The 100-Year Reset with Luke Gromen: Gold, Bitcoin, and Fiat’s Demise

Jackson Mikalic (00:02.19) All right, we are live. It's the last trade. This is a special edition. We have Luke Groman joining us, joined by my co-hosts as well, Brian and Michael. Luke knows, but I'll say it on air. I'm a big fan of your work, Luke. I've been a subscriber of FFTT for I think four years, I want to say, maybe shortly after I discovered you in 2020. So could be five, but that point aside, I think you do a great work. You're one of the best macro analysts out there. So anyone who's not familiar with Luke's work, certainly check out his ex account, check out his research after this conversation today. And I want to call out as well, if you are tired of me recording from my grandmother's attic, give us a like and a comment on the YouTube video here. I might be able to upgrade my podcast studio in the next few weeks. So Luke, great to see you. How are you doing? Luke (00:50.014) I'm doing great, Jackson. How about yourself? Jackson Mikalic (00:53.018) I'm having fun as always. Yeah. Thanks for joining us. Michael Tanguma (00:54.626) Luke, Jackson's our weekly insight into current macro trends as millennials and Gen Z struggle to find a home, buy a house. we hear weekly or every other week we'll hear about him getting priced out by boomers, not being able to afford a home in the Philly area. So that was his plug to share that his struggle is real. Luke (01:18.186) That's right, it's, I sympathize. Jackson Mikalic (01:23.27) That's right. For now, to quote President Donald Trump, I'll have fun playing with my Bitcoin. But we'll get to the home ownership at some point. So Luke, I want to be respectful of your time. Thanks again for joining us. I think an interesting place for us to start is just to comment on where gold currently is, the market price of gold, and Bitcoin as well. I would love to hear your thoughts on just what the market is telling us. I did see something two weeks ago, this is the first time ever, where gold and Bitcoin were the number one and number two year-to-date performers. Brian Cubellis (01:28.607) You Jackson Mikalic (01:53.224) So interesting data point there. What do you make of that? Luke (01:57.396) I think for gold, I think it's a trade where all roads lead to gold. Like pretty much anything that can happen, I think is good for gold. And I think ultimately is good for Bitcoin, Bitcoin still trades with a risk off component to it as people have talked about, know, vis-a-vis NASDAQ and what have you, stocks more broadly. But gold seems to be kind of a winner no matter what happens. Rates go up, we get a fiscal crisis, which may be part of Contributing partly contributing to the breakout today good for gold Rates go down aggressively real rates go negative good for gold We get a trade deal Or we don't get a trade deal. We saw that with liberation day good for gold We get war good for gold. We get peace Increasingly looks like the peace is going to be dictated at least in part by the bricks That's probably good for gold of any peace dictated by bricks rather than by the US And so you kind of look around and just go all roads lead to gold That's you know, that makes sense to me from a Bitcoin standpoint. I think it's it's kind of the same thing Like I said Bitcoin does have a bit more of a drag with what risk assets are doing in the short run But ultimately I think the reason why both have done so well year to date is neutral reserve assets. you know, all of a sudden long-term sovereign bonds are no longer risk-free on a real basis. and that's something that is, you the math has been crystal clear, for 10 plus years. but I think just in recent years and then overlaying the geopolitics on top of that post 2022 with the Russian FX reserve sanctions, all of a sudden people are thinking about. I mean, even layering in the nationalization and Trump and tariffs and stuff, you know, do I actually hold what I own and is it actually inflation proof? you know, there's really only two assets in my view that do a really good job of that as a neutral reserve asset, energy link, you know, supportable, et cetera, et cetera, et cetera. And it's gold and Bitcoin. And so it makes sense to me that those two are leading or, you know, top the leaderboard here today. Brian Cubellis (04:17.683) Yeah, it makes a ton of sense, Luke. One thing that you referenced in there was 22 when Russia's treasury was seized. think that's it feels like a long time ago at this point, but in the grand scheme of monetary history, it's pretty recent. at that time, Zoltan Pazar from Credit Suisse put out a fantastic report, which you were all over at the time. And I think a lot of his ideas, you had actually been saying for years prior to that. But I'm curious, what are your thoughts on his thesis around, really, Bretton Woods III, this move towards forms of outside money, namely gold and Bitcoin, versus inside money? three or so years after that, how do think that that thesis has played out? Because in my mind, he was spot on with forecasting what was about to happen in next few years. And so where are we in that thesis? What ending are we in terms of that? really playing out in your mind. Luke (05:18.592) Yeah, mean, shortly thereafter, you know, I think I said to someone, I think this might be every come to be seen every bit as big as Nixon closing the gold window in 71. And yeah, I think it's played out quite well. Central banks have bought on average, I want to say 1000 or 1100 tons of gold a year every year since gold is now the second biggest reserve asset that just surpassed euros. Another probably, I don't know. two years of decent price appreciation in a thousand tons a year and gold will be the number one reserve asset surpassing the dollar and treasuries. And so to me, there's an absolute sea change going on since that happened being driven by realpolitik, which is, I heard from multiple different people that don't know each other that major Persian Gulf nations were quote unquote Basically, scared to death, petrified, I think was the word, by that seizure of FX Reserves. so, regardless of how you feel about the actual seizure itself, it happened and there was a reaction and that reaction makes perfect sense. I don't think you can put the genie back in the bottle as it relates to that. Everyone has seen that. And so I think that's done. In other words, going forward, you're going to have a neutral FX reserve asset. And that's gold. And I think on some level, it can be Bitcoin. We've seen some marginal sovereign wealth fund type buying out of the Gulf, think Abu Dhabi late last year. But that's been about it. It could hold that or... you know, compliment gold in that role, but we've not really seen it yet. But I think that's, I think that is, that's like I said, I think that was the 1971 moment in the other direction. That was, we're going back to a system with a neutral reserve asset that floats in all currencies. And that then has just absolutely enormous implications for the global macro and global financial system. Because what it implies is that currencies are going to trade Luke (07:34.28) more on balance of payments. And so the nations that run big deficits are gonna have weaker currencies than the nations that run big surpluses are going to strengthen relative to those that run big deficits. And that was sort of how it had always worked kind of except for the dollar. The dollar ran the biggest deficit but was still the cleanest dirty shirt. And I think that's, I think we're, the worst performance in the dollar in 50 years to start this year, I think might be a warmup to sort of, it, the dollar getting marked to its, its balance of payments fundamentals. Michael Tanguma (08:07.79) Yeah, it's a great outline. It's something, I'm curious how you reconcile and also maybe sharing a little bit of monetary history, specifically after 08. I think one of the best podcasts you've done, at least that I've listened to, was with Robert Breedlove. We actually did a recap on it. I think it was about two, two and a half hours, but really broke down a lot of these concepts. And one of them, it reminds me when you were speaking, a little bit of tether, and it's not widely known and I can't prove it, but it's, I think, widely understood in this industry. that Tether is de-pegged multiple times from the dollar. But the exchanges were incentivized to not do anything about it because it is the trading pair for BTC. So everyone waits to resure up and then keep at par with the dollar. everyone, you don't have like a basically just kind of like fleeing of assets. And what that reminds me of is that's a small microcosm of a larger global environment. It kind of, think about it in this same sense with assets, insolvencies, counterparty risk, is there's just an unwinding that's going to take very long. there's, to your point, you've been looking at this much longer than we have. It's like point blank. You want hard assets, gold and Bitcoin, but we live in this world today where the 60-40, like we're still looked at as insane people. When you think about even the Paul Tudor Joneses of the world that are, gold and Bitcoin are taboo. How do you get exposure? Up until recently it was GLD and these ETFs, I'm fairly confident you don't hold it large, ETF, you probably understand why you would want spot. But that's where the market's going to get cattle herded into because that's just what they know, equity like exposure. And so there's just still such a long learning of to your point, FX and trade was net settled, but we went away from that on this dollar standard. And so we're in a multi-decade process of just relearning what money is and what assets are. Just curious how you think about where we're at and how this started much longer than this past few years, even with the FX. the Russia seizing of Treasury reserves. Luke (10:07.744) Yeah, it's, I think we're in like, you know, two pitches into the first inning to what is a probably once in a hundred year monetary system change. And I think it's gonna impact sort of everything around us. You know, there was a, I don't know if it was a hot mic or intended to be heard, but Putin and Xi in early 23, as she was leaving Moscow said, look, we're making changes to the system not seen in a hundred years and we're driving these changes. And to me, I thought that was a really important comment because a hundred years prior was 1922 roughly, which was the Genoa conference of 1922, which historians and macro people far greater than me point to as arguably the original sin to sort of this present dollar system, which that was when the, it was decided that goal that the dollar and the British pound would be made on par with gold as an FX reserve. And that basically made the dollar and pound as good as gold and every thing else less. And that kind of kicked off this whole, dynamic of, you know, paper is as good as gold. And as soon as you do that, where you don't have to settle imbalances in gold, in physical species, those imbalances are allowed to grow and grow and grow. And there's a winner and there's a loser and there's political reasons that those choices were made. You know, and I think part of it was allowed to continue post-World War II because Michael Tanguma (11:56.526) you Luke (11:58.656) You know, the choice was pretty simple. Like the world was trashed except for the U.S. And so the U.S. all this industry and no customers and the rest of the world had nothing. Certainly industrialized world. And the choice was like, OK, either we live hand to mouth for the next 60 years or we basically create a system for a period of time where debt becomes an asset. and in a very widespread manner as a way to basically pull forward from the future, rebuild the centuries of capital that was destroyed from 1914 through 1945 and into World Wars. And politically there was really no choice, right? Once people start to starve and live hand to mouth, they're going to vote for really bad people again. And you're just going go right back to where you started from. So the decision was made at a very high level to basically have this system as we had out of World War II, which was, you know, the dollar at the center of it, dollar peg to gold, everything else around the dollar. And that was done for very real politic reasons, which was just like the choice is everybody lives in caves and rebuilds hand to mouth basically after World War II. And we rebuild over 60 years and everyone's quality of standard of living sucks for 60 years. And we have a new, another depression for another 60 years or We can rebuild really aggressively by sort of, you know, stockpiling debt as reserve assets. And that's the choice that was understandably made. The part that I feel like most, even senior market participants don't, many don't recognize is A, that this was a decision that was understood and made and B, that there was a follow on to that, which was it was always understood that at some point they were going to have to go back to a neutral reserve asset, a gold, presumably. type of system or a bank or type of, of neutral reserve asset as Keynes talked about it at Bretton Woods. So, you know, it's one of these huge changes where I think we are now in sort of two pitches into the first inning of going back. Like it is, we have now reached the point. We can see it in the debt. We can see it in the deficits. We can see it in the geopolitics. We can see it in the imbalances. Luke (14:15.188) that are just so far beyond anything anyone ever imagined or intended, like we've got to go back to what they always knew they were going to have go back to, which was a neutral reserve asset that settles trade and floats in all currencies. And so I think we're in very early stage of that. I think there is some disagreement around that. think much of the global South wants gold. I think the United States has... started to stand up Bitcoin essentially through the stable coin initiatives, in particular, to perhaps compete with this or offer an alternative, you know, we'll see. But to me, the imbalances are so massive and it's so early on. I don't think people have, you know, as, as this hundred year original error and then understandable political decision post world war two was made and needs to now be unwound. exactly what that implies for the international trade value of the dollar, for the price of gold, the price of Bitcoin, different asset classes, for what happens to the real value of bonds. There's just so many things it potentially impacts. Jackson Mikalic (15:24.878) Yeah, incredibly well said. Appreciate you walking us through that, Luke. I would love to hear your thoughts on where we go from here in terms of neutral reserve assets. I had some notes down. I think it's fascinating and I don't know how to quite parse this myself because you've covered extensively how China, Russia, BRICS nations have been accumulating gold at quite a rapid clip the past decade. You just mentioned earlier in the show that gold is now the second largest reserve asset globally, and I've always tried to think through is are the BRICS nations or is China, if we focus China specifically, are they at more of an advantage than the United States is as it relates to gold as a neutral reserve asset? And there is a second part of that question on Bitcoin and stable coins, but I think I would love to just understand and pick your brain on the gold aspect first. how do you weigh how China and US are as it relates to just gold reserves and also the mechanics of revaluing the gold, not only in terms of how that works, I know it's kind of like an accounting thing, but what would that signal to the market if the United States revalued gold on their books? Luke (16:41.714) I think if the US, you know, that's, they'll take the shorter one first. think the US did revalue it just with the accounting move. I think it would signal that the US is on board with gold being moved back into the system as a neutral reserve asset, you know, fully on board and sort of, know, I think it would be bullish for gold. I don't know that we'd wake up and gold would be up, you know, a thousand dollars or something, but I think it would be very bullish for gold over the ensuing, however many, you know, for over the coming quarters and years. As it relates to China vis-a-vis gold, it's kind of a two sides of the same coin type of question because I do believe there are interests in the US government and intelligence world that see that if gold prices went much higher as part of a reset of a system where gold is the neutral reserve asset, that it might benefit the Chinese and the Russians to the detriment of others, particularly given in-ground reserves. If the Chinese and the Russians have more in-ground reserves of the neutral reserve asset, then that is an advantage relative to what they may have in vaults. And I think there's some validity to that objection. The flip side to it is the US spends its most of... its interactions with China telling the Chinese they need to consume more of their own production. And the Chinese government has been paradoxically, the communists have been telling our people for 25 years to buy more gold, buy gold, buy gold, buy gold, buy gold, buy gold, which is a very non-authoritarian, decentralized, know, freedom loving thing to do, which is why I say it's paradoxical. And so point being is that I think the grand bargain to be had on the table is look, the U.S. needs to weaken the dollar. The U.S. wants the yuan stronger against the dollar. And the U.S. wants China to consume more of their own production. And as you go down that list of three, the price of gold is a lot higher. It's like check, check, check. It takes care of all three. You can recap Chinese consumer balance sheets. They will have a lot more money to spend on their own production if the price of gold goes up a lot. Luke (19:08.018) You will have a weaker dollar. And I forget what the third one I just said was, but the gist of it is that the price of gold going up a lot helps all three of those things. there's sort of two sides of the house. I think from a grand deal to be had within sort of a reset, I think it is in the US's interest for the price of gold, for the price of gold sitting in China to go up a lot. But it's not in the US's interest arguably for the price of gold in the ground in China and in Russia to go up a lot. you know, it's kind of one of these, it's kind of one of these, you know, the US needs to decide what it wants because ultimately China's happy to keep buying gold here because they know relative to US debt, it's still wildly undervalued. So they'll happily just keep piling it on regardless. Michael Tanguma (20:05.036) Yeah, I mean sounds like the natural paradox of a neutral currency. It benefits everyone. Luke, I followed you for a while. think when you first initially, kind of at least in the Bitcoin scene, came on, at least from my remembering, was with Marty, who's a good friend. And this was years ago. And it's been, I think, to Jackson's point earlier, one of the clearest, know, best thinkers in this space helps because you don't necessarily come from the Bitcoin world, which usually helps because you look at it from a, you know, a broader view than a, you singular asset and also what it fits into a you know, just a traditional market construct and it feels like over the past few years you kind of grow and to realize that Bitcoin may play a larger role in global macro and also in your personal portfolio. Just curious how that's shaped and how you see that playing through this because I think the beauty and what we're trying to do a little bit more of is kind of isolate Bitcoin to be closer to gold than it is to crypto, right? This notion of proof of work. You know sovereign currency neutral currency it benefits if you were able to isolate it because it feels like for most Retail investors the path to understanding Bitcoin is has been historically through and gold But very similar with gold's appreciation and people understanding why it's appreciating and its value as a neutral asset Well, you can't help but also start to see and understand bitcoins value prop given that it kind of like gold with wings effectively, right? so just curious how you've been thinking about that and how you see that playing out as investors naturally start to go to gold, they will be more open theoretically to Bitcoin when in a world where they would have never gone to a sound money because of cash flows and all the other associated things that a normal traditional financial investor would not be interested in. Luke (21:49.024) Yeah, I probably, not even a probably, I first bought Bitcoin right shortly after Coinbase launched, right? So 2013. So I owned Bitcoin and I was on this, you know, this is in a prior life. I hadn't formed FFTT yet, but I was on there with another partner of mine who was in institutional equity sales and we each bought slug of Bitcoin and we're like, hey, let's, know, I mean, I can still find the, you know, the receipts on my Coinbase account from 2013. It's like, oh, like. I sent 10 Bitcoin over to John and John sent 10 Bitcoin back and hey, this is so cool. It cleared and sort of like, wow. And now you're like, my God, we were sending $1.2 million a rattle. Wow. Wish I'd have known that. So obviously, I don't know anybody says, boy, I bought enough Bitcoin back in 2013. I definitely did not. But I always kept it around that whole time. even after I started FFTT and even after it had gone from whatever, think I probably bought it from like 600 bucks to like 1300 bucks and then it went back to 500 bucks or something. And I just held it there because it's kind of one of those things where if you have just a stub of something, you're still paying a little bit of attention to it. And I just felt like I wanted to pay attention to it. And then in 2017 when it ran to whatever 17,000 and split from Bitcoin cash. And now I've got, you know, and this other stub in there and I've got Bitcoin and you know, that forced me to pay attention. Cause all of a sudden I was like, my gosh, like this is like found money. And it's like, actually real money. I should probably know something about this. And so I started kind of digging it again, but again, to me, it felt like it felt like a bubble. Like it felt like every other bubble I'd seen in my career where it sort of, and when in early 18, I mean, you can still find the old tweets that I put out there just, you know, to heads up the Bitcoin people like, look, they're bringing up these derivatives. That was when they were launching, think Bitcoin futures, like in the first quarter, 18 or something. And I don't even know if they ever did a whole bunch of volume in them. But my point in those tweets was like, look, this is how they've worked to... Luke (24:01.524) contain gold all these years. This is why gold isn't 10,000 an ounce is because you you've got all these unallocated paper derivatives. So just, you know, be aware because a lot of the Bitcoin community was super excited that, hey, this means institutional exposure, blah, blah, blah. And I'm like, well, it might not be good for it. And whether it was the futures or whether it was just the natural four year cycle, I don't know. But Bitcoin then proceeded to kind of do what it does. And so to me that validated, okay, well, this was just a bubble and whatever, I can forget about this thing again and I'll just leave it here. Because I'll be honest, was in 17, it was really given me a really hard time mentally from the standpoint of as I'm watching it go at 17,000 and I had a tiny Bitcoin position and a big gold position. And I was like, oh my God, I'm wrong for the right reason. Like I was right about what was gonna happen and I'm on the wrong horse. And then they did the futures and it fell down. was like, okay, right. It's like, okay, my priors have been confirmed. I'm good to go. Gold was the right one. Bitcoin was just a one-time bubble. We got all excited. Okay. And that was about when I think some of the Bitcoin community, maybe 2019 into 2020 started reaching out to me and having me on some podcasts, know, Peter McCormick and some other guys. And I give them a ton of credit because they sort of dragged me into it kicking and screaming because I was still at that point. was like, well, like it's kind of interesting, but I think it's just a bubble. I get that it's thing and now it's back. And, you know, their overriding point was just Luke, you come at it from this macro, like you were saying, Michael, and like you're running the ball to the one yard line going in. Like all you got to do is like say hike one more time and like step over the goal line and you'll get it. like, so they were just, I thank God that, know, I mean, as you guys know, the Bitcoin community is very, optimistic and uplifting and enjoy being around, generally speaking. And persistent. And so they're like, know, and, you know, to my credit, I wasn't a dick, you know, I could have been like, you know, piss off and, and like, they probably would said, you know, we'll F you, but, but I didn't, I just, I'm like, okay, all right. Like I never said no, I just, and so finally, like where it really hit big for me, finally, where I went from like, this is interesting to like, my gosh, was Michael Tanguma (25:54.104) persistent. Luke (26:20.328) In, I guess it would have been like November of 2020, if you remember Bitcoin went back over like $20,000 with authority. It was like, whomp, through it. And I looked at my wife and I just said, look, I'm wrong. Like this is not a bubble that went up because every other bubble in my career was, you know, up, crash, and it's dead for like five to 10 years. And yet here I am three years later, Not even two, two and a half years later. And this thing's breaking through the prior highs with authority. And I looked there, I said, this is a currency issue. This is like, if I look at the chart of Bitcoin in dollars, it looks like the chart of, you know, Turkish lira in dollars. If I, it looks like, you know, Lebanese pounds in dollars. looks, it looks, it looks like a hyper inflating currency. It looks like a currency crisis in a weak currency in dollars, except this is dollars in Bitcoin, know, Bitcoin in dollars. And I said, look, we're going to, this is going be a big position for us because I'm wrong. Like I thought this, and it's not, this is, this is not a bubble. This is, this is, I started calling it the last functioning smoke detector. Like this is what gold is actually what I, one of the biggest physical gold traders in the world told me a couple of years earlier. Bitcoin is doing what gold would be doing if it didn't have the gigantic unallocated gold market attached to it. And I'm like, okay, here we go. And so, I actually shifted a bunch of gold into Bitcoin and then I actually backfilled the gold that I had shifted into Bitcoin and then I kept adding to Bitcoin. so for me, is now, I think, and then once you have a good position, then you really got to learn everything you can about it. And the more you learn about it, the better you feel about holding it. mean, volatility aside, you sort of learn that, but like the more you learn about it and the more you get involved in the community and the more you realize, wow, this really is the last functioning smoke detector around what we're doing. And I wanna be there. And so that, it was really kind of a fun process through all of that. I mean, I wish I would have gotten to the 2020 point in 2013 because I'd probably be on a beach somewhere having flown there on my own jet, but that's neither here nor there. Michael Tanguma (28:39.214) I love it. It's incredible anecdote and it's a signs of, know, obviously a great investor and somebody that's just has the self-awareness because most people on the sunk cost fallacy and just double down on kind of their buyer, their priors. And it reminds me of similar, that doesn't get talked about enough, but Paul Tudor Jones journey, if you remember, I think it was after the 2017 bubble, he referenced having his analysts due to diligence and he looked at the supply and it was like 85 % of the same holders watched it crawl down to $3,000. and he's like, nobody does that. Like nobody still holds and he's like, what are we missing here? And then the other thing is it probably helped the Len Aldens and other individuals coming in from the macrospace to help in like, because it helps to see other intelligent people follow the trade versus the persistent lunatics screaming at you on Twitter as well. Luke (29:29.568) Absolutely. mean, I know Lynn, I know Lynn, she's a friend of mine. And so it's really helpful to be like, you know, it's a, a, a, it's a true luxury and privilege to be able to like, you know, bounce stuff off or be like, Hey, I don't understand this, help me understand this. And she's got this great, you know, way of breaking things down, like an engineer. I'm like, no, think of it this way. And then I'm like, okay. Got it. And once you want to have that understanding that leads to what Paul Tudor Jones discovered, right? Of, of, you know, why weren't people selling? Because they knew. Like once you know, like, you you, you don't, you don't sell unless you really have to. Brian Cubellis (30:07.231) Yeah, that's a really fascinating sort of peek into your journey, Luke. think one thing that stuck out to me there was your, I guess, initial curiosity to get some in 2013 is actually super critical to the rest of your journey because in my mind, most of the people in traditional finance, they don't have enough curiosity to do the initial allocation and then they don't watch it like you watched it. So having that initial allocation made you continue to at least think about it in the back of your head. and actually in the future be willing to say, what if I was initially wrong about this thing? Because that's the recurring pattern with a lot of more traditional finance, hedge fund types. The most recent example is Philippe Lafont from CO2, who talks about his journey and he initially just dismissed it for many years and ultimately woke up and realized like, I have to be willing to question if I was wrong about this thing. And that's almost, you know, that's one of the greatest skills of the best investors of all time is willing to say, being willing to say, what, you know, what if I was wrong about this? But I think the sort of the initial allocation is actually critical in that because then you're more predisposed to say, well, at least I got some back then. And so I'm not going to be as biased against this being, you know, not originally what I thought it was. Luke (31:29.792) Yeah. You know, I, I was, I had some advantages in that and that, you know, was working on the sell side calling on big institutions. Uh, and, uh, very dear friend of mine was, uh, was working at one of the biggest hedge funds in the world. had a couple of friends that introduced me to call it, I don't know, probably 2009 or 10. Um, and they were both played minor roles. They're both mentioned in passing in the big short, but they had made, you know, They had made good money in the big short, The mortgage derivative trade. And what these two guys were doing was they were buying Bitcoin in like 2010, 2011, right? And so people say, oh, if I could have bought an 11 for whatever they were buying it for, a buck, 20 bucks, a hundred bucks, gosh. And like, it's easy to say, but like, guys were like flying down to like Ecuador and like buying. Bitcoin from like video gamers is like it was the wild friggin West. And so they were kind of going around and so they were the ones that really like 10 11 were starting to tell me about it and they were the ones you know finally like by 2013 you know I said all right I want to own some how do I do it and like here go to Coinbase download on your phone away you go and I doubt I would have ever done it if not for that but I will say one thing as an investor I've always had an ability to do for whatever reason is like When I'm wrong, like, I can just flip. it's just like, it is almost like, it just completely, ownership gone with, I'm wrong, move on, wipe the slate, like go forward. So luckily it played out well this time. Jackson Mikalic (33:13.191) It's always funny to hear when people say, oh, if I'd known about it then I would have bought it, right? Because even to this day with the ETFs just going live in 2024, everyone effectively, not everyone, but 99 % of the people are let's say investors in the US could easily have made an excuse, well, if I'd known about it, I would have bought it, but they did know about it. They didn't buy it. And now only starting to buy it, very, very small percentages. It's still a retail driven market because the ETFs are allowing for that liquidity. the access right. Very, very few investors have actually gone into like Bitcoin native rails and purchase Bitcoin, let alone flow into South America and you've done a cash deal for 10,000, 100,000 Bitcoin. Right. So I always find that fascinating. Brian and I both are from the traditional finance world. And I actually remember in 2020 after I was living in New York at the time, after everything you shut down in the city. dad had to drive to drive up on St. Patrick's Day actually to evacuate me out of the city. Normally the craziest time in the city like St. Patrick's Day is probably the one of the busiest times in the city, not a soul in the streets. Anyways, I get back to Pennsylvania and it took me having to go look into like macro voices, right? To find some of these like more off the beaten path or esoteric interview podcasts. And that's how I found you. That's how I I found Brent Johnson, Lin, a lot of the great macro thinkers that I think do a phenomenal job. But when I got back to the office and I had this different view back in 2021, it was remarkable that nobody in my office, I'll put Bitcoin aside, but even gold, right? Even under this new fiscal and monetary regime that we were experienced for the past 12 or 18 months at that point, nobody was talking about gold at all. And that was very strange to me. And I'm curious to hear your thoughts just like, I know there's a stigma historically about being a gold bug and all these things. Same could be applied to Bitcoin. I wonder if you think that stigma is starting to shift and do you think that gold is finally kind of at a point now of getting, let's say, more institutional credibility in portfolios or not so much? Luke (35:24.298) No, it's interesting because I... Okay, I was at a conference probably 18 months ago and you know sort of you know, somebody said to me You know Luke I getcha I understand what you're saying, but if I buy gold and it goes down 30 % I lose my job and if I buy treasuries long-term treasuries and they go down 30 % I keep my job and so It's super interesting because at the same time without getting into any specifics. I'm also having conversations with people at the very, high levels in finance, very recognizable names and they love gold. They love it and they own it big. And so there's almost like this. sort of the, I mean, even like Besson, right? He's a self-admitted gold buck, right? He's now the treasury secretary of the United States. And yet, most of traditional finance is still where that person who said that to me is like, look, I can't own it because if it goes down, I get fired. Whereas if I lose money in treasuries like everybody else, then I'll keep my job. And so to me, it just speaks of being an early innings, right? It's kind of the classic, you know, you know, early adopter, late adopter stuff. Like the early adopters, you know, they're partly there, but they get it. think, and part of it is, is, you know, it's not a question of intelligence or of sophistication. I don't want to make you think that's the reason for it, but I think, I do think what it is, is, you know, the average person in finance doesn't, not only doesn't get paid to think about, but is actively discouraged from thinking about things like, Luke (37:14.874) What does it mean that central banks are buying all this gold and stuff? What does it mean Russian FX reserves being so like the average financial person in America is like, know, we seize Russian FX reserves. All right. Yeah. Hashtag America. Great. And that's extent of the thought rather than, okay, what does this mean? What does this mean? What does it? And so the guys are going, what's this mean? What's this mean? What's this mean? Are going, my God, I got to buy gold. I gotta buy gold. And central bankers are going, my God, I gotta buy gold. And sort of the people that aren't thinking about those second derivative things are like, well, just not thinking about that yet. know, price is probably starting to wake them up to that, right? Americans right or wrong, right? The average American investor won't buy anything if the price isn't moving. They'll wait till the price moves. And that's just how we are culturally. know, certain cultures are value buyers. Certain cultures are momentum buyers. And Americans culturally are generally a momentum buyer. So, know, it's probably starting to get onto people's radars, but even then, like... You know, most hedge fund prime brokerage agreements, I'm told, prohibit specifically being able to take physical delivery of gold from your prime broker. Right, by the time this cycle's over, I don't think that will be there still. That prohibition. Michael Tanguma (38:30.222) you Yeah, yeah, that's what makes this time incredibly exciting, exhilarating, because while it's bleak out there, we know it when we see inflation, we see the trends, demographic trends. There's this notion that, you you hear Dahlia come out, we were talking about it on a previous pod, I think he came out at like 5 % or 15 % allocation for something with gold and some smaller BTC. You know, he's much more allocated to that. But the inertia that exists with his investors, and we talked about as well with the all-in guys who pretty popular. It's like Chamath was on this trade in 2013. He doesn't talk about it because he has a whole LP base. Like these people aren't incentivized to discuss it in the same way to your point institutional investors either by design or because they can't talk about it and really pitch it as anything viable. But in reality on the back end there's a bunch of people allocated and it goes back to Saif-E-Din and his book about you can't really insulate yourself from a heart of money. and others are holding. so whether it's a sovereign or just an individual or company balance sheets, now there's a pub-code craze which we have our own opinions on, but the notion of a company like Figma, that's just pure good business to be able to hold a heart of currency if you're a business, if you're an individual, personal balance sheet. And you touched on something on Brilo's Pod that most people don't talk about. It's something that's been instinctually in my mind, because I've been in this space for a while. You talked about the ETF and approval and how there was a little bit of, I don't want call it weirdness, but it was a little curious in your mind on, you know, from a, I think you know I'm going with this, that from the US and inflation and effectively the 350 million Americans need to be able to preserve, you, onshore production and inflation runs, people need to be able to hold a better form of money or they're not going to be buy any of the things you produce. Michael Tanguma (40:21.677) And back in 22 and 23, this doesn't get discussed, but institutional investors wanted nothing to do with Coinbase. I talked to them, the folks at Citadel and Blackrock, they wanted nothing to do with Coinbase. It was a Web3 company in their mind. It was the same thing as BlockFi, FTX, Celsius. And something shifted between like that summer when everything collapsed in 22 and fall, and then 23 when Coinbase was just blessed by everyone and the ETF was blessed. And the guise was thrown and the common narrative was that the grayscale ETF and it was the lawsuit and the really did it but he never felt right and you're the only person I've heard kind of talk about this publicly do you know what I'm referring to on Brie Love's podcast where you're discussing the ETFs getting approval Luke (41:00.682) vaguely was like, yeah, was I just saying that basically you got to get you if you're going to inflate things, really inflate things, you've got to have let people hold an asset that's going to preserve and grow some purchasing power ahead of time or else you're just going to you're going to spur a revolution basically. Michael Tanguma (41:15.533) Exactly right. So in that vein, that was the real reason or a large component of the ETF approval was to get consumers the ability to hold a form of money that would be able to hold their purchasing power. Luke (41:30.1) Yeah, and I'm not all in the weeds on the sort of Biden administration versus Trump administration regarding favorability towards Bitcoin. My understanding is that the Trump administration has been far more favorable. And obviously that was still during the Biden administration. But I think ultimately, I think our leaders for, it really, there really is a version of the Churchillian, commentary, right? The Americans always do the right thing after they've exhausted all the alternatives. Like I do think that's kind of a, cultural phenomenon where America will ultimately do the right thing. They won't go down with the ship doing the wrong thing. and I think that might've been an example of that, where there was this belief of, Hey, You know, we can, can, you 2022, right? We were, how many times were we hearing that Powell is going to be the next Volcker, right? He's going to fight inflation. He's just stamp it out. And I was writing for clients at the time, you know, in not so many words that, you know, people saying that are high, there's like zero chance they can do that. Like it's, and it's not, you know, I went to public school. It's very simple math. It's impossible that he's not going able to do it. He's going to, it's going to blow up and fall of 22, it did blow up. Yellen started weakening the dollar. And so my view is that, probably sometime shortly thereafter. And if not then, then in probably, you know, first half of 23, when they had to come out and save, you know, signature and basically, know, the BTFP it's like, Oh boy, here we go again. Okay. We thought we could do this. We can't do this. We're going to have to inflate. And if we're going to inflate, then if we want to avoid, you know, the sort of, uh, you know, pitchforks and torch outcome, then basically, you know, We cannot keep bondholders whole on a real basis and inflate away the people. need to inflate away the bondholders and keep the people whole on a real basis. That's the smarter thing to do and politically. so that's, you know, I have no sort of proof of that, or I've not heard anything to suggest that there was some decision made in that regard. just watch the favorability shift as you described sort of after 23. Luke (43:48.784) in line with what was happening and you know I think you know there were other things Yellen showed throughout that time that were very pragmatic where she kind of said you know even even as far as going like my whole academic dogma around neoliberalism and free trade was totally wrong sorry Jackson Mikalic (44:10.3) I would love to talk about digging a little bit deeper into the administration because we brought up a Besant and being a gold bug. then Luke, you just mentioned and Michael about how if you're going to inflate everything away, you want to get your citizens into a better form of money or a scarce asset to preserve purchasing power so they can participate in the economy. Love to hear Luke, your thoughts on this first eight months or so of the Trump administration. What sticks out to you just from their economic policies and more specifically the embrace of Bitcoin and stable coins as part of the bidding up the treasury market, creating demand there? Just love to hear what sticks out to you there. I'm sure Brian has thoughts as well. Brian actually sold all of his Bitcoin for stable coins. That's how much he loves stable coins. But Luke, what are your thoughts? Luke (45:04.019) I think. Luke (45:08.082) I think they have shown an ability to course correct from starting in the wrong foot, right? So like if it was me and I was pretty vocal about this at the time, I would have come in and done kind of the big bath, right? I would have just said, look, the prior administration did all this. We're going to devalue the heck out of the dollar. We're going to revalue gold up. We're going to buy down debt and we're going to go. And they did weaken the dollar over the course of the, over the course of the first half of course. But like to me the whole doge thing was a complete air ball and was always going to be an air ball I mean you just look at what we spend money on it was you know Maybe that you know, it's entirely possible There was a political nod there for that that that sort of ground ball had to get run out. Whatever I think. So from an economic standpoint, when I say they changed course, think they wasted time with a completely flawed doge effort that was never going to work. I think they completely overestimated their own ability and their own leverage as it relates to China specifically, but the trade war more broadly, both vis-a-vis things like rare earths and the balance of trade, but also critically about the treasury market. You they did liberation day and seven trading days later, the treasury market's blowing up. Like that shows a, to me, an astonishing lack of a second derivative, thinking or understanding of, what was going to happen. with all of that said, they have shown an real ability to, think, change course. And I think what we're so maybe the best. Luke (46:54.64) example of that is just sort of cramming through this genius act and stable coin thing, which is ultimately in my view, the pace and the aggressiveness with which this was pushed through, I think should be taken as a read on how concerned they are with the U.S. fiscal situation. In other words, they've got to find significantly repressible balance sheet. They need to find somebody willing to buy lots of bonds at near 0%. now, and so I look at that and go, that makes sense, but it only really makes sense if you can get rates at the front end down. And, you know, there is sort of 40 years of dogma in the U S around, well, they can't cut rates of inflation is still here or unemployment is still low or what. And, you know, that's what we're living through in real time right now, which is no, they don't. They, they are, you know, Why are they firing this woman? They need rates down now. And the reason they need it down is not because they hate the Fed or because Trump's an authoritarian or wants to be some dictator. It's because the US fiscal situation is that bad. They need rates down to zero. They need to finance a lot more of it in the bill market. If they need to means they need to get stable coin market cap up a bunch. And then I look at all that and go, in that world, You know, it's hard for me to see a world where stable coin market cap goes to two, three, three and a half trillion over the next two, three years, like Besant has talked about, and Bitcoin doesn't move, right? Or, or goes down in price. I just don't see a world where that makes a lot of sense to me. So if not explicitly, they're kind of standing up Bitcoin in that way as a, as a neutral reserve asset of sorts, but at the very least they need Bitcoin up. Because if Bitcoin goes up, I think that's going to drag, we can have a chicken or egg discussion what comes first, stablecoin or Bitcoin. I don't know. I could argue that either way to no effect or to the limited effect. But ultimately, I can see the relationship. And so it's hard for me, I think it's hard for me to see a world where stablecoin market caps up a bunch, which they absolutely need as a result of the fiscal situation like yesterday. Luke (49:14.75) without Bitcoin rising a lot. So it's suddenly in their interest for Bitcoin to be a much bigger number. Michael Tanguma (49:20.078) Yeah credit to you I think you were one of the only people calling out at least loudly how doge just the math didn't check out pre to the Discussion and most people are excited about it's like this just doesn't this isn't gonna work one thing to call out on the stable coin aspect that People generally don't bring up is it'll soak up demand on the banking side as well because I think pre this genius act and I It's still I think this is gonna tie more to market structure. We're pretty genius act Banks could custody the asset they just had to have a one-to-one ratio in treasuries or dollars sitting next to the underlying. And so I think there's gonna be something natural that would happen like that as well as BNY and these banks step in, they'll be able to custody the asset, but they're gonna have to have some kind of pairing with naturally treasuries or dollars, stable coins, which is naturally gonna soak up more of that kind of demand you're talking about. Luke (50:12.8) Yeah, and you know, there's a world where, you know, they can get Euro dollars flowing out of other places into stable coins, T-bills. Again, it's easier if dollar rates are lower, but they don't have to be because best can just go, you throw the grenade of like, hey, in the next crisis, you know, we're not backing any of that stuff. No swap lines for anybody. Have a good day. You know, put it all in stable coins and, you know, with the yields around the world doing what they're doing, particularly in a lot of these places, you know, we, we look to maybe not be that far potentially. You know, we're a couple of bad bond market days away from a crisis of sorts that might start to sort of, you know, light that fuse. So let's see. But I, to me, that's, I, it makes sense to do, um, you know, and then we can get into economic policy around, you know, what they're doing with some of the, whatever we want to call them, nationalizations or investments or. However we want to spin these things, know, these are capitalism, not socialism or whatever we're calling it. I'm equally unpopular on both sides of the aisle actually, because I try to actually call a spade a spade. Michael Tanguma (51:24.728) That's how you know you're onto something or crazy is if nobody agrees with you. Maybe I don't know. We talk about that very often at our firm because we work on something called multi-institution custody and it doesn't allow for any institutional counterparty to hold unilateral control of the asset. But the individual doesn't hold. I got one here just to always keep it the plastic device with all the money. And we make the hardcore Bitcoiners not too excited because it's not you know obviously not your keys not your coins. But then there's obviously institutional capitals like well if you're being wire fidelity. Luke (51:29.094) Yeah Michael Tanguma (51:54.654) It's like I gotta hold all the money and this is that middle ground and so it's something I tell the guys often when you get laughed at you're either very crazy or you might actually know something. That would be maybe a good transition on the productivity side of things. Like where do you see the nationalization effectively of Intel? Because at the end of the day, we know government intervention ends up with inefficiencies, not efficiencies. And maybe starting there, because I have some other follow ups, but just curious what your take is. It just seems like a preposterous path we're going down, but curious on what you think. Luke (52:30.302) I think it is... I think it is... I think it is a preposterous path, but I think it's, it's the right path. The problem is, that it's as with the Doge stuff where they were doing the wrong order of operations, right? Like Doge would work fine if you had devalued the heck out of the dollar first and devalued the heck out of the debt. Then it would have been fine. But without having done the first, first, um, it was never going to work. And I feel a little bit of the same way as it relates to some of these nationalizations, which is to say like, We had no problem backstopping banks and you could say, well, that was an emergency. Well, this is an emergency. Like NATO just got its ass kicked in Ukraine and we got his ass kicked because we literally, the U S military on the margins now made in China and we were out produced by the Russians, a country that we used to laugh at. That's a country where the gas station attached. Yeah. Well, they out produced us four to one, the entirety of NATO. Why? Because that's how much our industrial base is hollowed out. So like as as much as nationalizing the banks was in 08 was an emergency. This is an emergency. Now, with that out of the way, the challenge is that they're treating it like a narrow emergency. This is like, well, we have dollars and we can do this. And so let's do this. You know, it's basically like we're going to out China, China without the requisite infrastructure, without the requisite electrical grid, without the requisite like strategic planning. Like it's just like, well, if we own Intel and we own Lockheed Martin, then it'll be better and they'll make weapons and chips faster. And it's like, no, no, no, no, no. There's like, like there's still an order of operations guys. Like you gotta have a grid. by the way, for 40 years, you've been telling people like go into finance because engineering sucks and it's hard and you're never going to make any money. And you know, by the way, if you go into the skilled trades, you know, Luke (54:31.816) You know, you're, useless. Well, 40 years later, we are now woefully short welders, skilled tradesmen, engineers. And so if we're going to nationalize some of these critical industries, which I think is on some level, the right thing to do to get some money directed into them. You still have to do the uncomfortable part, which is you got to direct some money into these trades. You got it. You got, know, All of us need to get out of finance and go weld because we can make $1.2 million a year welding. And we don't have to think about our jobs when we go home. And we're not worried about what Trump's going to tweet at nine o'clock that night. We don't give a shit. We're watching Monday Night Football. So that's the, and now the tricky part with that is the bond market blows up. they, if they want to nationalize companies to reshore industry, They don't have the long-term plan. They don't have the infrastructure, you know, in terms of grid, et cetera. They don't have the welders. They don't have the engineers. And making matters worse, in the next five to eight years, a quorum of the engineers and welders in this country are going to age out. So then we won't have them at all. And now you're, you know, kicking labor out, not going to talk politics of it. I can just tell you, you're going to, you know, a lot of this labor, you're not going be able to make welders in five years anyway, because they, you know, they don't even speak the language, right? So you're not going to be able to. turn someone who doesn't speak English into, you know, an engineer in five years, probably, or three years, say, right? So maybe five years you could, but not in three. so, but at the same time, that removal of labor is also going to put upward pressure on wages. And again, it gets back to this elephant in the room, which is trying to do all of this without just taking your medicine as it relates to the bond market. It's not going to work. Like you basically. The thing we should do first is just blow up the bond market. Like just blow it up. Revalue, like, and now that's saying get rid of it, but I'm just saying devalue the currency enough so that it is no longer like making the decisions. Cause right now it's making decisions for us. We can't grow too fast. Why the bond market? We can't hire too many people. Why the bond market? We can't, you know, subsidize welders and engineers. Why the bond market? We can't do this with, with growth initiatives. Why the bond market? Get rid of it. Like we would never, you know, when Luke (57:00.224) How many times have you guys heard we're in a great power competition or even amongst the more hawkish, you know, we're at war with China. Great. Show me in 1941, 42, 43 where FDR said, I'm gonna make bullets and tanks and ships and jets to fight the Nazis if the bond market will let me. It never happened. It never happened. And I think part of that is what we're seeing. I think that's where we're going. But it's one of these things where you don't want to say it. You know, I can say it and people say, Luke's crazy. I think Luke's going to be right. But Luke's crazy, right? That's fine. I'm a crazy guy in Cleveland. I can say this. You can't say this if you're Scott Besson. You can't say it if you're Stephen Meyer. You can't say it if you're Donald Trump. But I think that's what they're going to do. Right. Like when we really look at what this whole Fed thing is about. This is about subjugating the Fed. Get them out of the way. They don't get a say in this. If we're in a great power competition, they have one job. Buy every bond we issue at three ACE at the front end and two and a half at the tenure like they did during World War II. That's it. And bonds get killed on a real basis. Michael Tanguma (58:06.146) Yeah, I mean from a first principle perspective, the Intel, it's effectively a distortion of capital markets, but also to your point of incentives, right? Because you referenced earlier in TradFi and individuals in finance, they're looking at their benchmarking bonds, they're not gonna get fired, but if you blow that up, it realigns the incentive, which ties back to, it was a tweet you had retweeted, it was somebody paraphrasing that they were like, I think they were in defense manufacturing or some hard skill and they were trying to raise venture capital and the venture capitalists told them to go, to the PE firm, the PE firm told them like you're not Musk and to go to the VC firm and it's that just basic like concept of nobody's incentivized to do anything productive in this world because the underlying unit is fundamentally flawed and that's what's I guess not exciting but gives at least somebody you know younger I think everyone hope that if we get back to it like the sound Renaissance I think we're upon when it comes to gold and Bitcoin and people just understanding money doesn't grow on trees Well, the free market will ultimately bring in those plumbers and the welders when people, if they say, pay me in cold or bitcoin, I'm not going to produce it and then they'll demand their market rate. I think we end up there. Now, if it's two years or 20 years, that's TBD, but that's where the market goes because people just will want the better money. So yeah. Luke (59:23.04) No, I think that's right. mean, and I think you're seeing, you know, someone asked me that the other day on a podcast or somewhere. They said, well, it's not fair if Bitcoin goes to a million, then it's going to be the Bitcoin or some narrow subset that gets rich and everybody else. like, yeah, but look at the Bitcoiners. They are net producers that understand money. What do think Bitcoiners are going to do when Bitcoin goes to a million or whatever the number ultimately? They're going to turn around. They're going to buy and invest in an HVAC business. You look at, Google up like biz, I think it's like biz, biz sell buy or something like that. You can find people selling these small businesses. The internal rates of return on these things are insane right now. Insane. Like you can buy, you know, a business, HVAC service business. It's like for 650,000 bucks and you're going to make 250 a year. Like, and no one wants to touch it because it's like, there's an artificial, there's an artificial obstacle there. There's just, there's no, there's, nobody going to trade school. So they wouldn't know what to do with it. So it's this fascinating thing, but at the right number for Bitcoin at the right, you know, you would, you would start to do it now, like you said, time TBD and what does that look like? Because we don't, you know, the interest doesn't sleep and it's growing really fast at 5%. And, know, at the same time, some of the entitlement stuff's growing really fast and you know, we may not have that. that ultimately to your point, like, free market will work. It's just a question of Bitcoin will force that free market to work and then Bitcoiners will sort of pick up the pieces and rebuild things and away we go. Michael Tanguma (01:01:00.329) Yeah, I know Jackson has some thoughts but one last thing to share there's so Texas obviously or not obviously but had approved the strategic Bitcoin reserve and we're talking with them and you know others on around custody and ended up in a without you know Killing any confidence in a very high-level room in Texas, you know working for the governor when it comes to just everything related to accounting for the state of Texas and GDP and What came up was like how do we tax this thing and how do we like, you know, just measure it and all those like, okay Look, that's important, but that's like incremental very small, you know receipts as compared to just make this favorable for people to come and build businesses and work and you've already kind of seen this because to your point There's something you IE is really like figured out from not only the the tax environment, but they've been mining It's like you want that within your borders because naturally to your point it's very first principle, like people don't hoard money just to hoard it. They have certain things they want, whether it's just personal goods and services that they want to live lavishly and then that'll reinvest, or they're naturally going to reinvest in productive goods and services and you want that within your sovereign borders if you want your citizens to thrive. And I think people are slowly waking up to that and that's kind of positive in kind of the structure of the states where you have that competition happening here. Luke (01:02:13.424) It's fascinating because money's been so distorted for so long that everybody kind of has it upside down, which is to say, think about OPEC exists, it's a cartel, right? And why does OPEC exist? It exists to restrict the output of oil in order to maximize dollars. Why do they have to do that? Because the dollar's a fiat currency that is, you have to do that. If OPEC was selling for gold, or if OPEC was selling for Bitcoin, there would be no need for OPEC because every producer would be incented to run oil production full out all the time to get as much gold in Bitcoin as they could today because it was a finite, harder money. And as a result, you would have a deflationary, highly productive, and every business around the world would have that same incentive. Maximize output and productivity today. I'm going to invest to improve productivity because I'm competing for a harder money. You end up with this, this wonderful world, this high growth, low inflation, highly productive world, just by changing the incentive like that with the money. But it's, know, it's like, if you ask a fish, it's environment. The various thing it would describe would be the water. Michael Tanguma (01:03:28.334) you Michael Tanguma (01:03:33.295) It's so funny you bring that up because that's something some of the highest gigabrains on the engineering side of Bitcoin have referred to as the Nakamoto point that eventually when you play this out, 50 % of all production will go to mining. The other 50 % it's actually a book. You probably read it where it came from, the prize, which effectively breaks down kind of like oil production. can kind of, yeah, and it basically, I think stems from that, that all of you can look at geopolitical conflict that exists around oil production and how do you have to transfer Luke (01:03:44.736) Was that right? Luke (01:03:54.003) I've not read it, but I know of that one. Michael Tanguma (01:04:03.338) for dollars, but if you have a neutral asset you can literally mine it directly to the decision point is either directly to the asset or to the consumer good and that just creates an equilibrium that we've like effectively never seen. Luke (01:04:15.114) We've never, yeah, because it's just all, know, humans are flawed basically, and know, greed, fear. Jackson Mikalic (01:04:23.474) So yeah, on this topic of just where this is all heading, my question is how weird does it get? And what I mean by that is, so Luke, we've discussed a lot of the underpinnings of where we are today, the discrepancy between labor and capital and learn to code is now learn to weld. And I'm just curious, where does this all go, right? Because now we're under crazy deflationary force with AI. Like probably a year from now, I won't have a job anymore because I'm just gonna... automate myself out of one. And how do we reconcile the $37 trillion of debt with more and more compounding at crazy rates? how do we inflationary system that is just exponentially growing? How is this going to end with AI just eating everyone's jobs? Luke (01:05:14.1) Yeah, how weird is it gonna get? I think it's gonna get pretty weird and I don't know. Ultimately, I keep harping on as it relates to AI, like most of AI is way over my pay grade. Other than this, I can tell you with absolute certainty if AI does even a fraction of what a lot of people think it could, it's fundamentally incompatible with our debt-based monetary system. I've seen this happen already. Like I can, you I have an advantage being in Cleveland, being in the Rust Belt. People are like, oh, the productivity would be great. I'm like, for some, like, let me tell you how this went the last time we had an AI productivity miracle. It was called Chinese. It was called China. It was called take all the manufacturing and move it to China. And it was great for the corporate execs. It was great for their stock options. It was not so great for the working and middle class It was you know, they who had you know, their $30 an hour job at GM with full benefits knocked 12 bucks an hour as a Walmart greeter no benefits but for a period of time there from like oh two oh three to like oh seven oh eight it was fine because they got a subprime mortgage or a subprime home equity line and So they still got the bass boat. They still got the truck. They still got, you know, the vacation. Their, their, their standard of living didn't fall immediately with their actual standard of living. hadn't been Mark DeMarco yet. And then home prices stopped rising and then everybody couldn't refile those lines and it all came unhinged. And we know how it ended up, which is the feds balance sheet went from 800 billion to 4.5 trillion over the next four years. Okay. That's the model. And you know, that's the model, which is. Massive productivity gain. Okay, are we going to get some sort of subprime lending to paper over, know, white, I mean, it struck me the other day. I mean, you guys saw, if you read my work, like New York Times had a map showing in 38 of the 50 biggest US states, the biggest employer is healthcare. And that's not docs and nurses. That's mostly administrators. That's mainly paper pushers. That's stuff that like AI is uniquely Luke (01:07:25.184) you know, suited to disintermediate and those people have all of mortgages. They all have car loans, you know, student loans, not so big. That's just defaulting on the government, but you actually can't default those, but that's neither here nor there. But like we've, we saw this before where, okay, when they stopped paying on the mortgages, when the mortgages start getting delinquent, then what, where does that show up? Are we going to bail out the banks again? So you can see very quickly the path is okay. Loss of jobs on the margin. doesn't have to be a lot, but you just wage deflation, loss of jobs. You start to see some consumer credit defaults. Do we get some sort of, know, it would have to probably be universal basic income because I don't think there's any subprime that's going to be coming up to really paper over any of that. Maybe, maybe we're seeing some of that with the, you know, the, the, the, buy now pay later on, you know, frigging burritos, you know, maybe what, maybe some of the growth of that industry is, is this version of. of subprime. That certainly could be the case. But ultimately we know like, you you're not gonna be able to refi a burrito more than a couple of times. And, and ultimately like the debt based monetary system doesn't work with what AI is going to do. And therefore they're going to have to backstop this. Are you like, you know, They're gonna have to backstop the whole system. I was talking with Jeff Booth, you know, and I'm sure you guys all know either know Jeff or know of Jeff. He's a great book, The Price of Tomorrow. And he and I talked about it first time we met in person and we're talking about it at conference and people are like, well, what's gonna happen if you've got, you know, all this death growing exponentially and technology is getting exponentially deflationary. How's it gonna work out? And he looks at me, I go, they're gonna have to fully reserve the debt. He goes, they're gonna have to fully reserve the debt. I.E. 150 trillion and debt, you know, whatever that's consumer and, and, and sovereign, don't know, 80 trillion, a hundred trillion. It's all going to end up on a central bank somewhere, central bank balance sheet somewhere printed. And those dollars will be printed to fully reserve the debt. And so to me, like most AI, I know is above my pay grade, but if it does what even close what some people think it could, many people think it could to me, like you gotta own Bitcoin and gold. Like you have to. Luke (01:09:44.372) because basically they're gonna have to fully reserve much of the debt to prevent it from blowing up the entire system as a result of the deflation driven by AI. Jackson Mikalic (01:09:54.109) Yeah, and I would go as far as even to say if you, one of the data points you shared earlier this week, Luke, was just on the birth rates in the U.S. hitting all time lows, right? If you want to own a home or you want to start a family, you need to own gold and Bitcoin as well. And so, Yeah, it is going to get weird and I don't think any of us have a crystal ball, but it truly is unprecedented times. And so I like to think at least, even though I'm not out there welding and producing anything with my hands, hopefully this podcast makes it to some people who can share it with friends or family so they can start to peel back layers of the onion, get a better understanding of what's actually going on here because it is critical. You know, we like to pick on the boomers all the time and maybe in some part for good reason, but I also have some level of concern for the boomers, maybe not the ultra wealthy boomers, but model portfolios tell you to own bonds, right? And we've made an entire case this podcast why that may not be the best idea if you're living through a one in a hundred year global monetary reset. And so I not only have concern for people of my generation, millennials and Gen Z, but also on the other side of the barbell, A lot of, you know, there is going to be a lot of wealth that's destroyed if you're not properly allocated. So, yeah, I really appreciate the work that you're doing. Luke (01:11:14.314) No, I appreciate it. Yeah. And I think that's exactly right. I mean, it's not what it's one of these things too, where for the average investor, you know, it's put 10, 20 % of your net worth into golden Bitcoin based on, you know, volatility adjusted, right? With what you're comfortable with. And then like, go live your life. Like, it's not one of these things you need to be monitoring every day. And it's not a huge fix, right? It's not like, you know, in a country that really, really loves like, okay, just give me the pill and I'll do it doc. The pill is simple, the financial pill is simple. It's 10, 20 % in gold and Bitcoin, volatility adjusted based on what you prefer and like go live your life. Michael Tanguma (01:11:52.376) Yeah, there's a key aspect to the... No, I was just gonna say, I think there's a key aspect on the goal play and the inner change. We talk about often, they're gonna persist. Jackson Mikalic (01:11:53.404) Yeah, it's well said. Well, anything else? Go ahead, Michael. Jackson Mikalic (01:12:06.312) The bond market turned off Michael's audio and video it seems. Michael Tanguma (01:12:10.913) did I lose everyone? Am I back? Luke (01:12:12.456) He froze there for me. he's back. Michael Tanguma (01:12:17.231) Am I good? Michael Tanguma (01:12:20.707) Go ahead, Jackson, it's all right. Jackson Mikalic (01:12:24.936) All right, you're back. Go ahead. Michael Tanguma (01:12:27.711) All I was going say is that the gold in Bitcoin, the trades are going to persist much longer than everyone expects or maybe forever. You hit on it earlier, Luke, having a big position in gold and then naturally moving a little bit into BTC. I remember in 2020, when COVID happened, was all in Bitcoin. I've been all in Bitcoin for a while, but I naturally shaved some off for gold. It was like, if this thing is real, this is pretty kind of finding out whatever COVID was. It's like, you're just going to want something physical. And I've been thinking about that more recently because I'd encourage anybody listening, know, there's a certain segment of the market that is all in or very heavily skewed towards Bitcoin. And I ended up randomly watching Cinderella Man. it's a movie about a boxer or whatever, but it's really actually a movie about the Great Depression. And I think we naturally forgot. about what happens in a Great Depression and how you get wiped out and you're not gonna eat your Bitcoin. You may be able to use it, but you may want a little bit of gold just in case. And I don't think that's, we see this with very significant holders. I'm talking people holding $100 million. in BTC, they'll naturally cycle out a position into gold for a number of reasons. It's just a prudent thing to do. And I think the opposite is also going to happen as gold runs and people have been the gold bugs, they're going to actually diversify into BTC for a number of reasons. And I think that's still an early kind of theme that most, both those camps have been in separate territories and then naturally are starting, are going to have to converge because that plumbing is also in the works as well. Luke (01:13:59.2) Yeah, think that's fair. Jackson Mikalic (01:14:01.596) Yeah. Well, Luke, appreciative of your time. We didn't get to cover the rare earths, but we'll point people to your X feed because I want to be respectful of your time. So if you want to learn more about what happened this week, check out Luke's work. But thanks again, Luke. Really, really do enjoy your work. Encourage people to read your research. If people are not following you already, where's the best place to get in touch? Luke (01:14:26.164) Yeah, they can learn more about our institutional and mass market research at FFTT-LLC.com and as you guys noted on X at at Luke Grohm in all one word. Jackson Mikalic (01:14:37.192) All right, thanks Luke. Michael Tanguma (01:14:38.991) Awesome, thanks guys, thanks Luke. Luke (01:14:39.092) Thank you guys for having me on. Enjoyed it. Brian Cubellis (01:14:39.178) Thanks Luke, appreciate it.