free market internet economy. Meanwhile,
you're still going to have to wake up and check
the two year and the ten year to understand the
price of money in the traditional finance world. So we're
splitting into two worlds, and there's going to be different
(40:43):
entities who control the reserve assets of those worlds who
rise to the top and have extreme influence in the prices.
Speaker 4 (40:52):
We're split into two worlds, but then at the same
time they're crossing and converging and overlapping at the same time.
So you mentioned Blackrock earlier. They've taken a US Treasury,
which is the bedrock of the global financial system today.
TRADFI taking the US Treasury put into a fund and
then tokenize the fund buildle and then those tokens of
that fund are now trading on crypto dot com and
(41:14):
dare a bit in the cryptoeconomy, so tokenize US treasuries.
But then on the other side you have micro Strategy,
which has now created the preferred chairs. The latest one
they've created, which is called stretch STRC, is basically a
stable coin. It's like a central bank stable coin that
they try to keep pegged around one hundred dollars par
(41:36):
and then they increase or decrease the rate to keep
the price stable, sort of like what.
Speaker 3 (41:41):
The FED does, raising and lower in the rates to
keep the price stable.
Speaker 4 (41:45):
So you have sort of like the bitcoin cryptoeconomy doing
this that's crossing the TRADFI and TRADFI crossing over, and
so it's pretty interesting to see sort of how these
separate systems parallel systems will eventually merge and we'll kind
of see that convergence happening there.
Speaker 2 (42:00):
And I think you know what really drives that convergence
is the fact that you know, and I love Michael Sailor,
he's opened the Pandora's box to financial engineering. Even at
People's Reserve, we're building on top of his shoulders, and
you know, we've taken notes from a very long time
ago watching what he's done. But what it really boils
down to is problem solution. There's a real world problem,
(42:25):
and that problem is that real interest rates are negative.
So a nine percent rate backed by billions of dollars
of bitcoin equity is a really important tool because when
you can only get four and a half from the government,
or four from the government, or in the near future
one or two from the government, yet the rate of
inflation or the increase in prices is going up at six, seven,
(42:49):
even ten percent, you can't eat that negative return, right,
You can't have a real rate of negative return. That's
a big problem, especially for businesses. So you need a solution.
And what we're seeing right now, this is what all
engineering is. Engineering is creating a solution to a real
world problem, and because of the cracks within the traditional system,
(43:10):
these problems are becoming bigger and bigger, and bitcoin is
providing a way to solve that problem. And whether it's
micro strategy or people's reserve, we are taking bitcoin and
we are fusing it into financial tools in order to
solve these real world problems. And by solving people's problems,
you deliver value. And that's what bitcoin's all about. It's
about value delivery instead of a fiat mindset which is
(43:33):
based on value extraction. And these value extraction schemes have
created such big problems that we now need a foundational
layer built on equity rather than debt in order to
solve these problems. And as you said, it's very interesting
to see how fast these worlds are coming together. I
do not think investors anticipated that we would see bitcoin
(43:54):
working in tandem with the dollar to create cash flow
products to solve interest rate issues issues.
Speaker 1 (44:00):
But here we are.
Speaker 2 (44:01):
Today with brand new products the world has never seen
before that are now solving these problems.
Speaker 4 (44:07):
Yeah, and it certainly makes me think about the quote
from Bill Gates saying, you know, most people underestimate or
overestimate what they can do in a year. But underestimate
what they can do in a decade. And to your point, like,
on one hand, these things seem to be moving extremely fast,
but then so many people are like, but bitcoin's down
this week.
Speaker 3 (44:23):
It's like, stop.
Speaker 4 (44:24):
Anticipating what's going to happen this week and think about
what's gonna happen over the next couple of years. I mean,
the entire world is literally shifting, but you kind of
have to zoom out.
Speaker 3 (44:31):
A little bit to get a different perspective. Let's wrap
it up.
Speaker 4 (44:34):
I got a big question for you to kind of
wrap this up. You've talked about like the fiat mindset
you just said that right now, and sort of how
bitcoin sort of has changed some of that thinking from
a fiat mindset, a debt based mindset, to an equity
based mindset. What would you say, beyond the finance and technology,
what's the single most profound change that occurs in a
(44:56):
person when they shift their unit of account from a
debt instrument to bitcoin an equity instrument.
Speaker 2 (45:03):
Yeah, that's I love that question because they have that
famous saying you don't change bitcoin. Bitcoin changes you. Well,
governments don't change bitcoin. Bitcoin changes governments and business doesn't
change bitcoin. Bitcoin changes business, and that's what I'm most
excited about moving into the future because those changes are
based on an extraction mechanism versus a value delivery mechanism.
(45:26):
And I think the biggest change you see in bitcoiners
who have been responsible savers of it and benefactors of
increased purchasing power, is that once you remove the financial
stress that the current system exudes on almost everybody except
the very one percent who have a large, disproportionate amount
(45:47):
of the wealth, you're how do I say this, your
motivations change. I think a good example is here in Florida.
We have a big services industry. Right We have a
lot of vacationers who come here and we have a
big services industry. As a matter of fact, the whole
country has a big services industry. But I went out
(46:09):
to dinner the other night with my family and I
got bad service and it was just I was I
was thinking to myself and I was and I told
my wife on the way home, I'm like, you know,
you can't blame them because they're serving and they're they're
getting you know, they're making more money, but they're doing
less stuff. So these people are trapped within this inflationary
problem where the rate of dilution of the dollar is
(46:33):
so fast and the slowness of the increase in wages,
it creates frustration. And for any listener that's in that
situation right now, keep working hard, keep delivering value to
the economy, and do it with a smile on your face.
And save in bitcoin. Utilize bitcoin savings technology to get ahead,
because when that stress is released from you, when you
(46:56):
when you have financial freedom, how you look at the
person next to you, how you treat the person next
to you changes, and when it's like the butterfly effect,
if you do one thing nice thing for one person,
they might turn around do a nice thing for another person,
who might do a nice thing for another person, and
that nice thing might save that next person's life. But
in the FIAT world, you know who cares. I got
(47:20):
I got my own problems. I gotta worry about me
first before I can serve you. Right, you're here on
the airplane, put your own mask on first, before you
put your kids mask on, because if you don't put
your mask on, you might not be able to breathe,
and put their mask on and you both die. And
FIAT forces you to look at yourself first before you
look to others. But when you embrace bitcoin and you
have financial freedom, you're able to look at others first,
(47:42):
and you're able to serve others. And it's it's very
it's a Christian mindset, I believe you know, Jesus came
here as the king of kings and lord of lords.
But he washed his disciples feet and Peter said, Lord,
I'm not going to wash your feet. And he said,
if you don't wash my feet, if I don't, if
you don't let me wash your feet, you have no
part in my kingdom. And he said, then please go ahead.
But in this world we flip that upside down. We
(48:05):
want to be the served, we want to be the king,
we want to be in charge. And that's a fiat mindset.
Bitcoin comes in, gives you that financial freedom and says, wow,
you know, life is great, this is amazing, this is
a miracle. This is what we want. We want the
goods and service and services in exchange for the money.
We want the experiences, and we want to take these
experiences and leverage them to bless others and give them
(48:28):
good experiences. And that's really the most powerful thing about
bitcoin and I think we're going to see it not
only in personal and business and government, but it could
change the whole dynamic of human relationship. That's how important
money is at a foundational level.
Speaker 4 (48:44):
Wow, that's big and I see it as you said, right,
it changes everything everyone and I love the biblical reference
to serve and not be served. That's the purpose. But unfortunately,
you know Maslow's hierarchy of needs. We care of those
base layer of needs and bitcoin allows most people to
do that.
Speaker 3 (49:04):
If you take advantage of it.
Speaker 4 (49:05):
You don't have to wait for the government to add
a strategic Bitcoin reserve as.
Speaker 3 (49:08):
You kind of alluded to in the beginning.
Speaker 4 (49:10):
You can just adopt it as a reserve today and
so you can take care of those base level needs,
so then you can be more of a servant in
a good way, not a bad way. Awesome, man, so
much good stuff here. I appreciate taking the time to
come talk to me today. What should people to be
you know, watching following to kind of pay attention to
what you're doing.
Speaker 1 (49:29):
Well, thank you so much for having me mark. It
is an absolute pleasure.
Speaker 2 (49:32):
And you can just go to People's Reserve dot com
to learn more about People's reserve. Of course, follow us
on x at People's Reserve, and if you want my
macro input, you can follow me on x at CJ. Constantino's.
And thanks again for having me. It's been great.
Speaker 3 (49:47):
Yeah, thank you so much,
Host
Mark Moss
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