{ "episodeId": "SLP293", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "stephan_livera": { "name": "Stephan Livera", "role": "guest", "tag": "STEPHAN" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 8.99, "text": "Hi and welcome to Stephan Livera podcast, a show about Bitcoin. Today for episode two hundred and ninety-three, we're talking about the debt problem you can't ignore. Greg Foss joins me. He's a three-decade veteran of fixed income securities, specializing in high yield, and he joins me to talk about debt, bonds, government debt, and why Bitcoin is the answer. We talk about the credit craziness of debt markets, the interaction between debt and equity, how we've seen this bond bull market play out over decades and what happens next, and we explore some of the alternatives. Could the government repudiate the debt or could we outgrow it? And we also obviously talk about why Bitcoin is the best asymmetric trade. This show is brought to you by Swan Bitcoin. Swan is the best way to accumulate Bitcoin with automatic recurring buys and instant buys. They've got really fast setup and it's really cheap to automate your stacking. Now, Swan is available internationally, so you can wire in your funds. Now, if those of you in the US, it's even easier to stack with Swan. They've got a C8 where they automatically pull from your account, buy Bitcoin, and withdrawals are free. Swan take a focus on education and content, and they are Bitcoin only. There's no confusion with altcoins. So this This is the best place to send pre-coiners and new coiners. Swan also offers Swan Private. This one is for individuals who are, if you're a high net worth individual or you're working with a business or a corporate and you need to buy Bitcoin as part of an entity, you can get one-on-one calls and a dedicated Bitcoin account expert to help you. So go to swanbitcoin dot com slash livera to sign up and start stacking with Swan. Lynd at HoddleHoddle is a peer-to-peer Bitcoin backed lending platform so you can lend stablecoins or borrow against your Bitcoin There's no KYC, it's global and anonymous. Lend at HodlHodl is a way to earn extra income on your stablecoins, you can get an average of twenty five percent APR. Now, on the other hand, if you need some liquidity, you can borrow against your Bitcoin, so you still hold one key in a two of three multi-signature controlling your Bitcoin during that period. There's no rehypothecation, and HodlHodl doesn't hold your funds. So this is peer-to-peer lending and borrowing. It's Bitcoin DeFi. Set your own terms Borrow or lend and the interest rate. Go to lend dot huddlehuddle dot com. Have you ever wanted to get involved with Bitcoin mining but you just didn't know where to start? Well, Compos Mining can help you out. Compos is an online marketplace making it easier for everyone to mine Bitcoin. So you can select a machine, they can ship it to you, or you can send it to a facility that has already been vetted, and this allows everyone to tap into economies of scale and access reasonably priced hardware and cheap industrial power rates. Compos also have a special VIP bundle on right now. It's twelve machines, thirty-two thousand four hundred dollars upfront, plus eighteen hundred dollars a month, plus the hosting cost, and there's a big discount on this as compared to if you were purchasing those twelve machines individually, and that will be twelve Antminer S19J ninety tera hash units. So go to compassmining.io and start your process of mining. Onto the show with Greg. Greg, welcome to the show." }, { "speaker": "stephan_livera", "time": "03:13", "start": 193.02, "text": "What a pleasure to be here. Thanks for having me." }, { "speaker": "stephan", "time": "03:15", "start": 195.12, "text": "So Greg, I've been, watching some of your work, and I think it's really great that you've been coming at this from the perspective of a man who's been in the bond market directly for, what is it, three decades, and telling your experience from that, and then relating it into the Bitcoin world. Can you just tell us a little bit about yourself and how you got here?" }, { "speaker": "stephan_livera", "time": "03:36", "start": 215.88, "text": "Sure. so I am, I'm old, okay. I'm fifty-eight years old, and I have been trading risk For over thirty years, as you mentioned, my focus has always been on credit and credit risk and specifically high yield bonds. I, was actually Canada's first high yield bond trader w- that took, principal risk positions, meaning if a client wanted to sell a risky bond, rather than taking a, an order and as an agent trying to find another buyer, our investment bank would buy it as principal and take that risk, obviously if we were buying it with our own capital Capital, we thought it was a good investment, whether or not we were able to find another buyer or not. So, my focus has always been on credit risk, and why is that? I guess, y-y, I gotta go back to first principles. I was an engineer at McGill University, Montreal, Canada. I decided about two weeks into engineering that I knew I didn't wanna be an engineer full time upon graduation, but I didn't really know what else I wanted to be, and the, the truth was I, I enjoyed the challenge of the mathema- Maddox. And in my fourth year at McGill, when my focus at McGill was sports, when that was over, I said, \"Boy, I better find something to do.\" And I decided I was gonna apply for an MBA in, the United States. I would apply in Canada as well, but I really wanted to go to the States. And I was lucky enough to be accepted at a school called Cornell University, which is, about a five-hour drive from Montreal, upstate New York. Really great school, Ivy League institution, and I was, I wouldn't have And I was, an American citizen, while I had the marks, I didn't have any work experience, but the fact was they were building a international business school, they wanted, applicants from outside of the country, so I came in through the back door, which was, you know, everything happens for a reason, but man, was I lucky. So, I went and I did a foc-- I focused on finance down there, and that was pretty interesting. I actually, still remember the days though when, i-in, in an exam, if there was Students would have like six books, how to solve an integral or whatever, and I'm like, \"Oh my god, you, you don't, you don't need textbook to tell you, you know, this is second language for engineers or first language, rather.\" So anyway, I came back, I, I, I had a chance to work on Wall Street, but I decided, no, I was gonna come back to Canada. I worked for Canada's largest financial institution, called the Royal Bank of Canada, and it was a great eye-opening experience 'cause you realize everything you learn" }, { "speaker": "stephan_livera", "time": "06:13", "start": 372.74, "text": "In 1988, at the Royal Bank of Canada, Canada's largest financial institution, was insolvent, Stephan. Insolvent. And I was working directly for the CFO, and literally I said to him, and he's a great guy, I said, \"Emile, we have a problem.\" And he goes, \"I know, don't tell anybody.\" Like what? You mean bank analysts don't even know? And hence, and Royal Bank of Canada wasn't, in, in, you know, alone. All money center banks in New York, in fact, the global financial markets were suffering under the weight of lesser developed country loans, LDC debt, of which many countries had defaulted. a lot of them in South America. So Brazil, Mexico, Argentina had all defaulted, and Treasury Secretary Nicholas Brady came on, came with an ingenious plan So the banks wouldn't have to write their loans down to the market trading price, i.e., just for your listeners, what insolvency means is if the value of your assets is less than the value of your liabilities, you aren't in default 'cause you haven't missed any interest payments on any loans, but the mark-to-market basis, your book value of equity has been vaporized. And so I looked at this and I'm like, \"How is it possible that the global financial, institutions can actually be insolvent, yet people still have the...\" Comfort of placing their deposits in these fine institutions, and everyone knows the answer, too big to fail, implied backstop by, federal, central banks rather. And, I said, \"Well, this is it. This is my introduction to the fiat Ponzi.\" And that was nineteen eighty-eight, and I just, I didn't question it. I just said, \"Okay, it is what it is.\" If the, if the Fed and central banks can print money, people have the confidence to, to keep their bank, their, their deposits In a, in a very levered, financial institution system, but nineteen eighty eight led to nineteen ninety eight, which was long term capital management. I traded through that, I'm like, \"Wow, this is crazy, socializing losses on Wall Street again.\" you know, we had Nobel Prize winners at long term capital management, long-- Nobel Prize winners that based ninety to one leverage bets, ninety to one leverage bets based on six or seven years of volatility statistics. Statistics. I mean, it was ridiculous, yet this is what, what, what, what was allowed to happen. And again, socialized losses within the financial system. So fast forward, what was the next, event I lived through that was absolutely- The scary was the Great Financial Crisis in two thousand and eight, two thousand and nine. So everything has, in my career, has been a focus on examining leverage in the system, examining the, the banking system that most people don't understand. And two thousand and sixteen, I found Bitcoin after about a At that time, a twenty-five year search, my first reaction, like everyone says, \"Oh, Bitcoin, no, no, Bitcoin, it's, it's, it's, it's, it's nothing.\" And then you peel a layer of the onion, you see the, the blockchain in action, you see the math and code, twenty-one million, I don't need to tell your listeners all that, and I'm like, \"Okay, I have finally found...\" The solution to the fiat Ponzi." }, { "speaker": "stephan", "time": "09:26", "start": 566.03, "text": "Yeah, yeah, and so it's like we have been living, and for basically for all of us, pretty much, our entire living lives, we've been living under this fiat money regime, and that has been creating all of this additional, credit and debt that wouldn't have otherwise existed. And so we've seen these, and perhaps one way to think of that is that the markets for government debt has been more accessible for them than it- \"Quote unquote should have been, so maybe that's one way to explain it. And then, and as also, you know, as you'd probably be able to explain this very well, is we've seen this multi-decade, you know, bull market for bonds because interest rates have been coming down over time. Could you, outline a little bit about that dynamic for us?\"" }, { "speaker": "stephan_livera", "time": "10:12", "start": 612.26, "text": "Yeah, great question. So when I started, okay, I started trading for my personal account before I graduated from university, but let's just take a, the, the my professional career. In 1988, ten-year interest rates in the United States were about 12%. They had come down from 20% in 1982 when Volcker turned the screws on vac- on inflation. So from 20% in 1982 To one year ago when ten year interest rates, bottomed at, in the United States at sixty basis points, point six of one percent. There's basically been a forty-year bull market in bonds. And what does a bull market in bonds mean? Well, a bond is a fiat contract that doesn't Change the coupon, hence the name fixed income. The coupon is fixed, so the coupon doesn't adjust. What adjusts is the price of a bond in order to reflect the open market level of interest rates. Well, everyone thought they, you know, back in nineteen eighty-two, can you imagine buying a, a thirty-year government, bond that had a contractual coupon of twenty percent? That, that looked pretty juicy, right? You know, that, that was-- what did that- That mean? Well, that meant that equity markets would have to, have anticipated rates of return since equities are more risky of twenty percent plus, you know, perhaps they could have done that over a twenty year period, but no, bonds have outperformed equities on that basis just because it started with a contractual coupon of twenty percent, and now we are at one point four percent in the ten year, and it is a completely different paradigm for For fixed income managers, for any risk manager, only because of mathematics, okay? You don't change that coupon, that coupon is fixed. The price of the bond will change to reflect the risk in the market." }, { "speaker": "stephan", "time": "12:22", "start": 742.35, "text": "Yeah, yeah. And this is bringing me back to finance classes in university where they're teaching us, okay, the bond, price and the yield are inversely related, right? As the yield comes down, the bond price has to go up, and that's essentially been the dynamic for these, these multi-decades, which is It's kinda crazy when you think about it." }, { "speaker": "stephan_livera", "time": "12:42", "start": 761.55, "text": "It is cool, but here's a neat thing. I'm gonna relate bond pricing to, to physics, okay? Just for your listeners, and some of you may, may, may zoom me out now, not zoom me out, but turn me off. But here's the neat thing. You remember your physics formula, where distance equals velocity times time plus one half acceleration times time squared? Remember that? Well, a bond price is this. The change in the price of a bond is negative duration times change in interest rate plus one- Half convexity times change in interest rates squared. So bond pricing and physics are related by the same Taylor series formula, which at the end of the day, it's, it should be second nature to people, given they all understand the distance formula from physics, bond pricing. But no, everybody gets glassy-eyed when you start talking bond prices and changes in interest rates. It's almost like- What convexity, duration? Well, just think then of convexity as being acceleration and duration as being velocity, okay? First derivative, derivative, second derivative. That's as granular as I'm gonna get, but don't overthink things. Bonds are actually a beautiful mathematical formula, nothing more, nothing less, hundred percent defined by mathematics, no subjectivity, because the coupons are fixed. It's a contractual return. The only thing that can happen is they fail on their" }, { "speaker": "stephan", "time": "14:06", "start": 845.91, "text": "Yeah, interesting. So, yeah, like that's the thing, it's, it's, it's, it's this little contained system, and then when we're trying to analyze this from an economic perspective, then we have to think about, well, what is the value of the currency, right? The underlying currency that we're dealing with, and that, that's kind of where things can change, right? And because based on that and people's subjective valuation of that, and I think- I guess zooming out as well, another way to think of these, well, particularly government bonds, is it's essentially people are buying this instrument and it's paying out, you know, the coupon or, or the, you know, the maturity value, and essentially it's a promise that the government is going to tax its taxpayers, the citizens and the residents in the future, and then pay you, the bondholder, those returns. That's essentially what's going on, but it's like this Especially when you're talking about these long dated, you know, the long thirty year bonds, it's, it's a real generational compact, isn't it? It's a real sort of sense in which there's resources being transferred, from, you know, those future taxpayers, right?" }, { "speaker": "stephan_livera", "time": "15:16", "start": 916.2, "text": "So a hundred percent correct, except when you can print money. Okay? So it would have been ideal if there wasn't an ability to print money and you had to balance the budgets as well as your debt service obligations based on the revenues that you take in from your taxpayers. That would have been an ideal scenario that would have guaranteed that governments would have kept their deficits under control. However, enter the ability to print money. Enter the ability to pay someone back with manufactured money that wasn't part of the original contract. So here's the dilemma that we have now. You will lend the government, and the respective G7 nations still are in fairly good shape. Canada's not really in that good shape, to be honest, but even Canada, you have a high degree of probability if you lend them a hundred dollars today for ten years, you will get your coupons semi-annually, and you will get your hundred dollars Dollars back in ten years. The problem is that now that they've printed so much money and debased their currency, the purchasing power of that hundred dollars in ten years will be far less than the purchasing power that you have today. That's a problem. It's pure mathematics, but every fixed income manager needs to be aware of that and needs to hedge that one hundred percent certainty of debasing of the currency. It didn't used to be a hundred percent certainty, Stephan, because the debt balloons hadn't expired expanded to a point that they have today. Now it is a hundred percent certain that fiat currencies will debase because of the total global debt Which is about four times total global GDP or your tax base, which you just laid out very eloquently, that's your tax base. Well, if your total global debt is four times the size of your- GDP, and that, let's put a coupon on that debt of, let's say, three percent, because, you know, you have US ten years at one and a half percent or one, one point one forty, basis points, and then you have high yield debt, you have all sorts of other structured product, et cetera. The average coupon, if that's three percent on the blend of, of, of your numerator Four times three percent is twelve percent growth in the debt balloon just because of the coupon, not even including all this other deficit spending. And it's almost impossible for global GDP, the denominator, to grow at twelve percent just to keep up with the nu-numerator, the organic growth of the numerator. Therefore, they need to print money to solve that debt spiral. Now, the worst part of all this- This fallacy is the, the governments now are printing more money and deficits are also growing because of, stimulus, and they say, \"Well, we've paid for this. We're pay- we've already paid for this stimulus package.\" What a crock of baloney, okay? You, you don't pay for something when you buy it on credit. Have you paid for that already? When you go to the store and you buy something on your credit card, have you really paid for that? No. You've just entered into a contractual obligation to pay for it in the future, but when you can print money, that, that gives you an ability to, let's say, paint over the, the reality of the situation. The problem is, what if people finally call the bluff and say, \"You know what? I don't wanna keep rolling my debt in this?\" Continuous expanding balloon. I'm gonna stop, I want my money back today. And if enough people say that, i.e. a bond auction fails or something of that nature, wow, this could be ugly quickly. And that's why you need to hedge against the contagion that could happen in credit markets if somebody finally said, \"Enough, that's it, I'm not, I don't wanna lend a hundred bucks for ten years to get sixty-five dollars of purchasing power back.\" You know, and people who don't do that math, well, you know, you're, you're, you're, a prisoner of the debt spiral. And people that do do the math but don't know the solution, they need to find Bitcoin." }, { "speaker": "stephan", "time": "19:36", "start": 1176.31, "text": "Yeah, yeah, exactly. And it's funny because people have different conceptions of-- Well, let's put it this way, there are different ways that the system can resolve, right? One of them is, as you said, a lot of money printing. Another way might be a more explicit debt- fault. And maybe the argument is like, if the government engages in a lot of money printing or the, or the monetary system does a lot of money printing, so in that example, we might think of it like, there's different ways the central bank might do the print and spend, or it might be more like commercial banks and retail banks loan and spend, and in the creation of loans, that's creation of new money that is also, contributing to this whole debasement. Now the other angle, the other way potentially, now I'm kind of just devil's advocate here, right? What Abdicate the debt. They just say, \"Alright, well, you know what? Yeah, we've built up all this debt, and yes, it's four times our GDP. I mean, just globally, imagine. We're just not gonna pay it back. What happens then?\"" }, { "speaker": "stephan_livera", "time": "20:34", "start": 1233.65, "text": "Can you imagine what happens then? I, I can't even imagine. So let, let's hit your first point. I, implicit versus explicit default. w- I argue that 1971, when, the US arbitrar- not arbitrarily, but unilaterally went off the gold standard," }, { "speaker": "stephan", "time": "20:52", "start": 1252.5, "text": "I agree." }, { "speaker": "stephan_livera", "time": "20:53", "start": 1253.11, "text": "I would argue that's an implicit default, okay? an explicit default, which is your second, choice, where we're just not gonna pay W-what h- like these are contracts of law, right? Does this mean that, that the world unravels on the basis of a contractual obligation that someone just says unilaterally, \"Well, that's it, I'm, I'm, I'm not paying.\" I don't know what that would do to the world, and I don't even wanna think about what it would do, but if people, and any politicians that throw that out I would argue that, that's a dangerous statement because they've never sat in a chair that manages risk, okay? And that's the important thing when you con- when you compare academic thought Versus actual risk management thought where you've sat in a chair. Let me tell you, in two thousand and eight, two thousand and nine, I was working at a hedge fund and, and we actually had the-- we had had this figured out, and we were making a lot of money because we were short the right things and we were long the right things. But it was still the scariest time I've ever been involved in markets because Every single point of confidence was getting destroyed, okay? Lehman Brothers failing was just an absolute groundbreaking event because a, a financial institution that was termed as too big to fail was allowed to fail That's, that's one financial institution within one w-country, albeit the most powerful country in the world, that was allowed to fail. I just can't imagine what would happen And I sat there, and let me tell you, okay, so I was scared. I literally was riding the train to work in March of two thousand and nine, wondering if this was the last day I was gonna go to a financial trading desk. Many times, and, and it, it, it got itself together, and the Fed did exactly the right things when they had to with these things called TARP and all these programs. The problem is they never paid it back. They pulled forward the future, but never paid it back, and every time they try to using- At, at, the, the quantitative easing and taking their foot off the, the gas, there was a taper tantrum. Gosh, I don't even know, Stephan, I have no clue what would happen even if a, if a major state like California decided to repudiate the debt, let alone the country. So, I suppose it's possible, I, I, I, I will tell you," }, { "speaker": "stephan", "time": "23:34", "start": 1413.6, "text": "but yeah, it is crazy implications. It" }, { "speaker": "stephan_livera", "time": "23:35", "start": 1415.34, "text": "would, I think the world would unravel in a second, okay? based on my experience in two thousand and sev-- you know, two thousand and seven through two thousand" }, { "speaker": "stephan", "time": "23:44", "start": 1423.61, "text": "and nine." }, { "speaker": "stephan_livera", "time": "23:45", "start": 1424.71, "text": "credit makes the world work." }, { "speaker": "stephan", "time": "23:46", "start": 1426.39, "text": "Yeah, like walking through one of the implications of that. So remember, for a lot of people, their assets, their investment portfolio has equities and bonds in it, right? Like lots of, you know, whether they are retirees or people saving for retirement in their superannuation or in the US, it's four o one K, and I'm sure it's, I don't know the term for Canada, for the Canadian equivalent, but essentially all these people are saving, chipping in, and they have been either advised to do, you know, to have allocation to bonds and to have some allocation, and because of that, there's all these people who are just gonna-- would just lose all of that value instantly, right? So it's--" }, { "speaker": "stephan_livera", "time": "24:23", "start": 1462.94, "text": "So with the equity markets, though, the equity market, if you thought six six six was the low that it put in in the S&P five hundred in two thousand and nine, I will almost guarantee you, in, in-- and I don't even wanna play this game, that the S&P would go to under one hundred points if it even had any value at all Okay? Because remember, credit is a prior claim, and if the prior claim doesn't have a hundred cents on the dollar, the equity is worth zero, okay? And now the government doesn't have equity behind it, but what does it have? It has the citizens, it has its obligation to the equity or to the, to, to the everything that's, that's built in, in, in the nation, and if they stop paying, the foundation of, of principle, of risk and, and, you know, the, the, the pension funds, as you mentioned Many of them are ma-not many of them, all of them are mandated to hold a certain amount of fixed income. It, it's, it, it would blow me away. I just have no idea what the world would look like, and I suggest that we hope that we don't even have to dis- Discuss it, let alone experience" }, { "speaker": "stephan", "time": "25:35", "start": 1535.14, "text": "it. Yeah, of course, of course. And an interesting point you were touching on there as well is the relation between debt and equity, right? So just for listeners, maybe if you're not a business, commerce, financy guy, right? So equity represents our ownership share of a company and typically that might be paying dividends or it might, it might entitle you, not always, but to a voting option on what the company does, depending if it's public and so on, and then on the debt side, obviously that's, you know, you've Pay out, that company has to pay that out, and a lot of companies nowadays are, dependent on debt. But there's also that relation, as you were saying, in terms of, I guess the-- I'm not sure the correct term, but essentially seniority of the stack, right? So generally people say debt priority" }, { "speaker": "stephan_livera", "time": "26:18", "start": 1578.27, "text": "of claim. Yeah." }, { "speaker": "stephan", "time": "26:19", "start": 1579.03, "text": "Yeah, that's, that's the one. So debt is senior to equity, so meaning if there's some problem, the person who has a debt claim is getting made whole first. So could you outline a little bit of that relation and Market and the equity market relationship. Yeah," }, { "speaker": "stephan_livera", "time": "26:36", "start": 1595.85, "text": "great, great question. Thanks for that question. So that's what I spent my life doing, okay? 'Cause I didn't trade that much government debt, I traded the government debt when I needed to hedge, an interest rate position, but I didn't- have viewpoints on government debt as credit, everyone just assumes that the-- th-those are the highest credits. And but let's talk about a corporate obligation. So as you mentioned, bonds rank ahead of equity in the priority of claim in the event of something bad happening Bad happening means they aren't able to pay their obligation, their contractual obligation on the debt. Well, unless that debt is worth a hundred cents on the dollar, the equity's worth zero, okay? That's very simple. Now, think of a company that's doing well That has bonds outstanding and equity outstanding. It's a publicly traded company with debt and equity. When I say doing well, let's say their projected cash flows are coming in stronger than anticipated. Well, the fixed income obligations that they have, the bonds outstanding, that's a fixed coupon. They don't increase the coupon on the debt because they're doing well? No. That accrues to the equity holder, and they are then able to pay, as you said, dividends to the equity holder or they can go out and purchase other, Return assets that, that enhance the value of their enterprise, enterprise value being a combination of the debt and equity. That's what they're allowed to do, that's their, fiduciary responsibility to equity holders is to grow the wealth of the equity. Now, the bonds are a form of a contract that enhances enterprise value when things are going really well, meaning you can pay, four percent coupon on your bond, a four- four percent yield when you think you can invest in things that will return four percent or higher, and those returns accrue to your equity holders. So that's all when things are going well. When things aren't going well, and let's say your cash flows come in Far lower than anticipated. Well, your equity price is gonna be going down because the equity analysts who, you know, some of them aren't that dumb, okay? There are some good equity analysts out there, but most of them are dumb because most equity analysts don't even look at the, at the value of the bonds or the trading price or anything before they do their equity analysis. It's, it's actually crazy, but that's just the way the equity world works. it's getting better, there are good analysts out there that do that, analysis, but the point is if the Cash flows are coming in under projection. They don't increase the, the fixed income obli- coupon and they don't decrease it either, meaning they still have to pay that four percent coupon. Well, what happens then if you become free cash flow negative, meaning, wow, you know, you're burning through cash, you, have this debt obligation out there? Chances are the equity's getting repriced lower as the bond, as is their bonds. And if their bonds were issued, and they usually are issued at a hundred cents on the dollar or par for a four percent coupon, the market will be saying, \"Oh, that four percent coupon's not good enough to reward me for the risk of this company. I need six percent, I need eight percent.\" Well, then again, if the price of the bond goes down, it's not because of interest rates pushing it down though, it's because of the credit quality. Okay? Same bond Pricing formula, but the price is going down because they need a yield that will, reward them for the risk of that, of that counterparty not making Hole on their obligations, and that happens all the time to the tune of a default, and that's all that happens when corporate bonds have a- Component, it's an expected default loss. The problems come to play when unexpected losses come in, Stephan, and these unexpected losses are called by, caused by things like exogenous events, you know, contraction in liquidity, throughout the system. So always look to the bonds first For a true evaluation of what the credit, or the enterprise value, of a company is, equity analysts are just, they're, they're, they're the world's greatest optimists. You know, equity analysts believe that trees grow to the moon, and that's fine, but they're usually wrong, okay? They're usually wrong. Always look to the credit markets first." }, { "speaker": "stephan", "time": "31:05", "start": 1865.0, "text": "Yeah, interesting way to put it. Yeah, I like that because It's, yeah, so thinking back to equity analysis classes and things, the fundamental way people might think about things is what people traditionally think like DCF, discount cash flow. So they might think, okay, this company is going to return, you know, whatever, ten million dollars a year for the ten years, and then I'm going to take my interest rate and think of that as my opportunity cost of capital and then divide, you know, ten million-- So ten million for one year divided by one year of the interest rate, and ten million, divided, divided by, you know is worth of that, and so on and so forth, and then build up a value. And then, you know, that's one way to think about equity valuation, and then, as you've correctly said, in, in the bond world, in the fixed interest, fixed income world rather, we are thinking of it more about that company, how creditworthy are they, how a bill-- how able are they to make their payments at the time they come due? And obviously, there's a relation there because if that company now is very unprofitable And not making cash, well then they're a credit risk, and so that should make us more wary of, buying that bond, that company's-- if it's a company, buying that company's bond, correct?" }, { "speaker": "stephan_livera", "time": "32:22", "start": 1941.69, "text": "Hundred percent. There's credit metrics out there, very simple to calculate credit metrics, things like EBITDA, interest coverage ratio. So EBITDA is, a number for, your listeners, it's, it's a calculation, it's earnings before interest, tax, Depreciation and amortization. EBITDA is essenti- essentially your pre-tax cash flow, before interest, okay? Pre-tax cash flow. Now you don't deduct interest from your DCF calculation because then you'd be, double counting. D- discounted cash flow essentially accounts for the interest rate, so that's why you use EBITDA. And then in the denominator is your interest expense. So a company with ten times- The amount of cash flow to interest expense, you'd say, \"Well, that's pretty darn solid, right?\" And it's true, that would be a highly rated corporation, a double A credit, for example. And then you get down into the high yield area where I specialized, and EBITDA interest coverages of less than three times is typical for the high yield bond market, okay? Which means you only have three times as much cash flow as your coupon on your debt. Alright, well, that's, that's interesting, right? And what happens if you actually have less? Negative EBITDA interest coverage, meaning, not negative, but less than one times. Well, I hate to say this, guys, but that's where, that's where your fine governments are right now, okay? They don't even have, in many cases, the amount. Isn't that crazy? Because if they were a high yield borrower, they would be ranked or rated solidly as triple C type of credits. Blows your mind? Yes. Should it? Yes. For a credit guy who's done this for 30 years, I'm like, so many people have no clue. And the only thing that bails them out in the eyes of the rating agencies is their ability to print money. Okay, full stop. That is the fiat Ponzi in action." }, { "speaker": "stephan", "time": "34:25", "start": 2064.73, "text": "Yeah, I mean, you anticipated my next question because I was gonna ask, like, okay, let's break down the difference now between corporate credit and then government credit, and as you were just saying, it's, it's really, they're getting this special privilege, right? It's censure, it's this ability, it's their control, the monetary system, or they intervene in the monetary system to tip the scales in their favor. And so if we look at governments around the- The world that, you know, the dirt is going crazy. Oh, and one other, here's one other one that I wanna get your response on, right? So another one that people might say, if I'm an establishment fiat shill, I might say, \"Look, Greg, look, we are actually just going to outgrow the debt. You see, we're just gonna-- our economy is gonna grow, and that is gonna make us all fine.\" What would you say to them? Okay," }, { "speaker": "stephan_livera", "time": "35:10", "start": 2110.24, "text": "they failed math. Well, they failed math, and I just, I, I walked you through" }, { "speaker": "stephan_livera", "time": "35:19", "start": 2118.56, "text": "Of your denominator, which is growing yourself out of. Remember, I told you, you just needed, you needed to grow at twelve percent annually across the world just to keep pace with your interest obligation. Let alone, okay, so you're gonna grow yourself-- What do you, you're gonna grow yourself at twenty-five percent, are you? Okay, that's fantastic. Let's see you, you guys grow at twenty-five percent. You guys can barely even grow at seven percent after the most-- the, the global pandemic that shook the world to its It's foundation. Are you gonna grow at twenty five percent for the rest of time, Stephan? No, you aren't. Stop fooling yourself. Do the mathematics and understand that it is a mathematical certainty that you will need to print money for the rest of time to solve this D E B T debt spiral. Now, I hope this debt spiral doesn't turn into a death Spiral, but in corporations, these debt spirals frequently do turn into death spirals." }, { "speaker": "stephan", "time": "36:21", "start": 2180.83, "text": "Back to the show in a moment. Coldcard is my favorite Bitcoin hardware wallet. You can get this at coinkite dot com, and the Coldcard is a specialized device that you can use to generate your private keys, or you can use dice rolls to add entropy, or you can bring your own entropy. There's all sorts of features, and it can be used to be an offline signing device which you can use A micro SD card to ferry the information back and forward to the wallet, such as Specter Desktop or Sparrow or Electrum or BlueWallet. CoinKite are leaders in the industry and they're often innovating and creating new features, and one is SeedX or plausibly deniable means of storing secrets in two or more parts that look and behave just like the original secret. So to get yours, go to coinkite dot com and use the code Livera to order your coldcard. So for long term Bitcoin savings, it's important to eliminate single points of failure because no matter how careful we are, sometimes things can go wrong. And when they do, we want to be confident that we're not gonna see our savings go to zero. So obviously, don't leave your coins on an exchange or custodian, there's an obvious single point of failure. But even with a hardware wallet, you're still exposed. So with Unchained Capital, they've got collaborative custody. You can set up a multi-signature vault. Now, they've also got a very popular concierge onboarding program" }, { "speaker": "stephan", "time": "37:39", "start": 2258.84, "text": "Set up. So they will send you two hardware wallets, they'll do calls with you and cover everything you need to know to get set up with a proper Bitcoin security setup, eliminating single points of failure. So go to unchained dash capital dot com slash concierge and get fifty dollars off with the promo code LIVERA to sign up. Have you thought about backups for your Bitcoin or are you just trusting that piece of paper you got with your hardware wallet? Well, CipherGrid is a new product from CipherSafe dot io, and it's coming out, it's the best value in the industry. You get everything you need for fifty nine dollars. You get two stainless steel plates, and you get an automatic center punch provided where you go and stamp out the words, and you do four, letters for each word as the BIP thirty nine standard allows. And you can lock this with a padlock, and it's got a tamper evidence Like all CipherSafe products, it's made from stainless steel, fireproof, rustproof, and waterproof. So make sure you or your loved ones can access your bitcoins if something happens. Go to CipherSafe dot io and get a discount with the code Livera. Back to the show. Yeah. And so for listeners who aren't familiar, it's often in the large, well-developed economies, something like three percent growth is seen as good, right? That's like good growth. And so, it basically the levels to even hit sort of seven or eight percent is It's kind of like those really high risk emerging market sort of thing, and even that is, it's just insane to think that these governments are gonna grow their economy by twelve percent. It might be" }, { "speaker": "stephan_livera", "time": "39:05", "start": 2345.02, "text": "one, one time, it might be one time, yeah, yeah. It's impossible, Stephan. Let's, let's agree that in the, in the world of statistics, it is with ninety-nine percent confidence that I say it is impossible for it to happen, okay? I'm ninety-nine percent certain That isn't im- it is impossible for it to happen, and I'm a hundred percent certain mathematically that that leads to accelerated debase ment of the fiat currency." }, { "speaker": "stephan", "time": "39:33", "start": 2372.66, "text": "Yeah, yeah. And I'm also wondering as well, you, you were touching on this earlier, that some pension funds, or probably many pension funds, are mandated to hold, these fixed, income instruments, and I think this is probably the case in many cases around, in many places around the world where for regulatory reasons or for some form of practical reason, or the, the way the system is constructed, people have to hold some of these bonds. So I guess one other question people might- I'd be thinking is, well, what if the government mandates more bag holders, right? They sort of mandate more and more people to hold their bag." }, { "speaker": "stephan_livera", "time": "40:12", "start": 2411.57, "text": "Well then, I mean, to the extent that it's a, it's a closed system, that would, that money would have to come from somewhere, which would mean Likely outflows from other assets, including equities. Now, it's my personal belief that the Fed, that the governments actually care more about the performance of the equity markets than anything else. I think they feel that, you know, if the equity markets are doing well, it's a reflection of confidence in the economy and therefore, chances of them being reelected are high. you know, if they mandate someone to own, I, I guess you could mandate it, and then people would look at you and say, \"So you're mandating...\" Mandating me to lose more money? That's, that's how you're mandating me, are you? I mean, I think there could be a revolution on that front as well, when I say revolution, you know, not a violent revolution, as much as, well, let's, let's peel a layer of this onion a little more carefully because obviously there's something here that I am missing, the-- for those people that haven't been enlightened by the mathematics yet. and, and I don't think that would happen. I don't think-- I know it Other assets, fixed assets, hard assets rather, would get more of a bid, but, you know, then you're saying, well, should I actually have a, a house in a country who's mandating me to lose money? Maybe that means the value of your house is gonna be mandated to lose money as well, you know? I, it, it's really difficult. I'm, I'm a capitalist, I'm a free market capitalist. I do have a heart, I do understand the need to help your, less fortunate, a You can't do everything to avoid, the mathematics of an open market system. look, that's what capitalism in-- i-i-it allows for the free flow of capital to the performing assets that will treat that Capital best, so capital always goes to where it is treated best, and if you are mandated to lose money, dang, I'm not sure any capital-- You, you could mandate the capital to go there, but I would almost assure you that the capital would get out of that country as fast This is possible, like, you know, we would find other countries that aren't doing that. And if they did it on a global basis, well, then it is over. and I just can only say, \"What's the solution? What is the solution? We know what the solution" }, { "speaker": "stephan", "time": "42:37", "start": 2557.0, "text": "is.\" Yeah, of course, of course. Now, I think one other-- Of course, I'm just kind of throwing questions out there, just to-- Oh, yeah, no, I love it. Get, I love it. Yeah, to get people to see how broken the A very large superannuation pot of funds. It's, it's trillions of dollars. It's a massive asset, and we know, look, I mean, realistically, decades from now, when many of those people are, who are saving, let's say they're twenty or thirty years old now, by the time they are able to access that pool of funds, who knows? Because by then, the government may have, as you said, might mandate certain things. They might say, \"Oh, look, it's for the nation. You should be investing in our government bonds because we're gonna may try to, try to mitigate or lessen the impact of their prior irresponsible fiat decisions." }, { "speaker": "stephan_livera", "time": "43:32", "start": 2612.42, "text": "You know, I can't argue with that. it would be, very scary. Again, it's just another way of saying it would be very scary. I, I, I'm proud of Australia for bu-building up that fund. you know, the United States, the largest, economy and the most powerful nation in the world, is got-- everyone only looks at their government debt. they have about a thirty trillion dollar debt, accumulated deficit, you know what the biggest elephant in the room is actually their non superannuation fund, which for Medicare and Medicaid, they actually have unf-unfunded liabilities of another hundred and seventy trillion dollars. Okay? So you have thirty trillion of funded debt deficits, and you have a hundred and seventy trillion of Medicare and Medicaid liabilities. That's the elephant in the room in the United States, all right? Yeah. And people- Accounting for that, but that ain't gonna be there. It's math-- again, mathematically impossible for that number to be there." }, { "speaker": "stephan", "time": "44:31", "start": 2671.16, "text": "It's just not gonna be there. It's not," }, { "speaker": "stephan_livera", "time": "44:32", "start": 2672.36, "text": "guys. I mean, yeah, it could be, so I live in a world of hopey and, and glue-sniffing, right? No, it's not. It's not. Please stop doing that. It needs to be- Absolutely divulged that you aren't gonna get your Medicare and Medicaid benefits, okay? It's a hundred percent. It's, it's, it's, it's mathematically impossible, and it's with ninety-nine percent confidence I say that." }, { "speaker": "stephan", "time": "44:55", "start": 2694.61, "text": "Yeah, absolutely. And so people are living in a Dream world, right? They, they just think this government money in the future is gonna be somewhere around, but it's really not. Somewhere down the line. Now, of course, politicians, they wanna kick the can. Nobody wants the bad things to happen on their watch. They would rather push it off into the future and let the next guy deal with it. But fundamentally, at some point, the world is going to have to pay the piper, and many governments around the world won't be able to fund these, as you said, the unfunded liabilities of pensions and all of these You know, the solution then, and why we need to change, so why did you come across, you know, why do you, you know, obviously many listeners of this show are bullish on Bitcoin, right? where, you know, pretty much a bunch of us are hardcore orange pills, if not all-in, close to all-in Bitcoin, but from your perspective, why, why Bitcoin?" }, { "speaker": "stephan_livera", "time": "45:50", "start": 2749.78, "text": "So, I did find Bitcoin in two thousand and sixteen, and I, I, I mentioned I was somewhat skeptical, and then I saw the blockchain in action on TradeBlock dot com, and as an engineer, you know, I'm visual and I see this thing working, and I'm like, \"What? This is a living, breathing, beautiful thing where you're seeing the blockchains, the blocks being built, every ten minutes from the mempool, you see, you're seeing transactions taking place all around the world.\" world, you know, you see a, you see a twenty-seven dollar transaction go across, then you see a hundred thousand dollar transaction, then you see a two million dollar transaction, and it's flashing before your eyes, and I'm like Good God, this is a thing of beauty. So I, I, I did, you know, I fell down the rabbit hole, I, I continued to research it, and Bitcoin was at eight hundred dollars US at that time, and I got a nice little," }, { "speaker": "stephan_livera", "time": "46:45", "start": 2805.31, "text": "allocation in my portfolio, and I also did invest in a company in Canada that wanted to bring the first closed-end Bitcoin fund to the Toronto Stock Exchange, and we were successful. We actually in Canada have Bitcoin ETFs now because of that ruling that we won against the Ontario Securities Commission. We have Bitcoin ETFs that every single Canadian can buy and put into their savings that what's called an R- RSP, which is the equivalent of a 401k or whatever you called it in your, in your, country. these are tax-deferred, ben- tax advantaged, funds that you manage personally that you can put Bitcoin in as a store of value. Now, that's a beautiful thing, and I, I wanna pre- I preface it by saying this, Bitcoin is a better buy today at the price that it's trading at today. On a risk-adjusted basis, five years later than it was when I first started buying it at eight hundred bucks a coin, okay? And why is it better? Well, it's better because unfortunately we have this thing called COVID, and COVID accelerated the absolute debasements certainty S-with countries like Canada, okay? Canada came out of the global financial crisis in good shape because we didn't have subprime loan exposure in Canada. Our banks were in good shape, but Canada has been the worst of the G7 countries since COVID of printing their way to prosperity. Okay? We are absolutely out of control in our printing, our deficits have expanded, the purchases by the, the Bank of Canada of our own debt have been through the roof. It's just a game of chicanery, and I'm calling it out because I'm a proud Canadian who has a three hundred hundred year heritage, heritage in North America. My, my last name is Foss. It's actually Norwegian, but we came to North America in, in the 1600s, all right? So, a hundred years before independence. And, I'll just say that I didn't, and, and my, family didn't fight in the, in the various, wars, that they did, and, and all this for our country too in the last- Twenty-five or twenty-six months, almost decide that we are gonna destroy everything we've worked so hard to, to build. Now, I understand, again, I'm a capitalist with a heart. I understand the need to help the less fortunate, but at some point you gotta stop. At some point you can't pull forward all the future benefits that should be accruing to our children because we are selfish. And I have three kids, and that's why I am so concerned and so- Invested in Bitcoin as a hedge to the certainty of government, tomfoolery. And, you know, they continue to surprise me by their level of incompetence. That's one thing that's increasing, is their level of incompetence, okay? and, and that's very concerning as a dad with three kids. So Bitcoin for me Will be the store of value that I will transfer to my children with a high degree of confidence that the number will be substantially higher in twenty years than it is today. much like it was, you know, it's gone from eight hundred bucks to where it is today. I will still say this, Stephan, they're all rounding errors. These prices are still so stupid cheap compared to where Bitcoin can go. you, you, you, you cannot overthink the fact that, oh my god, I bought some at sixty thousand and now it's, it's gone down fifty percent. You guys aren't doing the math. This thing can go so much higher. It's the best asymmetric return investment that I have seen in thirty years of trading risk. You'd need to allocate accordingly. If you own zero Bitcoin, you are taking such an extreme amount of risk relative to, to a proper- Proper portfolio allocation. And what is that proper portfolio allocation? I'll leave it up to you guys to decide, but it is bigger than zero. Okay? Just get off zero, and then we'll talk. And I'll tell you that I have a bigger allocation than, you know, ten percent, but I don't have a hundred percent of my net worth in Bitcoin. I never manage risk that way, okay? I always have a, you know, somewhat diversified portfolio. The one thing I own zero of right now, for the first time in my career, is any fixed income. Income instrument. I have zero, and in fact, I have debt because I want that debt, I want me to be able to pay down the debt that I owe the bank in ten years with a dollars that will be worth only sixty five percent, okay? You should be using the bank as your leverage to pay down a contract with a D based currency. It's a beautiful thing for the borrowers, and that's what Michael Saylor has figured out. Michael Saylor Is rewriting the rules of capital markets in front of Wall Street's eyes, and too many people on Wall Street are too stupid to understand it. It's, it's hilarious. Oh" }, { "speaker": "stephan", "time": "52:07", "start": 3126.83, "text": "yeah, it's, it's, it is really hilarious that, Michael Saylor has essentially shown people an open-- with an open playbook, right? He's openly telling people, \"This is how you do it,\" because I think it's really just tracing out the implications and understanding the issues of a fiat money system, right? Even the, the Austrian economists have been talking about the problems of fiat money for, for Who knows how long, for, for decades, a hundred years even. And people like Gito Hulsman, who's, also I've interviewed on the show, episode fifty one for listeners who are interested, he's also spoken about how just naturally this is the incentive for most people, even if, imagine if you're a young person just come out of university and you're going and starting your first job, what's the incentive? It's to go into debt, get a mortgage now, because over time the real purchasing power terms of your loan is coming down down over time because they are going to have to inflate. And so meanwhile, you get to hold your house. And so that's, that's the incentive. Like, so we might criticize the fiat system and say, \"Hey, this system is wrong, it's bad, it's unjust, it's causing all of these negative outcomes for society,\" and yet it seems that, you know, the way that most people have an incentive i-is to try to play the fiat game. Now, of course, if you play the fiat debt game wrong, you can get wrecked and you can lose. But if About how you do that, right? Like if you're doing it, an, an example would be looking at Michael Saylor and MicroStrategy is to understand the way they have structured their debt to try to make sure, okay, I can make the payments on this thing, and meanwhile, I'm holding, I'm borrowing the weak asset to buy the strong one, as Pierre Rochard spelled out in his thesis Speculative Attack in twenty fourteen, listeners, twenty fourteen. So there have been people out there talking about this stuff, but it just seems- Seems like the broader financial press, financial markets world is still not quite aware. I wonder why, why do you think that is? Is it just that they are sort of engaging in herd behavior, groupthink, or why?" }, { "speaker": "stephan_livera", "time": "54:13", "start": 3253.48, "text": "Well, first of all, I couldn't have said it any, better than you just did. So, congrats on that very concise explanation of why you should actually consider borrowing in fiat, because you are borrowing in the weak asset to buy the- Stronger asset or appreciating asset. Why hasn't the world figured this out? It's a great question, and I think it comes down to, more than anything, it's just, education, right? You don't learn this. They don't teach you this in school. Because if they were to teach you this in school, they would be teaching the people about the problems of the system. And, you know, it was Henry Ford who said over a hundred years ago, he said, \"If, if the average American understood how banking really worked, there'd be a revolution in the world.\" And, and that's true, because the average American doesn't understand how the banking system works. They don't understand, how, how much leverage is in the system globally. And more than anything, a lot of people are counting on the government to take care of them. They, they, they just, they, they-- I guess they're, I'm not gonna call them sheepish, but that's not a bad description, okay? They, they are scared, and they, they want the government to coddle them. Look, you know, that's, that's, understandable, but again, it's not realistic, especially when we have, built up a debt balloon and pulled forward future earnings at the expense of our children. So education, I think, is the answer, and this is why podcasts like yourself, some great ones out there, I've been blessed to be on, on some really, great podcasts, yesterday I was on with Pete, Peter McCormack, and we were on with a young kid, his name is Dylan Leclerc, and Dylan is twenty years old, okay, twenty-two-zero, and I'm three times his age, and he is three times smarter than I am, and he's taught himself, all of this, okay? And it's so beautiful because that's the type of education that will change the world in the hands of people that aren't gonna be dead in twenty years like I am, that can actually change it for the next, you know, he'll be alive, he'll be alive for the next sixty years, and I'm pretty happy about that. Jack Maalers, I'm pretty happy that he's so young. I met this guy, over a Zoom call, Stephan, that I introduced to Peter yesterday who- Happens to be going to Oxford University, he is a, a student, if I'm not mistaken, at Oxford. he has put, put together, an online exam for Bitcoin, how well do you understand Bitcoin? It's a great idea, and he had me beta tested and everything. And I, I mentioned his name, and I'll mention it on your show as well. His name is Stephan Allen, and he's in, from Oxford in the United Kingdom, and he is another example of someone who's gonna help change the world For the better through education, because he's putting an online exam on, for anybody to be able to take, in order to learn more about Bitcoin, because you don't learn this in school. You are, you are brainwashed with the Keynesian, way of thinking, in school and are, the academics who are teaching you are conflicted beyond belief. You're listening to idiots like Steve Hanke at Johns Hopkins, who absolutely is so conflicted, it's a disgrace, and his disingenuous, blather all the time is so penalizing to the, to the thought process of young people. So you have to balance the two, right? And, and so my, my, money's on the young guns, my money's on the Jack Maillers of the world. the Stephan Allens, the, the Dylan Leclairs, okay, it better be, because, we don't have much choice if we were to put our money on the government and the academics out there, quote unquote academics." }, { "speaker": "stephan", "time": "58:10", "start": 3490.38, "text": "Yeah, yeah, certainly. And I think we are starting to see the younger generations realize that the fiat system is screwing them, and so it's time to take action and get into Bitcoin, meaning set up a DCA plan, get up, get started with stacking, you know, whether you, you know, take a lumpsom to start on Start DCA, of course, it's one of those things where when you're young, you don't have as many assets, right? Obviously, you haven't had the time to build up those assets. So a lot of the The pool of the current wealth of the world sits more in the Boomer and Gen X perhaps generations, and so I guess they, they will also invest as well, into Bitcoin when they, when they realize it, but I think people can see the way the wind is blowing, and I'm also curious as well, so this is something, you know, I've been commenting on, on the show for a while, is a Bitcoin financial system, I think, would be a lot more equity based, and there would actually be a lot less debt in that system. I think there It'd probably be more expensive and harder to come by, and we would actually be living in, in a world where equity was more prominent, like the equity in terms of how we fund businesses, how we structure businesses, and the way people go about things in, in that hyper Bitcoinized world. I'm curious, do you have any thoughts on that idea? Great," }, { "speaker": "stephan_livera", "time": "59:30", "start": 3570.07, "text": "yes, absolutely. now it has to, it ha-- it has to be a process. It w-- you know, again, it, it, there ne-- there will need to be a parallel system system for a good long time, and I, I just wanna draw on something that Nick Zabel, pointed out when I was down in, in Miami. He called, so you'll have to, a parallel system, hopefully that, that, you know, because the, the current fiat system still exists, we don't want it to end overnight. There's a risk it does end overnight, but let's hope that it continues. Think of fiat as being your checking account and Bitcoin as being your savings account, your store of value, your ability to store value over time and space. That's Bitcoin, that's your savings account, and then your checking account is-- what fiat's good for, it's, good for global trade, it's good for, you know, avoiding barter, because everything has a price and you can pay in this currency. You just don't wanna store your value in a currency that's programmed to debase, so- So you, you, you, you choose your investment accordingly. The, you know, I, I, I, we frequently talk about, this, the, the, allocation because we are privileged G7 countries, that, you know, we don't think of the problems that the, the lesser developed countries have. But, you know, when I was in Miami, I got to meet, the privilege of meeting these kids from Guatemala who were working on, an exchange called Ibecs Mercado, which is basically They're saying, \"Look, in Guatemala, they are, helping people buy Bitcoin, and these people buy it, and they don't s-set, sell it. They're, they're like ninety percent buy tickets.\" And, I was, I actually called them out when I was on stage. I said, \"These guys wanna do Guatemala, excuse me, Bitcoin Lake, based on a lake in Guatemala called Lake Atitlán or something, that was gonna be based on El Salvador's Bitcoin Beach.\" Little did we know that six and a half hours later, Jack would be on stage, Jack Maalers would be on stage with, the president of El Salvador and saying, \"Hey, we're gonna make this legal tender in El Salvador.\" It, it still makes my spine tingle. It, this is an example of countries who are leapfrogging corporations to invest in this beautiful technology, okay? So there's use cases, and then there's investment cases. And right now, I'm just so excited to even be in contact with these guys from Guatemala, 'cause they're getting called in on the ground floor. They're going to El Salvador, which is only three hour drive away, and they're getting, they're consulting, let's say, the chamber of commerce for, for, Businesses in El Salvador that are now trying to wrap their heads around the Lightning Network and everything, and I just got a note from them yesterday, and they're like, \"It's so fun to see when the merchants understand the potential.\" So you have the investment side, and then you have the use side And you gotta remember that both of them have to exist in order for the network value of Bitcoin to continue to increase, 'cause that's what the value of Bitcoin is. Subjectively and implicitly, the value of Bitcoin is the value of the network, okay? And as that network grows, the value of Bitcoin goes higher. I wrote my paper on intuitively valuing Bitcoin using credit default swaps of sovereign nations. That stuff is all good and there is a value I come up with, but the real value of Bitcoin, the intrinsic value of Bitcoin, is the value of the network itself. And if you're onboarding a country, yeah, think about that. We on- A country of six million citizens. Dang, that is pretty exciting. So my paper, just to summarize, comes up with a value of Bitcoin based on credit default swaps for sovereign nations. Bitcoin of around one hundred and fifty thousand US dollars today. That intrinsic value, using credit default swaps, will increase as the debt balloons of all the nations increase. So number go up, yes. Where's it going to? Guys, again, we're in rounding error prices. Right now, let's talk in twenty years when Bitcoin's over two million dollars a coin in today's value in twenty years. Alright? I've never seen a better asymmetric return opportunity in thirty years of managing risk. You need to have an allocation just in case I'm right, okay? Just in case it goes to over two million bucks of Bitcoin. And it is, in my opinion, a high degree of likelihood." }, { "speaker": "stephan", "time": "01:04:04", "start": 3844.35, "text": "Yeah, fantastic. Yeah, I, I absolutely, I think it's one of those things where it's just the knowledge isn't evenly distributed. And so if you're early in this and you understand, you're listening now in twenty twenty-one and you understand this, you are so, so far ahead. So it's important to get, take action and, you know, start stacking and also start building, start contributing in some way that you can, whether that's writing or, educating. Or building a business, or reviewing Bitcoin core code, get, get involved. so yeah, so I think that's probably a good spot to finish up. So Greg, any final comments there? And of course, where can listeners find you online?" }, { "speaker": "stephan_livera", "time": "01:04:42", "start": 3882.22, "text": "So, I'll start with the last question. You can, you can find me online on Twitter, which is something I've actually just found in the last twelve months. Okay, I'll be very honest with you, like I, I knew what Twitter was, I didn't understand the power of Twitter, and I was, 'cause I But having never used a personal computer, oh, shame on you, Foss. No, no, no, personal computers didn't exist, okay? You need to understand where I've come from. And so you can find me on Twitter, this beautiful social media platform where there is so much information, and that information generally is free, which is a beautiful, beautiful thing. I'm under, Foss, Greg Foss, so F O S S G R E G F O S S. I'm based in Canada, and if you're ever coming to, Canada I live in Toronto, but I'm a partner in eight Irish pubs in Montreal. So if you ever come to Montreal, look me up. We're gonna go to some Irish pubs in Montreal on my nickel. Stephan, I, I wanted to call you out and say what you're doing is, is so beautiful for the educational process. There's guys like you, you know, Marty Bent, all these people, Breedlove and, and Jeff Booth, here's another Canadian, okay? I need to call out my fellow Canadian, Jeff Booth, who read in my life. It's called The Price of Tomorrow, and I, I don't say that 'cause he's Canadian. I honestly took more notes in that book than any book I've ever read, including every, any textbook I've read at school. so, so what you're doing, I wanna be part of this. I'm, I'm, I have three children, I've been privileged, I've, I, you know, I, I'm doing this because I have three kids, not because I'm trying to get the number to go up so that I can F you guys that are, are saying stuff like, \"Oh, you guys are just, you know, trying to get, the greater fool theory.\" Anybody who hasn't done, you know, I've, I've been researching Bitcoin for over six years, and I'll just tell you, I'm still learning. So let's summarize it with what Matt O'Dell said. Anybody who pretends they understand Bitcoin is not only fooling themselves, they're trying to fool other people. Most of the people who don't believe in Bitcoin have done less than two hours' work, and the people that really understand Bitcoin are continuing to learn, and they've done hundreds, if not thousands, of hours of work on this beautiful network and this beautiful technology called Bitcoin. For your kids, please do some homework. Okay? It's time for the boomers who will transfer wealth to their kids to do some homework as to the best way of transferring that wealth to their children." }, { "speaker": "stephan", "time": "01:07:28", "start": 4048.75, "text": "Fantastic, Greg, I've really enjoyed chatting with you. Certainly, it's been, really great, to talk about all these finance and economics ideas with you. So thank you for joining me." }, { "speaker": "stephan_livera", "time": "01:07:38", "start": 4058.58, "text": "It was a pleasure. Thank you so much for having me, and, good day, mate." }, { "speaker": "stephan", "time": "01:07:42", "start": 4062.84, "text": "So I think this episode is a particularly good one to share with your friends and family, potentially, if they don't quite- Understand the problems of the fiat money system and why it's actually not sustainable. So of course, don't be overbearing, but where you are able to share with them resources, share this particular podcast episode with them, and they might learn something about it and actually take action to start buying Bitcoin and learning about Bitcoin. So get the show notes at stephanlivera dot com slash two nine three, and I'll see you in the citadels." } ] }