{ "episodeId": "SLP561", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "peter_st_onge": { "name": "Peter St Onge", "role": "guest", "tag": "PETER" } }, "segments": [ { "speaker": "stephan", "time": "00:01", "start": 0.54, "text": "Hi, you're watching Stephan Livera podcast brought to you by Swann dot com. Today I'm speaking with my friend Peter St Onge. Now he's rejoining me on the show. Those of you interested can check out some of our earlier episodes where we spoke about things like AI and other things. Now today we're getting an update on his thoughts on US government debt, as well as what's going on around the world and what kinds of things we can expect to see. Here's my chat with Peter." }, { "speaker": "stephan", "time": "00:38", "start": 38.22, "text": "Peter, welcome back to the show." }, { "speaker": "peter_st_onge", "time": "00:40", "start": 40.3, "text": "Hey, it's Stefan. It's great to be back." }, { "speaker": "stephan", "time": "00:43", "start": 42.82, "text": "You've been, really killing it out there with your videos and your articles. It's so great to see you've had so much, really great success with that. So I just wanna congratulate you on that and, yeah, looking forward to chatting with you about, global macro, Bitcoin, and all these things." }, { "speaker": "peter_st_onge", "time": "00:59", "start": 59.24, "text": "Yeah, awesome. Yeah, I've been shocked how many people wanna watch it. I was like, it's like, it's like three and a half minutes. I'm like, I didn't figure anybody would watch it. It was kinda like an experiment, but, there's apparently a group of nuns in California who like get together every weekend and go through all the videos and like are learning Austrian economics. So when I'm shooting videos, I'm always like thinking of them." }, { "speaker": "stephan", "time": "01:21", "start": 81.0, "text": "It's, it's great to see. And, I know recently you've been chatting about the fiscal" }, { "speaker": "stephan", "time": "01:29", "start": 89.2, "text": "this has been obviously a big topic in all, kind of online macro discussion circles, but let's get your, you know, high-level take on this, like as I understand it, you know, it's- Basically, the US government is just continually getting into a lot and a lot of debt. So can you contextualize this for us, what's going on here?" }, { "speaker": "peter_st_onge", "time": "01:49", "start": 108.73, "text": "Yeah, actually, about probably fifteen minutes ago, Luke Roman had a great tweet that I think really summarizes it, where he said that, you know, what happened in the two thousand eight financial crisis is a bunch of money was lent to people who couldn't repay it, and what happened this time is that a whole lot more money was lent to governments that have no chance of ever repaying it. That money. That is really where we are. I think if you zoom out, we've had, you know, depending when you start the clock, a fifty or a hundred year Period where governments, especially in the West, but they've, they've sort of converted the golden goose into government spending. And what that means is that they take the power and the economic growth, they suck that out of the economy, and they convert it into bureaucrats, really well-fed bureaucrats, and into activists. And a huge percent of those bureaucrats and activists, they then go on to spend their days thinking how to grow the cancer Right? And so we are progressively shifting from an economy where the government is a parasite, but the economy more or less grows because entrepreneurs come up with new stuff They build factories, you know, we get more productivity, more capital, this and that. We go from that kind of healthy economy into a world where it starts to look, you know, more and more like the Soviet Union. I think the problem is that we've had a couple of events that have really accelerated that process, right? So one of them is obviously losing gold back in the 1970s with Richard Nixon, but I think that the more recently, the 2008 crisis and then COVID, okay, those both gave a massive boost. To that process of converting the productive economy into a, a parasite that's getting to the point that's so large that it could kill the host. And what that's translating into on the ground, like one of the biggest numbers that we can sort of track that process is of course looking at government spending. So spending as a percent of GDP, not necessarily taxes, okay? Because really what you're interested is how much of the productive economy is the government soaking up and converting into vote buying or into- To, you know, actually hiring new agents to, to further its takeover. So that has really accelerated, really worldwide. I mean, everywhere, you know, Japan, Europe, of course, the US, places like Canada. and then the other factor is the debt issue, right? So the, you know, normally when governments wanna get more resources, one way they can do it is taxes. But of course, people fight back on taxes, right? So they'll, they'll, they'll, they make an effort, you know, they talk about the horrible rich who, you know, don't pay their fair share and, and, and whatnot. So yes, they're always pushing on taxes, but really, you know, since Nixon, since central banking, really the go-to has just been the debt. So debt is absolutely exploding. Debt is what funded the COVID lockdowns. You know, we-- I think we talked about last time that, you know Early in COVID, if you sort of imagine a world without central banks and some junior bureaucrat came in and said, \"Yeah, we're gonna do a lockdown, we're gonna shut down, you know, half the economy, we're gonna lose half the taxes, but that's okay 'cause we can lay off half the government workers 'cause there won't be anything to do,\" okay? No way, right? They would never go for it. The only way that COVID lockdowns happen, the entire- Outsize COVID overreaction. The only reason that all happened is because they had central banks. Thing is, in every crisis, you get this ratchet effect where government will get some new power and some new spending, and they'll do that, you know, because the headlines are screaming about grandma dying or, you know, because of a war is the more typical way to do it. So they'll get this new power, they get this new budget, but the thing is, once they get a hold of it After the crisis is over, they don't give the whole thing back, right? Typically, they give maybe about half back. and that other half becomes kind of a profit from their perspective, and, you know, they can hire more of these parasites Ideally, they can put them into something where the private sector is now playing along, right? So in other words, that new spending can metastasize into this sort of self-supporting industry that is eating Eating now the productive economy. So a great example of that is the whole global warming shtick, where, you know, you've got these billion-dollar companies in solar and batteries and wind, what is it, windmills and all this. You've got these companies who make enormous political donations. So you have not only the bureaucrats and the activists who are consuming all of these resources, now you've got these companies, and the companies can then sustain it, right? And so that's really what we're building towards. In two thousand and eight, we had a big boost of it. That particularly in finance, but really across the board, because every crisis is an opportunity. In COVID, they just went to the races. So if you look at government spending all over the world, there's just this level shift during COVID where it absolutely soars Oh, there's actually a lot of charts where it literally soars off the chart, like you have to resize the chart now to capture COVID, right? So, you know, spending accelerates, and then across the board, they didn't really give it back, okay? They're finding new crises to fund with this, and, you know, of course, that raises a separate point, which is that traditionally we've imagined that governments, you know, what they wake up in the morning and try to do is prevent crises, right? They try to prevent wars or prevent natural disasters or prevent, Pandemics and whatnot, but there, there's this funny incentive system where actually every crisis, if every crisis turns out really, really good for them, right? If they can get a new couple billion in budget, they can hire more people, they can feed more activists, and when they retire from government, they get a cushy job with the activists. All right, that sets up an incentive structure where there may be people in government who are actually interested in seeking out new crises, right? Interested in taking, let's say, weather patterns and turning those into, you know, some kind of world Ending cataclysm that requires trillions in spending. And so that I think is probably going to be a theme going forward. I think a lot of us recognize that, right? Like, you know, a lot of people who, sort of see the world the way that you and I do, relatively skeptical people, we're kind of looking for the next COVID, right? We're curious, is it gonna come from AI? They're gonna, you know, recycle, COVID and come up with a new disease and so on." }, { "speaker": "stephan", "time": "08:22", "start": 502.26, "text": "Yeah, a-and that's a great, you know, you make a lot of points in there. I think one interesting area is that maybe we have a tendency to kind of always fight the last war, right? Like after 9/11, there was so much panic about, okay, airline security, airplane security, right? But maybe that's not where the next thing comes from, right? So right now people talking about, oh, is it, is it gonna be another pandemic? But well, no, that was the last one. They're gonna do something new next time, right? Like attack thing, like whatever it is, whatever reason comes, they will find an excuse or whichever war they wanna fight or fund, right? Even if it's nothing to do with America, America will fund, you know, whether it's- You know, pick your conflict around the world, and so these are, as you said, this ratchet effect, and notably popularized by the great Robert Higgs in his book Crisis and Leviathan, which is a libertarian classic, I recommend it for listeners if you haven't read it, great book, and I think this is the pretense on which many of these government expansions are undertaken, and so yeah, as you said, there's this big debt problem in the US, as I look, great work The website for this one is usdebtclock dot org, so I like to check that one out every now and again, and you can see as I look at it right now, current national, US national debt, thirty-four point six trillion dollars, right? We've got a US federal debt to GDP ratio of a hundred and twenty-two percent. And let's not forget, this doesn't even count the unfunded liabilities. And so that unfunded liabilities number is two hundred and fourteen trillion dollars, which is just Absolutely mind-boggling, like it, it, it is, you know," }, { "speaker": "peter_st_onge", "time": "10:09", "start": 608.68, "text": "yeah. To, to put that number in perspective, the accumulated wealth of humanity is on the order of three hundred trillion. So, yeah, that's-- In, you know, how, what, in ten thousand years, the accumulated assets of humanity and the US government, if you add up the unfunded liabilities and the national debt, it's about eighty percent of that. Keep in mind, Americans are five percent of humanity, okay? So, this is, it's pretty dire." }, { "speaker": "stephan", "time": "10:37", "start": 637.15, "text": "Yeah, it's pretty, it's, it's quite rough. And I think one other point I'd love to hear your insight on is the distinction between governments going into debt to fund the government deficits versus these spending and stimulus programs, right? Because they are related, but they're not exactly the same, right? And so as an example, we might see these big, you know, everyone was talking recently, I think it was a one point two, something trillion, bill was just passed through in the, in the, the two houses in the US. And, you know, obviously it's driving this conversation, and obviously you're talking about it in your article as well, talking about how, you know, i-i-for Q4 2023, Treasury issued seven trillion dollars in new debt. So can you help us understand the relation between when- The federal government comes out with a big new spending bill, and it's this big omnibus bill versus these positions around government debt, you know, at, at, at the bond level" }, { "speaker": "peter_st_onge", "time": "11:43", "start": 703.38, "text": "Yeah, so you've got kind of two types of government spending. One of them is the ongoing, day-to-day stuff that they, you know, that they do every year. you can kind of regard that as like captured territory that they've annexed, okay? and then you've got this other one, which are these sort of one-off bills because of alleged emergencies, you know, maybe because, the economy is doing badly. Of course, the economy is doing bad because the Fed screwed it up, but anyway, they don't recognize that. They just think that it, Stimulus packages for that, or they'll have a special bill because of COVID, for example, there were a whole bunch of stimulus bills, they might have it, you know, because of some alleged threat. So for example, there was something called the Chips Act, I think it was last year, two years ago in the US, where they handed what forty-five billion to a bunch of semiconductor companies. Now of course, normally you might ask, you know, why, why are we giving money to billionaire semiconductor companies? but this was allegedly because, you know, China was Or whatever. So right, you have, you know, two separate categories, right? You have the ongoing stuff, the captured territory, and then you have the, the sort of advances, right? The forays out to capture new territory where, you know, and the money ends up either going to cronies or it goes to activists or a certain amount of it might go to the, alleged purpose because, you know, the media on some level, you know, you wanna give them good stories about, you know, grandma in Oklahoma who got, broadband internet access or something, Of course, the vast majority of it is gonna be peeled off, with cronies and activists. And so both of those are concerning, but I think in a sense, the latter Those special bills, those are kind of more concerning because that's really where they're, they're making a power grab, right? They're trying to reach out for new territory, and those special bills are I haven't seen statistics, but, so I don't know if it's increasing, but it is a very large share of spending nowadays. certainly during COVID, I think most of the spending was one-off, and of course, that one-off then, at that point, is captured territory, and so it goes into the general budget. in other words, they start these temporary programs, and then of course, you have to sustain them because, you know, otherwise grandma will eat cat food. but what we're starting to see now is where, you know, and, Announced the details, but, you know, Xi is promising a huge stimulus. Japan's been feeding out stimulus packages for years, Europe, really all around the world now. You have these almost constant Stream of stimulus packages, and what those end up doing, you know, every time that the government is spending a bunch of money, it's going to go to something, right? So it's not just that they hand the money and then the recipients, you know, put in their wallet and go on with their life, right? They're, they're gonna turn around and spend it on something. And whatever that something is, is draining real resources away from the productive economy. So the productive economy becomes starved of- Workers steal. Okay, we saw this really nicely during the, there was an infrastructure bill a couple years in the US, and it was famous because Pete Buttigieg complained about the racist overpasses. so, you know, allegedly overpasses were too low to stop buses from getting through because poor people take the bus. At any rate, that bill had, from memory, something like eight hundred billion in, in infrastructure spending. infrastructure's generally popular. Now, of course, most of it went to crony- Projects, you know, it didn't go to highways and things that people actually expect. but anyway, what that infrastructure spending ended up doing, so at that time we had this really severe supply chain crisis, okay? And in Los Angeles, the warehouse vacancy rate was less than two percent. Alright. In other words, like if you try to park your car in a parking garage that has a vacancy rate of two percent, you're gonna spend about an hour trying to find the space, okay? Two percent is nothing, alright? There was basically no spare capacity in LA. They were parking trucks out on the street, like entire neighborhoods were just clogged with trucks 'cause they had nowhere to park 'em. And so if you introduce an eight hundred billion spending package that's gonna rebuild racist overpasses, well, that takes construction workers, it takes steel It takes concrete, what the warehouses require. Lo and behold, right? So in other words, you are handing this giant checkbook To, you know, fundamentally cronies who are gonna go out and they're gonna steal the resources that could have gone into building new warehouses, and of course, new warehouses in LA would have g-- been great during the crisis, they're, they're great in general. LA could use more warehouses, right? This is a useful asset, as opposed to knocking down an overpass and rebuilding it, you know, eight inches higher, which is relatively useless. So this, for me, kind of paints the picture. We forget that the real economy- is made up of people and it's made up of things, right? physical assets, right? Yes, money is used as, sort of bidding tickets for all these things, but fundamentally, if you're asking, \"Is a country rich or poor?\", you're not exactly asking how many bidding tickets it has, how many, you know, how much, how much paper money it has. You're asking how much resources can they command, right? And in that sense, every dollar of government spending, whether it's the regular spending or these special spending packages, it is It's directly sucking resources out of the private sector, and then that ends up starving the productive sector, right? We were, talking about at the top there that it's sort of converting the economic golden goose into fodder, sort of eating like the seed corn, right? Rather than planting it, now we're just, you know, we're just having it on a big party, to buy votes for the next election." }, { "speaker": "stephan", "time": "17:42", "start": 1061.78, "text": "Yeah, it's sad to see, and so people are rightly concerned that their living standards are going down, and, there's also this rightful concern of The person who gets that, you know, the crony who gets the government funding, he's doing really great. Or maybe if you're working for a consulting firm who's consulting for some government contracting company, hey, you're doing great, you're, you're making all this money. But the real economy is suffering and not able to grow in the way that it should. It's not able to actually bring the prices down, and that's why people are saying stuff like, \"Oh, hey, I went out and I bought a milkshake and it's twenty-seven dollars.\" Like, this is the whereas perhaps in other countries it's not that bad, because maybe there is a little bit more investment that's, staying in the private sector, let's say, in the true private sector. And so I guess that's, that's one way to see how the living standards in more crony countries is actually getting worse." }, { "speaker": "peter_st_onge", "time": "18:49", "start": 1128.51, "text": "Yeah, you're absolutely right. And, you know, that's a perfect way to sort of summarize it, is, you know, as the government takes over more of the economy, it's always going to lead to stagflation. It's gonna need the stagnation along with inflation. The reason is 'cause they're printing money to bid away productive resources and make them unproductive. So your economy's gonna slow, you're gonna have inflation. That, that's what they're, you know, what, what they're using to steal the resources is the newly, printed money. And the end result, right, is falling living standards. There was a report out just a couple weeks ago, well, it was publicized a couple weeks ago. In Canada, by the RCMP, right? So that's the Canadian version of the FBI, and they were warning that they think the Canadian, standard of living could decline precipitously, in the next couple of years, and they think that could lead to civil unrest. Now, Canadians famously are very nice people. They aren't prone to civil unrest. This isn't, you know, this isn't Pakistan where, where, people tend to have strong opinions about the things our governments do, okay? yeah, I mean, this is Canada, right? And so that, I think, you know, really that's something that's going on worldwide. Japan, for example, right? J- the Japanese government is deeply unpopular. In fact, Japanese governments have been un- deeply unpopular for about twenty years. They, they generally sport about like thirty percent approval ratings, because the Japanese government has really advanced far along that process of converting the productive economy into this stagflationary quagmire where every day it looks like you know, the last at best. A lot of Japanese are doing badly, you know, living alone in poverty. if you go to Japan, and especially if you go to the rural areas, it's often very surprising how, how bad the quality of life is. it can almost look third world. you know, you have houses that, that, you know, part, part of the roof is a tarp and, you know, nothing's been repaired in thirty years. but that's really the kind of future I think that we're As governments capture more and more of these resources, and, you know, it's accelerating, right? there was just news out last week that Treasury debt issued, first of all, it's twice what they're taking in tax revenue. Okay, so, this last month, they spent twice what they took in tax revenue, all the rest of it, is going on, on to new debt. Secondly, it matched the all-time high, so it's a two hundred and fifty-year high. It matched the all-time high that was hit during the COVID pandemic. And that was supposed to be a once in a lifetime thing. Just, you know, give us, what was it, nine trillion? Give us nine trillion one time, guys, and this is never ever gonna happen again, we promise. Hasn't happened since the Black Plague, five hundred years, you guys be off the hook. Once in a hundred years, you" }, { "speaker": "stephan", "time": "21:39", "start": 1298.74, "text": "know?" }, { "speaker": "peter_st_onge", "time": "21:40", "start": 1299.54, "text": "Yeah. Well, and, you know, the-- those of us who remember 2008, it was the same deal, right? They said, \"Yeah, you know, we're gonna need a couple trillion And Jon Stewart had a great, shtick on that, this is back when he was funny, where he said, \"Okay, why is it that like every couple weeks we get this once-in, you know, three hundred year disaster, and for some reason they're happening just over and over every couple weeks?\" So I'm starting to think these aren't, oh crap, what's the line? These aren't, right? okay, I'm starting to think these aren't perfect storms, I'm starting to think these are regular storms and we have a shitty boat. Right. And that's, I mean, just beautiful, right? That's exactly it. Every single time they screw it up, they say it's a perfect storm. Just, you know, once in a five hundred years. And notice how the numbers" }, { "speaker": "stephan", "time": "22:35", "start": 1354.87, "text": "rise as well, right? That top program in two thousand and eight was like seven hundred billion. Now we're dealing-- that would be nothing now, and now we're dealing with trillions." }, { "speaker": "peter_st_onge", "time": "22:44", "start": 1363.71, "text": "Yeah, exactly. Right. Yeah, during the, yeah, exactly. In 2008, people got really upset about seven hundred billion. I think they, they like bailed out GM with like forty five billion or something. That's chump change now. You get laughed out of Washington now for those numbers. You need a trillion on top of anything to really get taken seriously. So yeah, the numbers get bigger and, you know, to already be back at that once in five hundred year COVID spending level, it, it's, it's only been like two years, and, you know, it just keeps getting bigger and bigger. Especially if we're talking about the US, I mean, they're, they're starting wars about one every three months here. you know, there's only so many countries in the world, so, you know, each, each crisis gives you lots of excuses. You know, foreigners will get upset that you declared war on, on, on them, and then they might do something to you, and of course, that'll just be, you know, the perfect, you know, once in five hundred year crisis where, you know, we gotta take over some new power. So, yeah, I mean, the, the, the process kinda looks runaway. y-y-you know, I think in a sense what's surprising is that- we fought back so long, you know, that it's taken this long, right? Because Nixon broke gold in nineteen seven-- or what, what is it? Nineteen seventy-two? Nineteen seventy-one. that really- You know, sort of put this process off to the races, right, where they could print unlimited amounts of money. the Progressive Era, you know, that was about a hundred and ten years ago. That's, that's really when they sort of installed what we now call the deep state. so, I mean, it's kind of encouraging that it's taken this long to break this badly, but, you know, if we go back through history... There is some point of no return where the government just gets so big that you can't really shrink it anymore. You know, it's like, I don't know, it's like, it's like getting a pet lion. You know, it's really, really cute in the beginning, and at some point it gets so big that, you got problems and you-- Yeah. Yeah, yeah, you actually can't throw it out anymore, okay? You're stuck with it. So now you gotta learn how to live with it." }, { "speaker": "stephan", "time": "24:46", "start": 1486.3, "text": "Back to the show in a moment. This show is brought to you by CoinKite dot com. CoinKite is the maker of my favorite Bitcoin security hardware, notably the Coldcard and other devices. The Coldcard is a really secure device. You can use it to generate your Bitcoin private keys offline and then keep that segregated from your watching wallet that's connected to the internet. And now that wallet, that software can be things like Sparrow Wallet, Specter Desktop, Nunchuk, or others for Or, keeping an eye on what your Bitcoin transactions are, but the idea is you keep the private keys on this device, and it's offline, so that way you can sign that transaction, meaning spend or spend Bitcoin, but your-- the private key is, staying on this device. That's the idea, and so that can help you secure your coins. It's a really easy setup process where basically if you're a beginner, you can just directly plug it to, to your computer, write down the twelve or twenty-four words, and, go through the process. Those Yes, you can use advanced features like airgapping, like multisig, like SeedX or you can find out more and get your cold cards over at coinkite dot com using code levera for a discount. The lead sponsor of this show is Swan Bitcoin over at swan dot com or using the Swan Bitcoin app for Apple or Android phones. You can sign up really quickly, you can buy Bitcoin, and you can learn about Bitcoin. Swan makes it really easy for you. You can send in your dirty fiat using ACH or using a wire. Wire transfer. Once you've done that, you can either do a lump sum, just take an initial buy, or set up an automated recurring purchase plan. So normally, or it's common that people might start with an initial purchase and then set up an ongoing plan where they are regularly saving with Bitcoin. Now, those of you who've been around for a while know that if you are just regularly saving with Bitcoin over the long term, this allows you to deal with the volatility in a better way because you're actually picking up more Bitcoin in those bear market lows. And then when, over time, as the, you know, as the cycles go, you, those coins that you purchased in the bear cycle, they're now worth a lot more in the bull cycle. So remember, Swan is creating real Bitcoiners. There's a lot of educational material that Swan makes available for users, so you can find out more over at swan dot com slash livera. And now back to the show with Peter. Well, and now we've got to keep feeding the lion, right? but I think the other- That's exactly it. Or he'll eat you. and I mean, maybe that's, more true in, in a really sad or macabre way as well. but let's talk about this other idea, which, as you pointed out, Nixon- Severed that last tether with gold, right? It used to be that people could go, and not individuals, but central banks, you know, you know, could go, you know, they could go to that window And, you know, that, that link is now gone. People would say though, \"How come it's taken so long?\" Right? Like, this is kind of the other criticism that often gets lever- leveraged against Austrians and saying, \"Well, hey, you've been calling so many crushes. Look, we've, we're here. It's now fifty years on from that. You know, you weren't you saying there was gonna be all this really high inflation? \" you know, ha- I guess the question I'm trying to get to is We calling the timing is the hard part, isn't it? Like we, you know, yes, we can see a process is unsustainable, but getting the timing right as to when things really go terminal, that's the hard part, isn't it?" }, { "speaker": "peter_st_onge", "time": "28:19", "start": 1698.97, "text": "It's absolutely the hard part, and fundamentally, you know, governments can seize, unlimited amounts of private resources in order to stave that off, right? So if we look at GDP over the past couple of years, for example, when I started doing the videos, I thought we were gonna go in for a recession. because we had just jacked interest rates, you know, what was it like, five percent, I think we moved them, in a very short period. That was the most extreme interest rate hike, since the 1970s, anyway. And if we go back through history, whenever you do that, you always get a recession. So, you know, I was, okay, good, we got a recession coming in. And since then, we did have two quarters that was technically a recession, but, I mean, it was, it was pretty mild" }, { "speaker": "peter_st_onge", "time": "29:06", "start": 1746.47, "text": "I think, you, you know, when I sort of go back and, and watch the game and say, okay, what did I get wrong there? there was an enormous amount of government spending that I didn't anticipate. That government spending, it shows up as GDP, it gets paid out to people as wages, they then go on to, you know, spend and buy stuff. So, I mean, the economy can keep going for a long time. When you sort of zoom out on that, the only thing that can cut that or that process- Can keep going forever so long as they can borrow more money, right? And that's really the crux of it, and that's why, you know, we're sort of, we're sort of scraping off the decorative layers, and, you know, it's like Terminator is getting shot and burned, and now he's just down to the skeleton, okay? And we're now dealing with the sort of, fundamental moving part there, which is how much debt can, investors fundamentally digi- Digest, because if they stop digesting new debt, then the Fed is gonna have to monetize all of it, meaning that every dollar in deficit spending that governments spend, the, the Fed is literally gonna have to print that up, right? That then converts all of that debt into inflation, and then at that point, we get to the final level, which is how much inflation are people willing to put up with? And there's some point where They, the RNS, the, the, RCMP would be interested in, in their response to the government. In other words, there's some point where they get upset. But if you go through the mechanics of that, it takes a lot of time to run through all of that, right? So it takes a lot of time to get to the point where investors, don't believe that your government will ever repay. Okay? That, that happens all the time, right? You know, countries, they go through hyperinflation, their currency crashes because investors- Just don't believe them. That happened to Egypt recently, happened to Turkey, happened to Argentina, of course, Zimbabwe. Okay, that does happen all the time, but, you know, when is that gonna happen to the US? I mean, it could well, you know, it could be decades, it could be tomorrow, like we honestly don't know, right? If we go back through the history and we look at, paper money, for example, we know that what is it, fifty-one out of fifty-two or, it, it, One being the US dollar, and then, you know, the, the US dollar for a long time sustained all these other currencies through Nixon. since then, okay, since the Nixon shock, we're really in uncharted territory. if we go back through history, we know that the currencies all die, and that's, that's the process how they die. People stop believing, that the government will repay, they therefore have to print up all the money, and therefore that leads to inflation, and the people get upset and change their government. but we don't know how" }, { "speaker": "peter_st_onge", "time": "32:02", "start": 1921.99, "text": "You know, like when I have discussions about, for example, when are we gonna get the hyperbitcoinization? I mean, personally, I wouldn't be shocked if it happened, in five years. I also wouldn't be shocked if it took fifty years. you know, if I had to, if, if I had to guess, or, you know, whatever, the aliens are gonna turn, all the water into, green goo, then I don't know, twenty, thirty years maybe. but we do have a lot longer to go on this, and I think that's the reason, right? They can continue Effectively seizing private resources by issuing debt, okay, private investors then, you know, buy that debt, and so that, that transfers, private resources to the government, and keep doing that for a long time, even after that runs out, you get to the inflation part, it accelerates at that point. But even so, you know, Weimar Germany had hyperinflation, they, they had a lot of civil unrest, you know, it was not a pleasant time. You had like bicycle gangs that would drive out or ride out to the countryside and, and- And, beat up farmers and steal their crops. It wasn't pleasant, but, they also didn't have, you know, they didn't have like massive civil unrest or revolution. in fact, the bad guy came like thirteen years after Weimar. so, you know, in terms like when it's, when it's all gonna collapse? I'm pretty close to agnostic, I haven't the slightest clue." }, { "speaker": "stephan", "time": "33:25", "start": 2004.8, "text": "Yeah, and I, I, I think that's totally fair, and I think that's one thing where predictions are just hard. And I think what happens is in the world of, let's say, macro content, you know, there's a ton of people who make predictions, but really, how many people actually get these predictions correct? Like, not really. So maybe the real value of some of this kind of macro commentary and macro explanations and economic explanations is really more explanation of the dynamics at play. Right. The actual predictions themselves It's difficult to get correct, because as you said, I mean, it's possible hyperbitcoinization, you know, we go to sleep tonight and we wake up tomorrow and it's hyperbitcoinization, it's possible. It's just extremely, extremely unlikely that that happens like that quickly, right? It's more, as you said, maybe, maybe a ten, fifteen, twenty-year timeline is more, you know, likely, let's say. We don't know. but, I think to, let's say summarize some of what you were saying there, the way I'm seeing Governments, governments, and when they are in the process of issuing government debt, they're looking for bagholders, right? They want somebody who's gonna carry those government debt bags, i.e. buy government, US government treasury bonds and hoddle them. They want as many- Government bag debt holders as possible, right? Because you've got lots of bag holders, you can issue lots of debt, and ideally, if you've got lots of bag holders, you can issue that debt at a very cheap price, very low, and that kind of helps you Push that cost to somebody else, right? Someone else can take the cost while you get to enjoy the resources here and now, right? If you're a politician, a bureaucrat, et cetera, in the here and now. Exactly. And so that's kind of the situation we're in, and so I guess in that world Governments want to project a certain level of confidence or a certain aura of, holding our debt is very premium, it's very good debt, right? And that's where this kind of marketing of, oh, the US government debt is the world's risk-free, risk-safe, you know, whatever, the safest, risk-free rate, because our, our debt is premium debt and we're just better than all those other people. So buy our debt, be our bagholder, so we can, you know- Buy what we want and pay off whoever we want. That's kind of, in a nutshell, what's kind of going on if I kind of boil it down a little bit. But let's say some of the fly in that ointment is that now people are starting to realize they have alternatives, right? They don't have to buy US government bonds. They can buy property, they can buy stocks, they can buy obviously Bitcoin. They have other alternatives, and I think that's where, you know, it's gonna-- these things are going to change, right? But as you said, it's hard to call exactly the timeline on it, but I think that's, that's going to be some of the dynamic, especially as the world goes quote-unquote multipolar and people start maybe not just US government debt, maybe they start holding someone else's debt." }, { "speaker": "peter_st_onge", "time": "36:16", "start": 2175.99, "text": "Yeah, yeah, and, you know, one of my, favorite examples on that. Okay, so let's say that the question is, if you randomly murder three New Yorkers per day Will the population of New York increase or decrease? Okay. So, let's see, three per day comes out to a thousand a year. New York is a large place. you actually don't know. Well, here, you can make it simpler. Three New Yorkers per year. Okay. Will that increase or decrease population? So as an economist, I can very confidently say that if you kill three New York, New Yorkers per year, you will have fewer New Yorkers, okay? Because the process is when you kill somebody, they're no longer alive. However- However, the aggregate is the trick, right? And so you've got a lot of things going on in New York, right? You've got people moving in, you've got, you know, home prices going up, and then, they subdivide, and then a family can't live there, so the kids go-- You got a million things going on that influence New York's population. Now, each individual factor, you can very confidently, you know, you can go through the economics of and explain how X is gonna lead to Y, but the aggregation is always the trouble. And when you You're aggregating, I mean, like thousands of different phenomena all into one. So, you know, if you're talking GDP, then, a big question there is how much is the government spending? did they come up with a new war where, you know, now they can spend two hundred billion on artillery shells, well, that's gonna boost the GDP. if you're talking about inflation, are people worried about the future? In other words, they're printing money, prices are going up, but people are worried about the future, and so they're, they're hod" }, { "speaker": "peter_st_onge", "time": "37:56", "start": 2275.82, "text": "Inflation. And so, in, in any of those kind of, you know, I think that's part of why macroeconomists, rightly so, you know, everybody takes them with a grain of salt, and they should, is because you are aggregating, so many individual factors. And in this case, you know, if we're talking about when does the system collapse, I mean, that's a heck of an aggregation, right? You've got the interplay of economic factors, you have, you know, of course, a whole ton of political factors." }, { "speaker": "peter_st_onge", "time": "38:26", "start": 2305.82, "text": "Dynamics, like is it increasing, decreasing, are people able to communicate what's going on? Are they censoring the mainstream dissidents, but not the extreme dissidents? Okay, there's like a lot of patterns that they can take that are gonna, you're gonna have these butterfly effects, where it can really influence all of that. And, you know, as you say, you know, if you sort of boil all that away and you look at, you know, the fundamental moving parts, well, one moving part is willingness to huddle, US or, government Government debt, okay? And, you know, if something happens where all of a sudden those hodlers freak out and they're like, \"No, I'm not gonna hold this stuff,\" and, you know, again, that happened in Greece, twelve years ago, it happens all the time, we know that process very well, so if that happens, then that accelerates the crisis because it now converts all that government spending into inflation, and again, we know from history that inflation makes people upset. We've seen this over the past couple of years. So it's What the sort of, milestones are along the way to a dramatic change. You know what the, you know, three New Yorkers per year, okay? You know, like the cause and effect for all of these individual factors. But then the question is, okay, when you put all of that stuff together, you make predictions, you know, we think there's a twenty percent chance that China will invade Taiwan, and then if that happens, then this is gonna happen, and the other thing, and, you know, when you pull all that stuff together, then that gives you an actual outcome You know, I think when you do that kind of thing, you get a range of between five and fifty years. You don't get three days, you don't get seven hundred years, but, you know, that's, that's a pretty wide range. Now, what it implies, of course, is that, that, is that if you're investing for it, you know, you, you sort of implicitly-- anybody who buys any kind of asset or anybody who makes any kind of investment, like raising your kids or, you know, buying groceries, you're making some sort of implicit assumption That the world's not gonna end tomorrow, otherwise, you know, you, you wouldn't stock the refrigerator. and so the question is, for individuals, you know, how do you prepare for those various outcomes? Bitcoin of course works for a whole lot of those ranges, which I think is part of the attraction, but, you know, other assets then of course are ray on a spectrum, right? So stocks, bonds, et cetera. Houses. Yeah." }, { "speaker": "stephan", "time": "40:50", "start": 2450.28, "text": "One other topic I wanna get into as well, because this was something, you know, a week or two ago, there was a lot of people commenting about this, wanted to get your reactions on Japanese government debt, right? Because there- You know, we've seen some funny things happen, like the Japanese, you know, interest rates have started to go up there. The Japanese Nikkei, the Japanese stock market, has finally reclaimed the all-time high, you know, thirty-five years later or whatever it is, you know, since like nineteen eighty-nine. and so I'm curious if you're seeing any implications of that or how, how should we think about this idea of the Japanese government debt coming up off zero?" }, { "speaker": "peter_st_onge", "time": "41:28", "start": 2487.75, "text": "Yeah. So Japan's been interesting because it's sort of- Been the canary in the coal mine on debt. So the debt to GDP ratio in Japan is something like two hundred and seventy percent. It's extremely high. in the US, it's more like a hundred and fifty or a hundred and seventy percent, something like that. so it's much, much higher in Japan. The traditional red line was thought to be something like a hundred and twenty-five percent of, of GDP. So Japan passed that, I think, in nineteen ninety-nine. Okay, so Japan's been over that level for a very long time. in a sense, I guess the good news is that apparently you don't always crash when you cross one hundred and twenty-five. the bad news is that that then made all these other governments, curious if they too could breach one hundred and twenty-five. Because after all, governments wanna spend more debt because you can buy elections with them, right? And you can pay your friends, and you can set up a nice job after your retirement. There's a lot of, there's a lot of things that governments would like to do, with debt, so they have natural incentive to seek it. And" }, { "speaker": "peter_st_onge", "time": "42:31", "start": 2550.61, "text": "so, Japan might have been able to sustain it so long, for example, is a very, very strong bias among Japanese investors for buying, like, yen-denominated assets. they're almost unique in that degree. Maybe countries like Korea might be similar. but anyway, that's, that's, that's an open question, right? Whether Japan was able to breach that one twenty-five line, which is by, oh, God, Rogoff. Can't remember the names right now, but anyway, there's, there's a paper, I think it's called \"This Time Is Different.\" It's a famous" }, { "speaker": "stephan", "time": "42:59", "start": 2578.54, "text": "paper, right? Yeah." }, { "speaker": "peter_st_onge", "time": "43:00", "start": 2579.7, "text": "Yep, yeah, it's a paper that looked at hundreds of, of, of, currency collapses in the past. but any rate, so right, that's the big question, is Japan special or is this something that everybody can just break willy-nilly, that maybe, maybe this time is different, like maybe the world has changed in some way, and for some reason" }, { "speaker": "peter_st_onge", "time": "43:24", "start": 2604.06, "text": "Now, what's happening in Japan at the moment is that they have held rates really low, for, gosh, about thirty years, because the economy was fairly weak, and the economy being fairly weak, has driven, in this case, it's driven deflation where the, you know, sort of Famously, Japan's had near zero inflation. It's actually funny if you go, so I, I first moved there in 1990, and 30 years later, like a lot of stuff cost literally the same amount, which is really weird. but anyway, so they've had this, you know, relatively deflationary environment, really low rates. What happened is that was relatively sustainable until the Fed and Europe and the rest of the world hiked rates a couple years ago, and when they did that, that then caused the yen to- The plunge, right? So the yen has now dropped like a third, it's about a hundred and fifty per dollar, which is pretty epic, for anybody who, who'd been there in the old days when it was like ninety. I think it was 80 at one point, when I was living there, it was difficult times. but at any rate, so what, where that kind of puts the Japanese government is that they want to raise rates to defend the yen, because if the yen is that weak, that's a problem because it, it, it raises costs for Japanese households, right? So Japanese import about two thirds of their food, they import almost all of their energy, they produce almost nothing domestically, and so that means that if the yen is a third weaker, then it means that the price Of, you know, beef or, or grains or gasoline, that goes fifty percent higher, right? One over. and so the Japanese government has been trying to support the yen, but the problem is that they couldn't raise rates because the economy has been so weak. And in fact, Japan just went into recession, they just announced it, what, maybe a couple weeks ago. but, but they have to because of that yen, right? not only because, you know, households could get upset at the inflation, but also- But also because banks, could get into trouble if the yen continues to be so weak because they have, they have obligations overseas. and, you know, in fact, one of my consulting clients, they're a, they're a pork producer, in Mexico who export to Japan. And, you know, I've been talking to them and they say that the entire industry's been trying to hold off and hold off on the price hikes because they're hoping and praying that the yen is gonna normalize. Okay, so in other words, all of, all of that inflation Go, right? You got all these importers who are currently losing money, because they're waiting for that. So Japan couldn't wait forever, it looks like they're finally, you know, pulling the trigger and, ending that thirty years of near zero or sometimes negative interest rates. And, you know, again, it's sort of uncharted territory, like nobody knows exactly how that's gonna impact the financial system. The sort of modern central bank doctrine now is you just go ahead and break things, and then if any problems show up Up, you shoot a trillion dollars at it or a hundred trillion yen, make a new" }, { "speaker": "stephan", "time": "46:30", "start": 2790.41, "text": "program, right? Make a new BTFP or something, right?" }, { "speaker": "peter_st_onge", "time": "46:33", "start": 2793.38, "text": "That, that's exactly it. And so, you know, if, if they do that, you know, of course, then, inflation in Japan could just absolutely take off, you know, not only because all these, importers eventually have to hike their prices, but, you know, at that point, you would get all these new yen being printed. so I think Japan's gonna get pretty interesting." }, { "speaker": "peter_st_onge", "time": "46:54", "start": 2814.23, "text": "It, it Kind of more action in Japan that we have, in thirty years. And then that kind of feeds into, you know, in a sense, I think Japan is the poster child for this wider picture of what's happening all over the world, which is that, you know, Japan took that sort of consuming the golden goose, they took that process, I think, much further than even the US and Europe. there are enormous sectors of Japan that are just really, really," }, { "speaker": "peter_st_onge", "time": "47:26", "start": 2845.92, "text": "Stagnant, you know, productivity levels are like half what they are in Europe or the US. The Japanese are very hardworking, they're very well educated, so to have those levels of productivity suggests that these, these, markets are just not competitive at all. they have, you know, almost no, no new entrants. many industries like domestic industries, not export industries, they tend to be more competitive, but the domestic industries that make up most of the Japanese economy, they tend to be very stagnant. you don't have new entrants. companies might be run by like the founder who might be 80. I mean, it's, it's just a very it's, it's sort of what you expect in an economy that isn't competitive, and I think that that is absolutely spreading all across the West now, because that's a hallmark of government control, right? Once the government gets involved in an industry, it's going to auction power to the highest bidder, and the highest bidder isn't gonna be the startup, right? The highest bidder is gonna be the existing companies, and they're gonna tend to push for rules that stabilize the market, which in practice is It's gonna mean that, you know, one by one, industries sort of, you know, they sort of go out, right? You no longer have this raging fire of economic growth. They sort of go out one by one and, and, you know, sort of the picture of Japan at this point is that, yes, you've got some competitive, industries in export, and the rest of it is broadly speaking, pretty rough." }, { "speaker": "stephan", "time": "48:57", "start": 2936.78, "text": "Back to the show in a moment. This show is brought to you by Mempool dot space. Mempool dot space is the leading Bitcoin" }, { "speaker": "stephan", "time": "49:05", "start": 2945.41, "text": "To search Bitcoin transactions, or if I need to keep an eye on what's happening in Bitcoin's mempool, or if I want to estimate the fee rate that is, appropriate to get into the next block. So as many of you know, Bitcoin requires a competitive bid to get your transaction into the n-into that next block if you wanna get it into the next block. And so mempool dot space can give you an, some insight into what's going on there. You can even watch transactions, you can see what's happening in terms of- Of what flags were on that transaction, whether it had RBF replaced by fee on or not, and the RBF history for that transaction. There's just so much you can view there. Go to mempool dot space slash accelerator if you wanna sign up for their accelerator program. That's mempool dot space slash accelerator. So as Bitcoin is entering this bull cycle, it, you might wanna think about plan B residence and citizenship around the world. As many of you know, I left Australia for various reasons, taxes The COVID tyranny and various aspects of it. Nomad Capitalist can help you with this because they can help you strategize, they can help you pick which jurisdiction or combination of jurisdictions. Because Dubai makes sense for me, but maybe it's not the best call for you. You've got to think about that. Nomad Capitalist has a team of experts who can help you with this. They have worked across dozens of countries in terms of helping people get residents or citizenship. And don't forget, it's not just you the individual. If you have a business, you also need- You need to consider what's going on with that business so that you can get the right tax benefits legally by moving overseas. And so Nomad Capitalists can help you on various fronts, whether that's residence, citizenship, setting up fiat banking options, various other aspects that you need to think about. Maybe you need to think about the time zones that you would like to live across. So Nomad Capitalists can really help you by being the general contractor, right? They can help you by helping you come up with an overall plan and then They can help coordinate and implement that plan so that you don't have to get your hands as dirty with all of the details. So for those of you interested, for those of you with a liquid net worth above one million dollars, if you're an investor or an entrepreneur, go and check it out at nomadcapitalist dot com slash apply. That's nomadcapitalist dot com slash apply. And now back to the show with Peter. Yeah, that's a great point around lack of competitiveness. As you mentioned, there's this stagnation, as people say famously, \"zombie company.\" Economies, and for years, people have been talking about this concept of Japanification of other economies, right? I've mentioned it on the show, I'm sure you've been talking about it. A lot of other economies are going to go in that same direction, which is sad to see, and it also, not just at the kind of, 'cause we're not just kind of looking at the economics in the sense of like, oh, the num- the GDP number go up, right? It's not just that, it's also, there's cultural impacts too, right? Think about the There's, that, you know, whereas if we were seeing a real society with real economic growth, like as we quote-unquote should have seen with a real free market There might be people who would now say, \"Hey, I don't wanna work 80 hours a week, let me, let me dial that back so that I can spend time with my family, right?\" So we're, we're sort of seeing this cultural impact and this impact at a social level, and maybe that's also part of why some of these countries have such low birth rates, and now, you know, historically Japan was very- Insular in the sense of not wanting to have a lot of immigration, right? It was kind of like, if you're a tourist, hey, when are you-- you're welcome as a tourist, but when are you leaving? That was sort of, you know, that's the vibe, right? They won't tell you that, but that's kind of the vibe. And so- When you have a low birth rate, it's gonna cause all these other problems because the, the welfare Ponzi system is no longer, an, a, a pyramid shape and you get this kind of inverse pyramid, and that's gonna cause a lot of pressure for them because as we were just saying, if their debt was previously zero or negative and now the debt price is rising, what does that mean for tax revenue? What does that mean for those generations who are still working? Because now they are supporting this really big old- The, you know, generation, right? Japan is one of the world's oldest populations, or maybe the oldest, and they're paying this very high, you know, the tax debt is so high as well. So it causes all these social issues that we, we're gonna see in Japan, and sadly, we're, we're gonna see that elsewhere around the world." }, { "speaker": "peter_st_onge", "time": "53:40", "start": 3219.83, "text": "I think we will, and, you know, a lot of it, is heartbreaking when you consider the generational effects, right? So you've got a generation in Japan where, when they were young They were told to take one for the team. They made very low wages, they lived in like corporate dormitories, and the bargain was, \"You guys are gonna sacrifice when you're young, but once you're older, you're gonna get the fruits of that.\" And Partway through that process, Japan changed. It choked that golden goose, and so those older people aren't getting paid for that. the young generation now, they look at that and they say, \"Well, screw that, I'm, I'm not taking one for the team.\" Right? So when you shift from an economy that's growing, where the young have something to look forward to, okay, when you shift from that to something that looks like the pie is fixed, you get, you get a lot of, you know, tragedies You know, people who, they work like a dog their entire life and they have absolutely nothing to show for it. you also get a lot of discouraged young people. You know, that was in that, that RCMP report mentioned, young people in particular were seeing a lot of statistics like that from the US where the young are basically giving up. They say, \"Well, I'm never ever gonna be able to buy a home.\" You know, a starter home is half a million. you gotta be kidding. they just give up. They, they, In the Caribbean or something. they are shifting to, you know, Safedine has mentioned this a lot, right? The, the sort of, high time preference, society. And, I mean, the young appear to be absolutely shifting towards that. And part of the reason there, yes, it's the inflation, but in addition to that, it's the end of growth, right? This sort of, in their mind, it's, it's, we're looking at the end of abundance, and they're just starting to think, well, let's just Tomorrow, good things aren't coming tomorrow, just get what you can today." }, { "speaker": "stephan", "time": "55:45", "start": 3345.25, "text": "Yeah, that's sad to say." }, { "speaker": "peter_st_onge", "time": "55:47", "start": 3347.15, "text": "one other topic," }, { "speaker": "stephan", "time": "55:48", "start": 3348.05, "text": "because it's so hot right now, right? Everyone's talking about AI. You and I have spoken about this probably years ago. yeah. Now, you know, for listeners, you can, of course, you can go and check out some of the earlier episodes, but Peter's analogy here is like If, if we've got a free market, it's like we're on this escalator and you're kind of-- the world is getting better over time, and occasionally, sometimes your job gets, you know, automated or obsoleted and maybe you have to take a step back or so. But fundamentally, if we're on the escalator of society and the economy is growing, we're kind of on this uptrend. Now, fast forward to today, AI is super hot, right? Nvidia is pumping through the moon, there's so many people talking about AI for this, that, or the other There's people who think it's underrated, there's people who think it's underrated. I'm curious if you have any thoughts on, which kinds of jobs you think AI may start to either obsolete or change?" }, { "speaker": "peter_st_onge", "time": "56:44", "start": 3404.32, "text": "Yeah, I mean, for sure, content creation, I think all of us have really been amazed, you know, compared to when you and I originally spoke, I think back then, You know, most people, including me, were expecting like factory jobs, maybe, truck drivers. now I think more and more it's content jobs. fortunately, you and I aren't exactly that kind of content creators. I'm, I'm hoping we'll be alright, but, you know, video production, there's- Producing music," }, { "speaker": "peter_st_onge", "time": "57:20", "start": 3439.67, "text": "you know, analysis, okay, that also seems to be getting automated. there are an enormous number of people who, think for a living, and, you know, that, I think somewhat surprisingly, AI actually seems to be really good at that. Right. so- Because you could argue it amplifies" }, { "speaker": "stephan", "time": "57:39", "start": 3458.78, "text": "our work, right? It can maybe amplify the work of a video editor or an audio editor or someone, right? And, and it makes them more productive. So there's kind of an argument both ways there." }, { "speaker": "peter_st_onge", "time": "57:48", "start": 3468.17, "text": "That's exactly right. So, I, I don't remember who said it, but they said, \"An AI isn't coming for your job, a human who knows how to use AI is coming for your job.\" And I think that's, that's absolutely correct. You know, if we look at an analogy, so the internet, I think, in, in, in terms of jobs in the economy, the, the, the internet itself, I think, is very similar to AI in the sense that the internet replaced a whole lot of jobs, okay? There was a time when every major company employed people to go out and cut newspaper articles about their company, okay? And that would be put in a media file and then that might be referenced in the annual report, okay? Like there were literally thousands of people whose job was to do that before the internet. And Google came out with something called Google Alerts, which is like a trivial little piece of software, and you've probably heard of it, but who cares? Anyway, that completely obliterated that industry, right? Translators, okay, translators got wiped out with Google, Translate. unless, y-you know, nowadays if you're trans- But what I think is interesting about is that, look at what happened to those functions, right? So if you're talking about translate, translators still exist, but every translator runs it through Google Translate first and then they check it. Okay? So they still exist, but they work about, you know, ten times faster, probably a heck of a lot easier. you know, you just have to kind of look at the, the difficult cases. look at what happened with, you know, website design, right? So if you take a website in like 1990 or whatever, 1995, and you're looking at GeoCities, okay, yes, a GeoCities website is now automated, but what happened is the expectations went up Okay, so like still, you know, I just created a website last year, I had to pay a guy to do it, right? Even with all this automation, I had to pay a guy to do it. Why? Because I can't put up a GeoCities ad, website, right? Pe-people won't accept it. Now, when I say people won't accept it, what that translates into economic terms is that the product gets better. Okay. and so that I think, you know, a lot of the jobs that are, affected by AI, as you say, like a lot of that's gonna be converted into the same thing they used to do, but better, right? You're gonna be able to put a lot more people, on activities that previously you just couldn't afford a human for. and, so yeah, right. I'm, I'm relatively sanguine on that. Also, you know, again, if we look at the overall- All, jobs impact of the internet itself, you, you, you famously can't find it in the data. You know, all of the jobs that the internet replaced, which is an enormous number, I mean, if you think of all the things that humans used to have to do, you know, there's this famous image where they show an iPhone and then they show all the things that you used to need for that, right? You know, a, a radio, a calculator, a" }, { "speaker": "stephan", "time": "01:00:41", "start": 3641.57, "text": "calendar, and so on, a phone, etcetera, yeah." }, { "speaker": "peter_st_onge", "time": "01:00:44", "start": 3644.27, "text": "Right, so, replacing Look at the overall jobs numbers, it didn't-- you, you can't even see it, right? unlike, say, agricultural mechanization, where you can very clearly see when agriculture, mechanized, you can see it for agriculture jobs, right? But, but again, like if you look at the overall jobs numbers, you would never know, right? And the reason, of course, is that a job fundamentally simply means that you are doing a favor for other people, and that favor is so valuable That they're willing to do something for you in return. Okay? That fundamentally is what we call a job. It's also what we call a business. Okay? So I'm gonna do something for you, and if you like it, then you gotta give me something, and therefore we're both giving something to each other, and we're both all set. Okay? There is a nearly unlimited number of things that humans can do for each other. Now, at any given moment, people will tend to be doing the best thing they can do. Okay? In other words, you know, like if they lose their job, people are typically upset because it's not like they had a better job just sitting there waiting, right? if they had a better job, then they would have already been at that job, right? So yes, you know, you, you, you sort of step down, you know, you were, talking about the escalator in a growing economy, that's not that bad. Okay, like if we had a huge labor shortage because the economy's doing amazing and, you know, we're on the gold standard, we're back in the nineteenth century, then people actually wouldn't care that much. It'd be kind of like losing your job in Silicon Valley, where you're like, \"Oh, dude, now I gotta, you know, drive next door and tell them that I'm available for a job.\" Okay, that's not much of a tragedy. The tragedy, it's not the automation and the losing the jobs, that's not the tragedy. The tragedy is if there's" }, { "speaker": "peter_st_onge", "time": "01:02:38", "start": 3758.97, "text": "I think that's really what rightly scares people. It's not necessarily losing their job. There's a lot of people don't like their job, okay? The problem is, are there other jobs that you can actually maintain the same standard of living on? And that, depending on where you are in the country, that's increasingly less true than it used to be." }, { "speaker": "stephan", "time": "01:02:56", "start": 3776.44, "text": "Yeah, that's a good way to summarize it. but nevertheless, I think the challenge for some people is it's difficult to visualize where the new job comes, right? So as an example, they may say, \"Hey Stefan, or hey Peter, before I kinda get on board with all AI and using technology, I need to see you point out to me where's the new job.\" But it, like, that's just kind of, \"Hey, the market is...\" It's difficult to do that, right? Like, I could give an example where historically, you know, when people used" }, { "speaker": "stephan", "time": "01:03:25", "start": 3805.9, "text": "It's the level. Nowadays, it's just everyone presses, it's self-serve, right? You press your own, what, you press what level in the elevator you wanna go to. What, what job did that elevator guy go and do instead? Well, it's hard for us to point that out, right? But he went and got some other job somehow." }, { "speaker": "peter_st_onge", "time": "01:03:42", "start": 3822.74, "text": "Yeah, and, you know, we can point to it through history, you know, because technology's been advancing for thousands of years. so I mean, you know, we can point back through history and we can say, well, e-every single time, somehow magically the new jobs appeared. Now of course, what happened is they stepped one down on the escalator and the jobs were always sitting there, they just weren't filled. sort of a thought experiment that I like is if you imagine, imagine that staff is free for some reason. You have a long-lo" }, { "speaker": "peter_st_onge", "time": "01:04:12", "start": 3852.16, "text": "We should hire people. I think hiring people is wonderful. I'll pay their salaries, hire anybody you want, anything you like. okay, so you can hire people for free. How many people would the average family with two kids hire? Okay. Oh, you would have a nanny," }, { "speaker": "stephan", "time": "01:04:27", "start": 3867.03, "text": "they'd have a babysitter, they'd have a driver, like, you name it." }, { "speaker": "peter_st_onge", "time": "01:04:30", "start": 3870.3, "text": "A, a, a nighttime security, a, somebody to, I don't know, listen to you practice your podcast. I mean, you know, there, there's a lot of people I could hire if they're free. There is an unlimited amount of demand for humans, because, not only because humans are useful, like, you know, we can pick up things and move them, but, I mean, humans are useful for a lot of most elderly people spend most of their day alone when they don't wanna be, right? You know, somebody doesn't keep them company and chitchat with them. Right. I mean, there, there's, there's a functionally unlimited number of jobs in the economy. The only question is, what's the fundamental value that is able to sort of trickle down so that all of these people have a good quality of life? And there you're talking about things like, you know, to give a concrete example A, an iPhone, which is extremely valuable, there's a whole lot of things you can do with it, solves a lot of problems for you. an iPhone is made out of sand and dirt, metal, right? And that's it. Okay? So sand and dirt isn't very valuable, an iPhone is extraordinarily valuable. The difference between that It's competed away so Apple doesn't get all that difference. It sort of trickles down through the entire economy to sort of visualize how the process works. And so if you've got enough value being created by somebody in the society, and then you've got a competitive market such that that value is then spread out among everybody, then it doesn't matter what the jobs are. They could literally be everybody doing each other's laundry. That's the famous example from the, I think it was the nineteenth century, Napoleon dis- dismissed the British economy, 'cause he said, \"No, everybody just does, just does each other's washing.\" Well, okay, yeah, yeah, the vast majority of people in Britain in the nineteenth century did usele-- you know, relatively useless things like laundry or, or cleaning floors. If you ever watched Daunt and Abbey, nobody in that entire show is gainfully employed, right? I mean, in terms of producing something for society, they're, they're, they're all just like washing each other's backs. But somebody somewhere in Britain was creating an enormous amount And trickled down so that everybody in Britain was, at that time, by far the richest people on Earth. In fact, the richest people Earth had ever seen. So it's, it's difficult, you know, when you sort of trace out the concrete examples, because it's easy for people to say, \"Where are the jobs gonna come from?\" Twitch, you know, my answer would be, \"Well, I mean, if I literally knew what the next industry was to blow up, I'd, I'd have a lot of money, right? Yeah, I'd be up there with Through thousands of years of history, you know, from the moment that we automated, I don't know, food preparation using fire, technology has eliminated jobs, and there's inevitably just an army of billions of jobs sitting there waiting to be filled, but there's not enough people to fill them given what people are willing to pay for them, right? And so what you hope is that- The people lose their job because they're replaced, so now they're willing to take the job, and meanwhile the economy's growing, so other people are willing to pay them to watch the kids. Okay? If, if that happens, then it's win-win. Technology's wonderful, we're all getting richer. You're stepping down on the escalator, but the escalator's going up. If on the other hand- That one breaks, right? If the economy isn't growing, then when people step down, they stay down, right? The escalator stops, and now you're no longer on an escalator, now you're actually stepping down a staircase. So that is the concern." }, { "speaker": "stephan", "time": "01:08:06", "start": 4086.74, "text": "Yeah, that's a fair way to put it. let's finish up with a little bit of chat on Bitcoin and your outlook there. Obviously, I know you're, you're a hodler yourself and you're obviously bullish. Do you have any outlook on Bitcoin over the next year or so?" }, { "speaker": "peter_st_onge", "time": "01:08:20", "start": 4100.86, "text": "So in general, I, let's see, I managed, funds. So I was paid to manage funds for about ten years. And what I learned from that is that I am very bad at trading. I don't trust myself. if I ever give advice on short term price movement, I either do the exact opposite or anyway don't believe me. So I have, I have no useful opinions about what's gonna happen with Bitcoin. Bitcoin price in the next year, and, you know, when I look at it, I look at the fundamentals, right? So, you know, kind of like the three people a year disappearing from New York, you know, so what are the moving parts there? And obviously, the ETFs, I think, have a lot longer to go. meaning, you know, new people coming into Bitcoin and putting resources into Bitcoin, because of how easy it is using an ETF. I think that is bringing enormous people, number of people into Bitcoin that should, you know, drive the price up all else equal. that's helping companies like Unchained, my lead sponsor, because as people learn more about Bitcoin, they also, you know, tend to appreciate the importance of actually holding custody over your keys. And I- At any rate, I think that the, the ETFs are very important 'cause it's, it's sort of this funnel that's bringing an entire new population into Bitcoin. It also, I think to a certain degree, gives us plot armor on regulation, right? 'Cause that's been one of the big questions ever since the beginning of Bitcoin, is when is the government gonna ban it? And, you know, once you've got BlackRock on the other side of that, I think that really changes the game. what BlackRock gets, they get, what they want, they get. they're very, good at using the political process. So I think those two factors alone, should make anybody very bullish about Bitcoin. And of course, you know, you just zoom out. I mean, my, my sort of fundamental thesis on Bitcoin is asking, what's the likelihood that it's gonna replace fiat money? there's something like Eighty billion or eighty trillion of fiat money in the world, if you divide that by twenty million, that comes out to a four million dollar price. So if you're a hundred percent certain that Bitcoin is gonna win, then you'd be willing to pay four million for it, not a penny over. if you are, say, ten percent sure that Bitcoin's gonna win, then you would pay four hundred thousand for it. so at the current price, that's an implied likelihood that Bitcoin's gonna win of one point seven percent. That strikes me as very conservative. So in the long run, I'm extremely optimistic. And by the way, when you're putting together that one, that, that probability, right, where you're fundamentally asking is, number one, will fiat die? Number two, when will it die? You have to gas because of time value of money and net present value. Anyway, will Fiat die? When will it die? And then point three, when it dies, what happens next? So, you know, historically, we go to gold And so the question is Bitcoin versus gold. in my opinion, if it happens sooner, then we're more likely to go to gold initially, and then people gradually peel over to Bitcoin because it's superior, because governments can't seize it. if it happens later, then I think we skip gold, as much as I love gold, we just go directly to Bitcoin. So you take those odds, right? Will fiat die? When it dies, will Bitcoin take over? That strikes me as much, much higher than one point seven percent, which is what the present market price" }, { "speaker": "stephan", "time": "01:11:42", "start": 4302.76, "text": "is. Yeah. See a case as well for this notion that Bitcoin can suck up some of the monetary premium out of other assets as well, right? Like this idea that people are using property as their store of value and stocks kind of are being overbid So perhaps the actual Bitcoin price could be even higher than just four million." }, { "speaker": "peter_st_onge", "time": "01:12:04", "start": 4324.16, "text": "I agree. Yeah, I have no idea how to estimate that. I haven't thought up a very good proxy for it. but right, absolutely. If the money is harder, then people are gonna be more willing to hold it, and so, I mean, that could theoretically double, the number that we're talking there. but yeah, absolutely. So right, I would take that four million or whatever, four million times the percent, okay? I would take that as a floor. Not a ceiling. And of course, that's present dollars, future dollars. It could be trillions upon trillions because of the processes we've been talking about today." }, { "speaker": "stephan", "time": "01:12:35", "start": 4355.68, "text": "Yeah, right. Yeah, it used to be that being a millionaire was a big deal, and, you know, having a hundred thousand dollar salary used to be a big deal, and now, not so much. I know" }, { "speaker": "peter_st_onge", "time": "01:12:44", "start": 4364.0, "text": "millionaire is very middle class now. It is hilarious. Like, you know, literally people who live in like San Francisco, you know, they got a million and, and they're like You know, they can't, take vacations and it's- Yeah, they don't feel rich, right? Yeah, right." }, { "speaker": "stephan", "time": "01:12:57", "start": 4377.89, "text": "Yeah. Alright, well, look, very enjoyable chat with you, Peter. Of course, listeners, make sure you check out Peter's show, follow him, and check out his Substack. You can find him online at prof saint Onge and, the website, prof saint onge dot com is the Substack as well. So, Peter, thanks for joining me and, had a great time chatting." }, { "speaker": "peter_st_onge", "time": "01:13:19", "start": 4399.27, "text": "Always, great talk, it's fun." }, { "speaker": "stephan", "time": "01:13:21", "start": 4401.47, "text": "Finally, I hope you enjoyed the show. Make sure to give it a like and a share if you enjoyed it. Thanks for listening, and I will see you in the citadels." } ] }