The Exchanges

Q Okay, what is that? I don't know. To any listener that doesn't know Bitcoin, that sounds like something from Lord of the Rings happening.

A Yeah, and the whole thing is basically Lord of the Rings. But no, so Bitcoin is, 30 days away from what's called the happening. It's basically a significant supply shock. Um, so like scarce assets or any currency, right? The U S dollar, gold, Bitcoin, there are ways that there's, there's money in the system and then there's money that's entering the system. So with, with the U S dollar, right, there's money in the system. Then the fed can print more money into the system with gold. There's money in the system that is in like bank vaults. And then there's, The miners with their pickaxes and the big machines getting gold out of the system, out of, out of the ground. With Bitcoin, there's something called mining, which like validates the transactions and makes the system run. Um, every four years, so there's the Bitcoin in the, in, in the flow, in the system right now that actually is like in people's hands, there's about 15 and a half Bitcoin, 15 and a half million Bitcoin out there right now. Every, uh, 10 minutes, more Bitcoin is released to the miners. Well, What the halvening is, is every four years, it's about, it's roughly every four years, the amount that's given out to the miners is cut in half. So what's about to happen in 30 days is the Bitcoin halvening will programmatically cut the daily incoming supply of Bitcoin from 1800 To 900. So, so a good way to think about thi…

AI assessment note: “What the halvening is, is every four years... the amount that's given out to the miners is cut in half.”

Q that printed is one, right? For a year, like doesn't printing money, isn't it hyper reliant on that dollar by that landlord being spent again by the landlord and then again by somebody else four or five times in the economy. So you get five dollars of GDP for per dollar of stimulus. And if you don't get that leverage, How does the stimulus work? How do you grow GDP?

A You completely nailed it. That, that's, that's, that's so important. I think people don't understand that. So we, the feds got a hammer, right? And they, they basically, the only thing they know how to do is interest rates, pump money. It's the only, it's the only thing they can do. Right. And so what they've done is the only two things they can do. They've yanked interest rates to zero and they've pumped money into the economy. And that, that actually works. Unless you have a global health pandemic, which is causing people not to, not causing people, people are not allowed to leave their homes. So in, um, 2008, 2009, the pumping money into the economy that actually worked really well. Right. And we got out of, we got out of that recession. Um, why? Because it was a, it was a financial crisis. So people didn't have enough money. You print more money, you give them more money. They go out and spend more money. The economy goes back up. Right now, why this is why I'm so scared is because you can give people all they want, but like I'm, I've been locked inside for 27 days right now. So I'm not, I looked at my credit card bill. It's amazing. I'm not spending any money, but you know, it's not amazing for is every, every business in the U S so you could give me 10,000 dollars right now. You can give me a 100,000 dollars. I got nowhere to spend it. Therefore the, therefore the GDP and…

AI assessment note: “I got nowhere to spend it. Therefore the GDP and the economy can't go up.”

Q So everyone's answer seems to be print more money, right? When does this break? Like, when does the idea of like, we can just keep printing money, get ourselves out of all problems. When does this come back and smack us in the face? And really we go, oh my gosh, this is not a solution anymore.

A I think now, um, Yeah, I think now, so like if we look at once you've, so we, so what we did at the beginning of this conversation, right? We figured out the hole, right? We called it five trillion dollars. Um, then what the fed is doing is they're, they're printing money and everything's on the table right now. It's crazy. Like we're going from impossible situations to implausible situations to like, oh my God, this is the reality now. And like, and we're, it's, it's jump risk, right? It's the risk that things can happen like overnight and you just don't understand. How fast things can happen. So like March fourth, um, we had this eight and a half billion dollar coronavirus package. That was, that was a month. That was five weeks ago. Like when I remember, you probably remember like five weeks ago, we're like eight and a half billion. Oh my God. Well then two weeks later, a two trillion dollar stimulus package comes out and we're like, and that makes the billion seem irrelevant. And then today, April ninth, another two trillion, over two trillion, 2.3 trillion dollar fed lending program comes out. But here's the issue. And this ties to what you just said. When does this end? I think it starts to end now.

AI assessment note: “I think now, um, Yeah, I think now”

Q government stimulates the economy, what they're actually stimulating in many cases, there are some of these equities, right? They decided to bail out a bank. The bank stock goes up. They decide United Airlines can't fail. They buy that. All those stocks shoots up. People that own those equities make money. Where does that leave the hundred and twenty six million people that do not participate in the equity market?

A It leaves them pissed off and it leaves them more. It increases the wealth, the income inequality gap even more, right? Because you have, you have individuals whose dollars are decreasing in value and they don't own any equities, right? Which are increasing value. So really just net net, they're, they're, they're losing on all sides of this operation. Um, and, uh, Look, I'm, I'm not, I want to be, I want to be careful in saying that like, I'm not like a tin hat guy or like tinfoil hat guy where like, I think this is all going to blow up. The U S has been the leader of the free world for a really long time. All I'm saying is that doesn't make us immune to mistakes, right? Or missteps. And that this is just this, this fiat experiment that we're on right now is it's a 49 year experiment. And we've, we've seen other countries weaken their currency to the point of hyperinflation, Zimbabwe, Venezuela, I'm just saying we have to be really careful right now because it's, it's, it's contentious. And I think we're going down a very dangerous path right now.

AI assessment note: “It increases the wealth, the income inequality gap even more”

Q Like, so how does each Bitcoin go from 7000 a day to 20,000 in two years?

A In my mind, it's, it's all of this coming together. So it's like the happening. If you keep the four hundred million dollar inflows into Bitcoin, that pumps it up to, uh, to 14,000 right off the bat or 14,000 and a half, 15,000. Um, it's, it's the investors realize, realizing that you have to hedge, right? That they need to allocate one percent of their portfolio to Bitcoin. Based on what's happening in the financial markets, it's inflation. Investors understanding that they need to, to allocate to inflation hedged assets. Um, so that, yeah, I mean, all of that stuff comes together. And again, this wouldn't be crazy. We've, we've hit the end of 20 17. We got all the way up to 20,000 dollars, right? Yeah. On the high side, My I'm, I'm going to throw this crazy number out there, but it's a 100,000 dollars and that's a 15 times ups, 15 X upside, um, in a pretty short period of time.

AI assessment note: “it's like the happening. If you keep the four hundred million dollar inflows”

Q It's like for people listening right now, what does that mean? They go try and buy milk and milk is now 20 bucks a gallon.

A It basically means your dollar is worth less. Like if there are, if There are a total of a hundred dollars in the market. Um, and you print a hundred more dollars. Well, now your dollars are, yeah, your dollars are worth, are worth less. So like, here's an actual way to look at it. The, um, So yeah, on a consumer level, it just means like prices start rising rapidly and your, the value of your, of your dollar is worth less. But in terms of like what's actually happening, the federal reserve balance sheet has gone from, uh, every five years, right? These are five year increments. It was two hundred billion and it was 350,000,000,450 1,000,000,600 1,000,000,800 billion. So rising a little, a little, then it was two trillion. Now that is four trillion. I think we're, we'll be at 10 trillion dollars right on the feds balance sheet, which is basically the amount of money that's in the economy right now.

AI assessment note: “It basically means your dollar is worth less.”

Q U S citizen, essentially 67,000 dollars in debt against you. And, and we're only producing per person cause 65,000. So if every person listening right now is a balance sheet or a profit and loss statement, we're all underwater. Jason, how do, how do we get out of that? How do you, you know, how do you produce your way out of that? Can a stimulus drive additional GDP growth?

A Um, it can. Right. I mean, like, so I, that was a really good point about GDP to debt ratio, right? Like when you look at, I think it's important to just remember this is all an experiment and no one knows anything, right? Like we didn't even get off the gold standard until 1971. And like, if you look in the seventies, the GDP to debt ratio is really healthy. It was like, it was in the 30 to 40% ratio, 30 to 40%. Right. And then you get to the nineties. Or the eighties, the thing starts crawling up. Right. And the feds balance sheet starts crawling up as well, goes up to like 50, 60%. Then 2009. Right. GDP to debt was like, I don't know, I should Google this, but like 60, 70%. And now, now you just threw out that crazy number, like a 105% now. Yeah. Uh, yeah. I mean, yes, yes. Like, can, can GDP go up through the stimulus package? Of course. Like that's why you pump money into the economy, but there are, that's why the, the fed does what they do is because it works.

AI assessment note: “can GDP go up through the stimulus package? Of course.”

Q know, the, the, the government's balance sheet before we start to see hyperinflation China over the past couple of years, you've actually seen about 300% in terms of debt to GDP ratio. We're only at called 104 105%. Like when does the system break? Um, I should, I should, I should maybe ask, how do you think about when the system breaks? No one knows when it would break. Right.

A But yeah. Um, when, like what happens when the system breaks? I mean, like, So, so this ties really nicely into Bitcoin, right? Like what, what happens is people look for other options and they look for alternatives and they get out of the current, like the current, um, financial ecosystem that we're in right now. Right. It's, it's, it's almost no different than, um, let's take like, this is kind of a weird analogy. We'll see if this works like on-prem software, right? You're a SAS guy. So like on-prem software was, was the only option. In like the nineties and the early 2000, but then things like, uh, Salesforce come around and it's just a better, it's just a better overall experience. And it just is a, um, it's, it's just a better option. So I think why I'm so bullish on Bitcoin, one of the many reasons, right, is it's a, it's sound money. It's a better asset. It's not manipulatable. It's not seizeable. It's not censorable. It's not debasable. Over time, people are going to choose a currency that the government does not control. That's my thesis.

AI assessment note: “when, like what happens when the system breaks? I mean, like, So, so this ties really nicely into Bitcoin”

Q That those companies move their supply chains out of China and put them in our own country. So this never happens again. So I believe you're going to see a mass exodus of a lot of companies, uh, who used to have supply chains in China, moving out of China. I think you're gonna see China's GDP get hit very, very hard from this. How do they win from this?

A So, Let's see. So a lot, a lot of people are leaving China and stuff like that. China is, it's important to remember, like things are not all and well and good in China, right? They're, they're a poor, poor middle income country, um, outside of the creme de la creme, the top, they're authoritarian, they're state capitalist country that guarantees greater risk for things like this. Um, Yeah. I mean, I, I think when it comes to China, like they, we've just seen what they can do. Like they can move much quicker than us. They've got everything set up for like a response for a global pandemic like this. And there's just like, I'm, I'm a, I'm a liberal Democrat through and through, right? Like I, I love, you know, but, but like you're seeing a capitalist or excuse me, an authoritarian system, like being able to move really, really quickly. And I think a lot of the Western world is a little shocked by how slowly we're forced to move because of our politics right now. And that stuff is scary.

AI assessment note: “they can move much quicker than us. They've got everything set up”

Q living paycheck, paycheck. Um, I'm not getting that surge in equities cause I don't have any stocks. Um, how, how does that person even start thinking about, oh, there's a thing called Bitcoin. Let me go like figure out how to buy my milk using Bitcoin. Bitcoin, right? And like, how do you get that hundred twenty six million not participating in US equities on an alternative system like Bitcoin?

A It had, it, Bitcoin was, is interesting because I've, I've, I've, you know, kind of been following the space since, um, there are a lot, a lot of people have been doing it a lot longer than me, right? But I got into the space in 2015. Um, I was living in kind of Budapest, Hungary actually. And, uh, a lot of the students out there love Bitcoin and started kind of looking into it then. Um, it's been interesting to see because like 2015, 20 16, 2017, like 2017, if you remember the market ripped, that was a consumer, that was a retail led, uh, pump in the price of Bitcoin. But what needs to happen for like mainstream adoption and for this asset class to ever, it's like what a hundred billion dollar asset class. It's, it's tiny, it's microscopic. Nobody uses Bitcoin. I I'm well aware of that. It's a speculative asset right now. I'm very well aware of that. Um, what needs to happen is mainstream is institutional folks need to Need to allocate to this asset class. And I'm betting that they will not be, not actually because I don't think a hedge fund manager, I don't think you're going to have a 70 year old gray haired family office man or woman say, oh my God, I need to get out of the US dollar. Right. I'm like, I hate the US dollar. I need to go into Bitcoin. What you're going to have is you're going to say, you're going to have these folks saying, I need to hedge against the, I need…

AI assessment note: “what needs to happen is mainstream is institutional folks need to Need to allocate”

Q Bitcoin price was down to 3800, call it a week, two weeks ago. It's now back up to call it 7300 on the same day that the Federal Reserve and the government is announcing another two trillion dollars pumped into the economy. Give us some context here. How do you see crypto and Bitcoin in general playing into market fears and a growing federal balance sheet amid the coronavirus crisis?

A Yeah. Great, great question, Nathan. Um, I think before diving into crypto and Bitcoin, you kind of have to actually zoom out. So you have to look at like, uh, number one, you have to look at what caused the financial situation, right? Then once you understand what caused the situation, you can dive into what is the current situation, right? And what is the current hole that we're in right now? Once you figure that out, you can talk about what, what's the solution to the hole. Once you figure out what the solution to the You know, when I say solutions, like what is the Fed going to do? What do they think the solution is? Once you figure that out, you can figure out where to deploy capital. Then once you figure out, you know, where people are deploying capital, then I think you can start to talk about Bitcoin. But without understanding the other stuff, I think, I think Bitcoin, it's not, it's not part of the conversation without understanding the other stuff.

AI assessment note: “before diving into crypto and Bitcoin, you kind of have to actually zoom out.”

Q What does that look like? What metric are you looking at? It says, oh, it's ending now. Now's the time.

A Well, let's think about where, where's that money coming from, right? It's not, it's not your print, their feds printing it out of thin air. So what you've got is a situation. So, so then it starts to get into like, where do you deploy capital? And, and What this is, is you have to look at the second order impacts of printing all this money and it's inflation. And in some situations, like there are other countries, third world and first world countries that have done what we're doing, which is printing money. And it quickly spirals out of control and becomes hyperinflation, right? Like inflation is just like crack. Like you can give a, you can give a, you can give a drug user like a little hit, which is like our stimulus. And we're like, Ooh, that was nice. Like, You know, the stimulus worked out pretty well. Let's do like a little bit more, a little bit more. All right. Well now you're hooked on crack. You're a daily crack user. Same thing as an, as a stimulus package. You're like, Oh, let me, let me give a little stimulus. Let me print a little bit of money. Let me print a little more. Let me print a little more. Oh my God. Now we have crazy hyperinflation.

AI assessment note: “you have to look at the second order impacts of printing all this money”