{ "episodeId": "SLP571", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "jpy_peruvian_bull": { "name": "JPY? - Peruvian Bull", "role": "guest", "tag": "JPY?" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.18, "text": "But eventually, what I've been saying is that this problem gets so bad that people will start looking for a new global reserve currency, and I believe that Bitcoin is, is the frontrunner in that game because it's just a, a better version of gold." }, { "speaker": "jpy_peruvian_bull", "time": "00:22", "start": 22.11, "text": "Hi everyone, welcome back to the Stephan Livera podcast, brought to you by Swann dot com. Today we're gonna be talking about, The Japanese market, and a, a range of things that all relate to the world of macro, and so joining me today is Peruvian Bull. I found some of his commentary really interesting, so, welcome to the show, Peruvian Bull." }, { "speaker": "stephan", "time": "00:42", "start": 42.46, "text": "Thanks for having me on. I've been a huge fan of your podcast, listened to quite a few episodes, and so I'm, I'm excited to, to now be, to make, be making one." }, { "speaker": "jpy_peruvian_bull", "time": "00:52", "start": 52.15, "text": "Oh, cool. Well, hey, I had no idea. Well, thank" }, { "speaker": "jpy_peruvian_bull", "time": "00:57", "start": 56.83, "text": "you. so So, just give us a bit of the background, whatever you're comfortable sharing in terms of what, what's your focus, what are you mainly, talking and commentating on?" }, { "speaker": "stephan", "time": "01:08", "start": 68.46, "text": "Sure, yeah. So I used to work in traditional finance, out of private equity fintech, for, quite a few years and, after working there and at some fund management, I, last summer I decided to quit my job and, and go into macro writing full time because I've been doing that on the side for a while. and I came across Bitcoin GameStop fiasco, and it really started opening doors for me and changing my whole mindset around finance and, and macroeconomics. And previously, I'd been a gold bug and been really hard stuck in the gold bug camp. And the Bitcoiners completely broke that, that model for me, and so I had to sell most of my gold and, and ape into Bitcoin. nice. But yeah, so, yeah, so I've been writing since August, I've been writing full time on macro, I've also written quite a few pieces on Bitcoin itself, on how it solves Triffin's D On the Lightning network, on scaling solutions, and so, we can get into that, because that's also a really interesting rabbit hole, Bitcoin becoming a global reserve currency, but, yeah, I, I currently am just covering macro, and I've written quite a few pieces recently on the Bank of Japan and their, their predicament, with holding their currency, at the one sixty mark." }, { "speaker": "jpy_peruvian_bull", "time": "02:20", "start": 140.26, "text": "Yeah. So, so yeah, let's get into some of this. This has been an infamous thing for decades now, and I guess let's try to set the table for people like, I don't consider myself like a macro expert or anything like that, but, you know, I find it sometimes entertaining to sort of hear some of the different perspectives. So can you just, let's say, set the table for us, set the context for us here, like what's going on with the Japanese yen and the Japanese, government bond market?" }, { "speaker": "stephan", "time": "02:50", "start": 170.43, "text": "Sure, yeah. So actually, I think, I think Japan is an appropriate, you know, kind of like bellwether for the entire, you know, global central banking apparatus. They've gone farther, and faster than any other central bank in experimenting in monetary policy. So they were the first ones to start QE in, in March of two thousand and one. They were the first ones to do yield curve control in twenty sixteen. and what they were trying to do was, they had essentially created a massive credit bubble. In the 1980s, and when it popped, their real estate and, you know, financial sectors declined precipitously. They had essentially like a slow rolling deflationary crisis, and they tried everything they could to get themselves out of it, and typically as central banks do, right? Like they caused the problem, and then they blame other, other people and other things for causing the issue, and they first blamed it on demographics, which was part of the problem, but definitely not, the main source of it. And so, you know, they started that QE program In, in two thousand one, and then with, the two thousand eight financial crisis, they upped their, bond purchases, and then in twenty sixteen, they said, \"Look, like, we're not seeing any growth. Like, the stock market is still down from its, its high in nineteen ninety, and we can't, we can't figure out any other way to stimulate the economy other than the wealth effect, so let's just go full bore on bringing interest rates to the zero bound or even negative in some cases on the short end and pin them there.\" And so that's Trillions and trillions and trillions of yen doing that every single month. And what it essentially, what they essentially began doing is, is what I call eating the bond market. So the, the Bank of Japan slowly began buying all the outstanding bonds. And first they started with the, you know, less traded maturities, the illiquid issues that the banks just wanted to get off their balance sheet. But soon they moved into the five year and the ten year and the most, you know, what are called on the run issues, the ones that are most traded. and they got to the entire outstanding Japanese bond market, and they own technically, their balance sheet is larger than the entire GDP of Japan. And so they've essentially like monetized the entire financial sector. And so what, what that's done is when they've brought interest rates down to zero for so long, they've created what I call financial gravity. It's this, it's this, you know, horrible feedback loop where you bring rates lower, more debt is accumulated because it costs nothing to borrow and it costs nothing to lend, and so banks are incentivized, it's like, \"Hey, you have no-- there's no risk, like the government will buy your bonds or buy any debt that, that goes bad anyways, so just lend.\" And consumers have no, you know, disincent If you can borrow at zero, or if your company can borrow at zero and pay nothing to roll the debt, you'll buy, you'll borrow as much as you can. And no one went farther in the borrowing scheme than the government itself, to the point where today we're sitting at two hundred and sixty-six percent debt to GDP. And so the government is now in this what I call a monetary black hole. They're, they're really stuck because If they try to normalize interest rates, if the Bank of Japan tries to normalize interest rates with the rest of the world, like let's say the Fed, for example, the government would eventually be paying 13% of the Japanese GDP in interest alone on the debt. So they've, they've essentially trapped the government, right? The, the Bank of Japan with their lowering of interest rates and allowing the government to just go deeper and deeper into debt and, and monetizing that debt via QE, via yield, yield curve control, which is basically QE infinity by holding the cap. they've allowed the government to go deep, deep into this black hole, and there's, there's essentially no way out. And what I've been writing about is, you know, what is the ultimate, you know, end game for this? What, what, what happens? And Which is, once you get to a point where this debt is so high, and you're, you know, you're running QE and inflation starts to return like it is in Japan right now, and your currency starts weakening because of a carry trade that's opening up because of the in- interest rate differentials, there's not, there's nothing you can do to save the currency, right? Like the traditional response in macro is to raise interest rates, because if, if the US has interest rates at five and you have interest rates at five, well then there won't be any capital flows other than trade, But if there's a huge difference in interest rates, then people can borrow in yen and buy USD assets or lend in USD and earn the spread. And so that's what's been happening because the Bank of Japan pinned interest rates so low for so long, you know, four or five trillion dollars of a carry trade opened up. And so all these people are borrowing yen and buying USDs, which is drawing money into the US markets and is drawing money out of Japan and essentially is, it's a synthetic short on the yen. So every time people borrow- Yen, it's creating more yen, they're selling it on the market, and that's shorting the yen, and the yen just keeps weakening and weakening and weakening. And in the past four years, it's gone down by about fifty percent. And so the Bank of Japan has been trying to do things to stop this, this slow motion train crash. And they first started with, in December twenty twenty-two, they moved the cap on their yield curve control. So they, they had it pinned at the zero bound, and they finally let it go to point, zero point five percent. You know, The interest rate, right? And when they did that, there was a huge volatility in the bond market. They, the Japanese Securities Clearing Corporation issued a margin call. a bunch of firms had to liquidate, you know, other collaterals, treasury securities to try to figure out how to, how to, you know, deal with their levered Japanese bonds because they were all levered long and now suddenly the government's saying, \"Okay, there's no longer a floor on the price. We're gonna let the, the interest rate rise to zero point five percent.\" So they did that, and then about six months later, in last July, they moved the cap again to one percent, and then they started doing random bond buying operations to try to scare the bond market. And the end result of this is that they're trying to, you know, sit on two sides of the fence at the same time. Their, their mon- their monetary policy makes zero sense, right? Because on one hand, they're printing yen to buy these bonds to keep the bond market, you know, from imploding because essentially- You know, no one really has any demand for bonds at, at zero percent, even the Japanese, they don't have enough. And on the other hand, when you print that yen and plug it into the financial system, it starts blowing out the currency because all this extra yen is being created, and now all these people can short yen or can sell yen and use that to buy USDs and earn interest rate. And so what the Bank of Japan has been doing is they've been printing what, yen with one hand, and then they've been selling dollar assets and buying yen with the other to try to defend Two interventions. They did one on Friday as the yen hit one sixty, right after, Ueda's Bank of Japan meeting, and then they did another just on, on Wednesday night, trying to bring it down to one fifty-three. And so they've been able to bring it down, but it's cost them about, you know, fifty or sixty billion dollars. And again, this is what I think is, this is indicative of, of, you know, the trap that all central banks are, are facing. It's just that Japan is ahead of the curve. They're They've gone the farthest" }, { "speaker": "jpy_peruvian_bull", "time": "10:09", "start": 609.18, "text": "in this debt black hole. Fascinating. And I think this is something people have been commenting on many of these trends and practices for decades, literally for decades. People have been talking about the carry trade, people have been talking about, let's say, the Japanification of, the rest of the world, and so in, let's say, macro circles, they've been talking about this as kind of like, \"Look at what's happening in Japan, that's gonna be sort of...\" That's, you're looking- Seeing the future for other countries in some ways, and so it's kind of, it's sad, but it's also instructive in certain ways of what is gonna happen to the rest of the world, as this happens, right? And they are unique in certain ways, right? As you said, their government debt, debt to GDP, two hundred and sixty percent or in that range, which is just like off the charts level compared to every other country. And people have already offered different answers on why it is they can do that, right? They say, \"Oh, they're culturally monogamous,\" or, \"Sorry, culturally, what's the word? Like similar and yeah, yeah, homogenous, sorry, yeah.\" And therefore, you know, there's more, quote unquote, willingness of the Japanese people to sacrifice, you know, so, so to speak, right? Like, this idea that they're okay to just let their currency keep devaluing over time to sort of have this very stagnating zombie company economy, which sort of- Sort of paradoxically still makes technology and cars and things, but at the same time, there's clearly been a social and cultural impact in the J- in the Japanese society, like their fertility rate is very low, you're hearing about all these people who have, you know, Crisis in various mental health aspects of it or people just feel like their lives aren't worth living. Maybe part of that is financial, right? Is, is they're getting crushed so much. but I mean, let's bring it back to what you were saying. So we've got this concept of- They're, they're trying to sort of hold the pieces together, right? And, you know, people talk about this idea of the, the impossible trinity. I know that's something you've mentioned as well. So could you just, for listeners who aren't as familiar, can you explain the impossible trinity and then how these pieces fit in here?" }, { "speaker": "stephan", "time": "12:25", "start": 744.53, "text": "Yeah, sure. So, you know, basically every currency on a macro, on the macro side, is, is subject to the policy trilema, or, you know, they call impossible trinity or the currency trilema, and what it involves is a triangle, just kinda like the blockchain trilema with three sides, three corners, and you can only pick one side, meaning two corners. And so the corners are, It means your central bank can raise and lower interest rates at will, you can, ease and tighten at will, you do what you want, you don't really care what happens with the rest of the world. The next corner is a pegged exchange rate or a fixed exchange rate, which means you can keep that, you know, keep your rate fixed to mainly the US dollar or some other large fiat currency. and then the third is, is an open capital account, which means, your economy's open to flows of money in and out, and you can only pick two. And so, you know, China has also dealt with this as well, right? Like- If you have a pegged exchange rate and you have independent moneta- monetary autonomy, which means you can do what you want in your country, that means you have to close your borders to capital flows, because if you're doing something that isn't in line with what the rest of the world is doing, then money would logically leave your country, and so you have to stop that by closing your capital account. And, if you wanna have, if you wanna have a pegged exchange rate in an open capital account, which means you're basically letting money flow in and out, but you're still trying to keep that, you know, that rate pegged to the dollar, then that means you have to give up monetary autonomy, which basically means you're gonna be a vassal of the Fed. So whatever the Fed does, you copy. If they ease, you ease. It doesn't matter if your economy's already overheating and inflation's already picking up, you have to, you have to Right? You wanna keep everything even. So Japan is at a weird juncture, right? Because what they're trying to do is they're trying to stand on all three legs of this at the same time. They wanna have their independent monetary autonomy, and actually they have to have that, that's a required corner, because like I said, at two hundred and sixty-three percent debt to GDP, they're past the event horizon of the monetary black hole. There's no, there's no normalization possible with the Fed, and so they have to keep rates low, and, and maybe they can, you know Rates and famously they raised their, basically their equivalent of the federal funds rate to zero point one percent, tenth of one percent, which is tiny, you know, it's nothing, but that's, that was, was big news in Japan. so they need to, they need to maintain monetary autonomy, and then they also need to maintain the open, open capital account because they're an e- they're an export nation and they're a large international creditor, and so they need to be able to access international capital flows to buy and sell goods and to invest. And so they can The rest of the world. And so that means that they have to give up that pegged exchange rate, that's the, the corner that they lose, and they've been trying to hold that line by selling their, their US assets, their US treasuries, and they sold, you know, what was it, eighty billion between September and October of twenty twenty-two, held the line there, and then Powell and Yellen kind of came in and helped them by starting to add liquidity to the system, not by the traditional, measures, but using reverse repo and the TGA and some some other ways of adding liquidity, the BTFP later in, in March of twenty twenty-three. but they've been able to kick the can, right? but now this month it's catching up with them again, and so they're, they're faced with this problem of, what do they do, right? Do they sell their US assets and basically fire sale a trillion dollars plus of US treasuries, which would drive yields up in the US and make things worse for us? trying to save their currency, or do they just let it blow out? And, you know, so far they've been, they've been trying to just nuke any shorts. They've been doing a quick attack, nuking the price down, waiting a couple days, it comes back up, they nuke it again from, you know, one fifty-five to one fifty-three, waste twenty billion dollars doing that, and they can do that, but they only have so many bullets left. Right. Yeah. So, so to clarify," }, { "speaker": "jpy_peruvian_bull", "time": "16:28", "start": 988.38, "text": "yeah, yeah. Go ahead. Yeah. So as you're saying, it's, it, in order for them, as you're saying, this is impossible tril- you know, trilemma, right? And In order for them to try to keep the currency in a certain range, it necessitates that the Japanese central bank has a certain level of foreign currency reserves or US Treasury bonds, and it has to engage in the market and actually sell some of those and try to take some action. But as you're saying with the, the comment about how many bulls they've got, there's only-- they can only do that for so long. And so I guess that's, that's the point where you're, you're, I guess you're getting at, which is that, You know, they, they may not have that many rounds left in the chamber." }, { "speaker": "stephan", "time": "17:15", "start": 1034.75, "text": "Yeah, and look, if they like, I've been, I ta- I had a really good Twitter Spaces on this just two days ago, and we were talking about it with, Weston Nakamura, who runs a, a great macro, newsletter on, specifically on the, on the Japanese, and he was saying, \"Look at current numbers, especially if they can't touch their treasury holdings, which is likely because Yellen, is probably on the phone with them telling" }, { "speaker": "stephan", "time": "17:39", "start": 1059.44, "text": "Military bases in your country, you can't fire sell a trillion dollars of Treasuries and, you know, whatever they have another, you know, seven or eight trillion dollars of other US assets, you can't sell that to get dollars. We're, we're not gonna let you do that 'cause that would cause immediate, you know- Financial chaos at home. And so if they can't sell their, their treasuries, they can only, they only have so much for other foreign currency reserves, mainly dollars, and that means they only have five bullets, five or six bullets left, depending on how big the interventions are. And, yeah. And this is, like I said, this is a, they're a bellwether for every other central bank. This is where every central bank is getting to eventually, where they have their currency blowing out, their, their rampant inflation, they can't raise rates to fight it, they Try to save their bond market, and so they're just trapped in an endless money printing doom loop." }, { "speaker": "jpy_peruvian_bull", "time": "18:30", "start": 1109.98, "text": "Yeah, that's really sad to see, and I think, as we were saying, Japan is in a, is in a very unique position because their government debt to GDP is so much higher than everybody else's. you could maybe argue that some other countries could maybe tolerate some higher interest rates, but just not Japan, because Even a small interest rate rise is gonna dramatically make things really difficult on the Japanese government being able to fund, yeah, services, right? that, that, you know, whether it's hospitals and education and roads and whatever, social and social services, so I guess the interesting question is also if you could sort of spell out a little bit of that interaction between the US market and, and the Japanese market, right? As you were saying, it's like if they sold too much of their US government bonds, that would have an impact back on the US. so I guess one thing in kind of the world of quote-unquote macro is that, sometimes- People can maybe overvalue or undervalue a particular factor, right? Like they might say, \"Well, this is the really important thing,\" but actually, that wasn't the most important thing. I'm curious, you know, why is this an important factor, like globally speaking?" }, { "speaker": "stephan", "time": "19:48", "start": 1187.72, "text": "Oh, I mean, this is a huge thing, right? Like, the, the, you know, Japan is one of the large-- They're a G7 country, they're one of the largest countries in the world. They're the largest net creditor to the world. They own one point one trillion of US treasuries. They own, you know, another six trillion dollars of US assets. And Japan is, you know, like we said, the canary in the coal mine. It, it, it kind of all goes back to, you know, again, not, not to get too esoteric in the history, but it goes back to Triffin's dilemma and the, the problem that emerges when you try to have a single currency, a centrally issued fiat currency that is the global reserve currency, which is what the US, you know, has had for the last, you know, sixty, seventy years, right? What Triffin noted in, in, in an address to Congress in, in 1960 was that, look, like the entire world needs dollars, and we can either fund those dollars, which means growing US current account deficits, we're basically sending out more dollars to the world on net than we receive, or we can choose to not fund that deficit, which means the rest of the world, you know, global trade starts to slow because there's not enough liquidity and there's not enough money to settle dollar debts abroad, and so there's basically would be a currency crisis and people redeeming their dollars for gold and caused the whole system to die. And so he predicted in 1960 that Bretton Woods system would collapse, and of course, he was right. And we just switched from, you know, having gold be the underpinning of the US financial system to the US Treasury. And so now instead of- Exporting, you know, gold essentially, right? We're exporting dollars and having people redeem them for gold. What we began doing in the '70s was having us export dollars and having them, having people recycle those dollars back into US treasuries. And that's been playing on for decades, and it's gone to the point now where the rest of the world owns over seven trillion dollars in US treasuries, and they own something like fifty-two trillion dollars of US assets. So that's equities, mortgage-backed securities, houses, you know, real estate, housing, commercial, you know, other forms of, of, you know, commercial debt, ETFs. And so basically, the rest of the world has a bunch of US asset holdings, and if they need dollars more than anything, they have to- to sell those holdings, which can cause a massive recession of, obviously deflationary crash in the US. Now, I'm not saying it's gonna happen, I'm just saying that that's a risk." }, { "speaker": "jpy_peruvian_bull", "time": "22:12", "start": 1331.67, "text": "Yeah, I think" }, { "speaker": "stephan", "time": "22:13", "start": 1332.99, "text": "The US, of course, Japan being, you know, the bellwether of this, the, Japan being the front, the frontrunner, the US has to make sure that Japan doesn't sell their US treasuries, doesn't sell their US assets in order to get dollars. And so the US is kind of faced with the problem is, do we let Japan just, you know, Tokyo drift into a currency crisis and just have their inflation blow out and, and have a, a basically a, an economic crisis? Or Should we, you know, open up a swap line and just print dollars and send them money? And if we do that, that's bas- that's, that's gonna eventually be inflationary for the US, 'cause we're just creating more dollars to pump into the system. And so what my work is trying to do is say, like, \"Hey, look, like, Japan is the canary in the coal mine, and if Japan's having this crisis, right? Eventually, China can have a similar crisis, and eventually, you know, Indonesia, and if they all need dollars more than anything And that means more QE, and that means of course, Bitcoin goes higher. I mean, this is just the next stage in what I call the dollar endgame and the slow death of the fiat monetary system." }, { "speaker": "jpy_peruvian_bull", "time": "23:19", "start": 1399.3, "text": "Yeah, fascinating. And what would you make of this idea or how would you explain this idea? A lot of people are talking about the multipolarity of the world, right? They're, they're trying to say, yes, the US dollar is still the reserve currency for now, but it's waning, right? I can't remember the exact stat, but people were saying it's something like, in terms of, the percentage of US, treasury reserves, it's gone, over the course of like twenty years or so, it's gone from like seventy-two percent down to like fifty Eight percent, something like that. I don't know the exact numbers, but I think that, that, that's kind of the point people would make, is that, oh, okay, it's slowly already waning, we're already moving into this kind of multipolar world, that it's not just gonna happen like this, but it's just gonna be like a slow waning factor. What's your take on that? Do you agree or disagree or how would you explain that?" }, { "speaker": "stephan", "time": "24:09", "start": 1449.46, "text": "Oh yeah, no, I completely agree, right? I mean, who wants to own the long bond when the Fed's hiking rates and inflation is still high and you're losing money in real terms? Like, it makes no sense. I mean, TLT, the main, you know, bond, long-term bond ETF, is down 50% in three years. And so if you hold long-term bonds, you got screwed. And so imagine you're the Treasury Secretary of a, of a third world country, you bought a bunch of US bonds, and now you're down 50%. Or forty-five percent on those investments, you don't wanna do that, you don't wanna hold that. and the US dollar, you know, everyone said and everyone knows long term, no single fiat currency can exist as the global reserve currency forever. You can't, because of what we talked about, Triffin's dilemma, like you, the, the, the centrally issued fiat currency has to issue more and more currency to the rest of the world as it grows, and that means that it itself gets buried deeper and deeper in debt and until it has a, a sovereign debt crisis and won't- As the sovereign debt crisis has to print its way out and then inflation roars and then that currency loses value and no one wants to hold it as a reserve currency anymore. And so that can start in stages, right? So we can see that first happening with the long bonds and, and China, for example, reducing its US Treasury holdings of long bonds. and the Treasury, I mean, last October, had an announcement and they reduced the pace of issuance of their twenty and thirty-year bonds and increased their two and five and seven-year, notes. And so, you know, the Treasury itself is saying like, \"We don't have enough, there's-- nobody wants to buy these long bonds anymore, we have to switch to more bill issuance and more short-term issuance.\" And a, a shocking stat is that in the first quarter of this year, seventy-one percent of the Treasury's funding was from T-bills, so one year duration or less. so we're essentially slowly becoming a, a banana republic because nobody wants these long bonds. But eventually, what I've been saying is that, right? Like- This problem gets so bad that people will start looking for a new global reserve currency, and I believe that Bitcoin is, is the front runner in that game, because it's just a, a better version of gold." }, { "speaker": "jpy_peruvian_bull", "time": "26:17", "start": 1576.91, "text": "Back to the show in a moment. CoinKite dot com are my favorite providers of Bitcoin hardware security products. 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Oh, the US ten-year bond is the risk-free rate, and, you, you should hold it, and, you know, they propagandize everybody. Everyone's kind of been psyopted into believing that's the way. And, you know, I, I wonder how much work was put into, making everyone believe that sixty forty stocks and bonds, you know, sixty percent stocks and forty percent bonds is kind of a good allocation that You tell your clients, \"This is the way,\" and, you know, people would sort of craft these explanations. Oh, okay, look, the idea is that stocks and bonds, one should zig, the other should zag, so that way if you have sixty forty stocks and bonds, if your stocks goes down, maybe your bonds will kind of either stay or go up, and that's why you'll be, you know, you'll be okay. How much of that is truth? How much of that is propaganda? Or was it maybe historically true, like for a time period, and now it's no longer true?" }, { "speaker": "stephan", "time": "30:36", "start": 1836.16, "text": "That's exactly right. So since the Volcker Shock in nineteen eighty-one, it has been true, right? Because we've had, for forty years, we've had, declining real interest rates until this recent, you know, hiking cycle, and we had a, a forty-year bull market in stocks. And so you could own both, bonds and stocks, and they would both do well, and your portfolio would perform, and generally Like, you know, bonds and stocks were inversely correlated where when there was a crisis, they would, you know, bonds would be bid because everyone goes to safety and stocks would fall like in two thousand and eight or in twenty twenty, for example. But now that's changing. Now there's a structural bid for equities because equities aren't indexed as, as hard to future, you know, fixed cash flows, and there's been a loss of, of, of bond, of bond demand And again, we can see that, there's pl- plenty of ways we can see that. We can see that with the twenty and thirty year bonds, with the, with their price, we can see that with, the Treasury itself, you know, issuing more and more short term bonds because they just can't sell enough of the long bonds to, to justify it. We also see, and I, I actually did a piece about this, called \"Stealth QE\". Where I looked at the Fed's balance sheet and I broke it down by maturity and week over week changes. And something that shocked me is, you know, we've been doing this taper for about almost two years now, right? And they actually haven't been selling any of their long bonds. They've been buying twenty and thirty year bonds, and they've been compensating by selling more- Yeah, keep going. Yeah, they've been selling more of the, you know, all, all, they're laying off all the short term bills. And so basically, there's no-- like, again, the bond market is dying a slow death. This is similar to what happened to the Bank of Japan, where the, the Fed just has to slowly eat, or the central bank has to slowly eat, first the long bonds, then you move to shorter and shorter maturities as people's, you know, desire for this debt. Falls off a cliff. and so, yeah, it's, it's an interesting dynamic because, like I said, Japan is just at the forefront of this, and I think that this is coming for the Fed, I think this is coming for the ECB, I think this is coming for the, the BOE, you know, the, the PBOC, the Bank of China, like all of these central banks are gonna eventually face this because they're all, their governments are all stuck in a, in a, in a debt interest doom loop, and the only way out really" }, { "speaker": "jpy_peruvian_bull", "time": "33:04", "start": 1984.08, "text": "Yeah, and so related to that, there's this concept known as financial repression, right? This idea that what they'll do is give you an interest rate that is lower than the real inflation rate, meaning You're kind of a bagholder, right? Like they want lots of bagholders, and they're just kind of debasing the bagholders. So if you're holding US Treasuries or US dollar fiat cash and coins, you're just getting debased. And so I guess the- Let's say the powers that be that wanna try to sort of keep the system stable, they want you to believe that the US Treasury is such a great asset, we should all hold it, or you should hold it, plebs, you know, hold this thing, and we can keep printing more of it and dump our bags onto you, and in this way- You know, quote unquote, their reasoning is to sort of inflate away that debt, to kind of lower the real, pu-- you know, purchasing power amount of that debt to try to sort of eke it out and try to keep the, keep, keep the party going. That's, that's how I'm seeing it. What, what do you see? Do you agree or disagree or how are you seeing it?" }, { "speaker": "stephan", "time": "34:12", "start": 2052.24, "text": "Oh, absolutely. I mean, the, they've, for example, the CPI, I actually did a, I did a piece doing a little bit of research into the CPI and unemployment, which by the way, unemployment is a complete sham. Like their unemployment numbers are turning into hot garbage. I mean, they've all-- the government stats have always been, been faulty, but just recently they've, they've gone off a cliff. there were, unemployment, like Jim Bianco pointed this on Twitter, in, on March 31st, the last- The last six, the previous six weeks of unemployment filings numbers were all two hundred and twelve thousand exactly. Or no, five out of the six were two hundred and twelve thousand exactly. And so he said, like, \"Imagine this, like an economy of this size, how can we have the exact same number reported for five out of six weeks? Like, that's statistically impossible. It's like a six sigma event. Like, that-- just, just people not being able to log in their computer would throw it off by a thousand, and they round to the nearest thousand. And so he's like, \"How are we getting the same unemployment filing numbers for five weeks in a row? It's, it's just not possible.\" And, and with the CPI, you know, they've changed the calculation thirty times in the last twenty years. there's a, there's a research paper, actually done by, I think it's the National Bureau of Economic Research, NBER, and they document, and you can see like, here, okay, they changed the calculation of used car prices, and now if a used car gets, you know, gets cleaned We're gonna lower the value, we're gonna, we're gonna increase, quote unquote, the value of the car, which would lower the price, and so that will help the CPI. And we're gonna-- Oh, there's a recession. So, you know, hey, we're gonna change the CPI. So if there's a recession, you know, people aren't gonna buy bacon and eggs. We're just gonna change the weighting for breakfast items to cereal and milk, and so it's cheaper, and so then the inflation number doesn't go up as much. So I think realized inflation, Still around five, that seems about right. at the peak it was probably around sixteen or seventeen according to Shadow Stats. and they've, they have interest rates right at five percent. And so if that's the case, then they're, they're already doing financial re-repression right now. And when the next wave of inflation comes, they'll do the same, because the, you know, the Fed itself can't really raise rates much farther above where they are right now. We're at five and a quarter. On the Fed funds, and most of the yield curve is around there or in the high fours. And if inflation rises, they're faced with this dilemma of, do we raise rates? And if they do, they run into the issue of the, the debt doom loop, right? Last year, they paid more than a trillion dollars in interest expense. This year, they're slated to pay one point five trillion. They added one trillion, they're gonna add this year one trillion of debt every hundred days, according to Zero Hedge. You know, they've already added like You know, seven hundred, eight hundred billion, as of, as of mid-March, and so they, they're trapped. They can't raise rates, they have to keep them where they are, and they can't also lower rates because that will just cause more inflation. They can't ease harder without more inflation. And so what their goal is, is to slowly drain you of your wealth over time if you're not holding the proper assets, right? They're just gonna say, \"Hey, inflation's gonna be seven percent, we'll hold them at five, we'll hold them" }, { "speaker": "stephan", "time": "37:35", "start": 2254.61, "text": "You know what? If we lower rates to one, it'll get even worse 'cause inflation will go to six, seven, eight, and real lives will probably be at twelve, and we'll hold the rate at one or zero, and you'll just make no money, and you'll just-- we're gonna debase this thing out from under you because we can't pay the debt in real terms." }, { "speaker": "jpy_peruvian_bull", "time": "37:52", "start": 2272.41, "text": "So are the people going to just keep buying it? I guess that's the big question as well, right? Because what the everyday people do matters, right? Like if there's this, just this kind of default flow into buying government bonds and maybe equities, like that's a typical thing people are doing, like they're just kind of stacking. 'Cause obviously everyday average people, they're not quite at the point like you and I where we're stacking Sats and we're hodling on our, you know, self custody. The average person, if they are a saver You know, they might have a few buckets they put things into first, any default excess kind of go, would generally go into their stock portfolio, maybe bonds, and maybe, maybe they take a small amount and they're gambling on, you know, meme, meme coins and shit coins or whatever, whatever other speculative things. But generally speaking, they're kind of flowing that money into, you know, the S&P 500 or something like that and bonds. So H-how long until that, you know, starts to shift in your view, or do you have a view?" }, { "speaker": "stephan", "time": "38:52", "start": 2332.29, "text": "I do have a view. So, you know, I know this isn't a macro podcast. Again, I've listened to a ton of your, ton of your shows. I know it's mostly like tech-- very technical Bitcoin, like lightning channels and payments and nodes and stuff. So, again, this might be like- Come a little out of the wheelhouse, but it, it, the, what the process you're exactly talking about is already happening. On March 7th of this year, the I-IZDA, which is the International Securities, and Derivatives Association, which is essentially all the large banks, sent a letter to the Fed and the OCC and the CFTC. Asking them for what is called a permanent SLR exemption. And the SLR is the supplementary leverage ratio, so that's basically like the amount of capital they have to hold against an asset in case the asset loses value. And so if, you know, for Treasury bonds it might be ten percent, for mortgage-backed securities might be fifteen, and then for something riskier like an equity might be thirty, right? Just in case it loses value, they have capital set aside to make sure the bank's not insolvent. And, back in March twenty twenty, the Fed had exempted all the banks from the SLR because what happened is, you know, they said, \"Look, there's a giant fire sale of US Treasury bonds happening in the market. The, the market became disorderly. The Fed, the Fed And they also bought corporate bond ETFs for the first time in history, which isn't well reported. but even with that, they knew that the coming wave of, of debt issuance from the US government was just gonna be so huge, they're like, we can't absorb all this ourselves. We're gonna exempt the banks from the SLR, we're gonna exempt treasury bonds from the SLR, which means you have to hold zero capital against your bonds that you buy. So that means you can basically buy the bonds, you don't have to hold any money against them, whatever happens with them," }, { "speaker": "stephan", "time": "40:38", "start": 2437.96, "text": "Going underwater, and you just hold them to maturity, which is the goal of every bank, right? And so they exempted them for a year, and so during the COVID, the COVID debt bonanza, they let all these banks swallow up a shit ton of treasury debt, and then they ended the exemption, and now, you know Another year, year and a half, two years later, the banks are coming back and asking for it. Without a, without a traditional financial crisis, without COVID, without a sh- you know, economy-wide shutdown. And the reason why they're asking for it is because the dealers can't find enough demand. Extr-- you know, in the market, that they're, they're taking this treasury debt, which they're getting loaded with because the treasury's just starting to, you know, vomit out debt as, you know, faster than they can even purchase it, and then they're turning around and there's not enough buyers. Retail is tapped out. We're almost out of, we've almost run out of all the, pandemic savings. reverse repo is being drawn down, which is another-- it's a window that allows people to post, Cash to, to the Fed, or yeah, post, Treasury bonds to the Fed and then get cash and get, get interest rates on it, right? So there's just not-- That's, that, that cash is being drained and being used by Treasury bonds, and so they're not-- There's not enough demand now, and so the banks themselves are saying, \"Hey, look, like, if you wanna have maintain an orderly Treasury market, you need to exempt us and allow us to buy bonds with...\" Essentially an infinite leverage, right, with zero percent capital reserves, because that's the only way this is gonna work. And what the banks want, the banks usually get. And so what's likely gonna happen is the Fed is gonna have to approve of this, and within a month or two, they're gonna have to start-- The banks themselves are gonna start swallowing more and more of the treasury debt. And again, this means that basically you hold your money in a bank, your bank is be-- is increasingly becoming an appendage of the US Treasury. It's just gonna- You know, the, the Fed, the Fed is essentially saying, \"Hey, look, like, we can't take all this issuance. All the ba- all the commercial banks, all the investment banks, you guys just swallow this stuff. You know, let your depositors be on the hook for it.\" And if you fail, we'll bail you out, and use printed money to do that. So it's just a roundabout way of doing more QE." }, { "speaker": "jpy_peruvian_bull", "time": "42:55", "start": 2575.44, "text": "Yeah. Wow, that's interesting because it's, it's a-- There's different ways to think about that. You can see it as kind of a quasi-nationalization or kind of a, a, a quasi-forced huddle, right? They're kind of forcing- Everyday banks to huddle the, the US government, debt bags. And so these are some of the different ways in which, we could analyze that. And so I guess One other question people might have is, you know, they might have heard that, hey, there's central banks around the world that are buying lots of gold. what do you make of that?" }, { "speaker": "stephan", "time": "43:35", "start": 2614.9, "text": "Well, this is exactly the, you know, the, the trend I've been talking about, right? Like these governments are saying, \"Hey, we don't wanna own US debt. Like this is, the US is in a, is in a trap just like Japan.\" They're, they're in a, in a debt trap, and so they can't get out without printing money, and the long bonds especially are gonna get killed. And so we need to sell this and get something that's gonna hold value better. And central banks are obviously, you know, very captured institutions, they're the epitome of one, and so they can't, they don't have the, you know, for-- foresight to turn to Bitcoin, and so they're buying the next best thing, which is gold, right? So they're saying, hey, look, Hold something that's a neutral reserve asset that is, has no counterparty risk that we can hold on our own books and not worry about, you know, it losing fifty percent of its value just because the Fed has to hike. So, that's that trend of, you know, de-dollarization, and, and it happens slowly, it happens over time, but the first way it starts is the US Treasury itself, the, the, our long bonds and then our short bonds losing global reserve status. And this is really bearish for the US as well. Again, like most people don't realize" }, { "speaker": "stephan", "time": "44:47", "start": 2686.54, "text": "Buyers of Treasury debt, right? They bought seven and a half trillion dollars over the past twenty years of US Treasury bonds. In, in two thousand eight, China itself, in, in about a, a year and a half timeframe, they bought seventy one percent, or no, foreigners, sorry, not all, just China, China bought like forty percent, but all foreigners bought seventy one percent of all Treasury debt issued from two thousand eight to two thousand ten. So they funded our, our, our deficit spending, and now they're saying, \"No, we don't wanna do that.\" And, you You know what I've said to Marty as well, like, you know, what happens if these foreign finance ministers actually start to grow a brain, a couple of brain cells, and say, \"Hey, like, instead of having our central bank issue currency and buy bonds with it, and it's just gonna go down, why don't we just use Bitcoin as, as a reserve asset? Why don't we put it on our balance sheet? Why don't we start trading with other countries in Bitcoin and settling in Bitcoin, and then we don't have to worry about this issue of, you know, the debt And that could be, you know, that would change everything for Bitcoin, I think. Nation state level geopolitical acquire, you know, acquisition of large chunks of, of Bitcoin" }, { "speaker": "jpy_peruvian_bull", "time": "45:54", "start": 2753.86, "text": "Yeah, and so there's a lot of talk about things like quantitative easing, right? And that's, that was, you know, from the kind of the years post two thousand and eight, there was a lot of QE, QE, but there's also this concept of Qualitative easing, right? There's this concept that you can be, you as a, whether you as a bank or as a central bank, can start selling out your, your good assets and buying worse assets, and you can think of it like when those banks were forced to hold, or when the central banks were forced to hold these, you know, the toxic, assets, that was like a qualitative easing in a way. So I guess you're, you're sort of pointing it out in that way that they're thinking more clearly about the quality of the assets that they hold. And in that way, you know, each of these central banks is out there trying, right, failing, not, except, unless they're buying Bitcoin, without, without saying it, they're trying to find some other higher quality thing to hold. Now, of course, you and I and listeners of this show all, all know kind of the lo-the end answer, which is Bitcoin is the highest quality thing to hold, and so it's kind of just interesting to, to see that, and what we've also seen is just that every time some kind of crisis happens New program, right? It's QE one, QE two, QE three. The recent, well, twenty twenty-three, there was the whole BTFP. You know, there's always some new program. They find some new way to sort of kick the can to try to play this financial repression game and sort of keep the party rolling, and so I guess that's, that's kind of where it's at. So if you have any ideas on kind of what- Programs or what ideas, or would you say it's mainly just that Bank One, the, in terms of the SLR, aspect? Do you would say that's kind of the main program that they're applying now?" }, { "speaker": "stephan", "time": "47:38", "start": 2857.81, "text": "That's the big one, right? And again, like I, I, I've said this before, like a lot of people said, \"Well, why now? Like, why, why do they need to request a, an SLR exemption? Why, why do they need more leverage? You know, why do they need to get rid of all reserves against holding treasuries?\" And I say, \"Look, there is a crisis, and it's the debt, and that's a big enough crisis now that it's actually forcing them to change this.\" And so the SLR is a huge part" }, { "speaker": "stephan", "time": "48:07", "start": 2886.57, "text": "Easing on paper, right? So, I mean, for one, we, we just had an FOMC meeting this week, and Powell slowed the pace of the taper, in Treasury securities from sixty billion a month to twenty-five billion a month, and agency securities, I believe, is at, you know, twenty billion a month as well. And so they've halved the pace of the taper, and on the other hand, they also, like I said, they're not selling any long bonds, they're actually buying the long bonds, and they're only selling T-bills" }, { "speaker": "stephan", "time": "48:37", "start": 2916.53, "text": "And they're also participating for the first time in twenty years in treasury buybacks. So they're buying back their own bonds, with excess money in the TGA because there's certain issuances that are just so illiquid that nobody wants to own. And so we're running into this issue where, you know, they're, they're having to come up with newer and newer and newer novel ways to add liquidity to the system secretly without adding liquidity. And the reason why, like for example, with the long bonds, the reason why that's net additive to this, like in terms of liquidity to the system, is because banks are required to hold, like, again, under the current regulatory framework, right, like they're required to hold reserves against a bond, and the long- The longer the duration of the bond, the more sensitive it is to interest rates, and so that means they have to hold more capital against that bond in case the bond loses its value. And so if they hold long bonds, then they have to hold a ton of capital away, short away on the balance sheet as reserves in case the long bonds go down, and the long bonds are very sensitive, so they can't go down a lot. And so by switching the issuance to short term and by the, you know, the, the Fed itself taking the long bonds off the balance sheet, the Treasury issuing fewer long bonds, that allows more liquidity to flood back into the system and keep the stock market and the illusion of, of, of growth going And so that's, that's what they're doing now, but I'm sure, I mean, exactly what you said, like, it's funny, all, all, all the Fed watchers tell you the same thing, right? They're just like, \"Hey, you know, the- The Fed's mandate is, they have a dual mandate, man. Like they have unemployment, they have inflation. That's what they're worried about. No, they're worried about sys-sys- systemic stability more than anything. They don't give a-- They, they could give a rat's ass about inflation as long as they can hold their credibility in line and as long as they can keep the financial system running. And so when-- whenever there's a crisis, they're just gonna find new and novel ways to create money and to put into the system without calling it, you know, printing money" }, { "speaker": "stephan", "time": "50:36", "start": 3036.14, "text": "I don't know what it'll be, but like I said, we, we already have several things are doing the Treasury buyback program, the SLR, the Fed quasi-taper, that's kind of not really a taper, and I'm sure they'll come up with more." }, { "speaker": "jpy_peruvian_bull", "time": "50:49", "start": 3049.37, "text": "Back to the show in a moment. Swann dot com is the leading place to buy Bitcoin, and the Swann team has a mission to onboard millions of people into Bitcoin. Now, the team have been working really hard to update the Swann Bitcoin app, which you can find on the Apple App Store or the Google Play Store. So, the team have created a really slick and smooth experience, so now you can go from zero to Bitcoin in just a few minutes. So, if you have family and friends who you are struggling to get them onboarded, well, Swan Bitcoin application is a great way for you to help them. You can be standing there right there with them, and in just a few minutes, they can have been onboarded and be buying Bitcoin. And Swan are making it really easy to do this because now there's zero fees on the first ten thousand dollars of Bitcoin buys that you do, and it's not just for new customers, it's also for existing customers. So remember to tell your friends and family to go to the app store and search Swan Bitcoin. Bitcoin, install the app and get started with Bitcoin with Swan Bitcoin. And now back to the show. Fascinating. And so, yeah, it just kind of all-- But at the, at the end of the day, none of us really knows the timing, right? And there are people who are saying, \"Well, are we gonna have a recession this year?\" Or, u-, etcetera. And people are kind of, going back and forth on that idea as well, because they, they were talking about this, you know, the, the yield curve inversion, and that" }, { "speaker": "jpy_peruvian_bull", "time": "52:19", "start": 3138.93, "text": "There's different ways that they try to mask that, right? And so Biden and his administration is out here saying, \"Oh, look, it's such a great economy, and you, you know, you guys just don't see how good it is.\" And then actually you look at, you, you hear, you see all these stories of people who are struggling and they can't make ends meet, and it feels like, you know, they're so much worse off than they were in two thousand and nineteen or something like this. So, so, Yeah, do you have any view on the whole recession question?" }, { "speaker": "stephan", "time": "52:47", "start": 3167.32, "text": "Yeah, that's a, that's a good point. so I believe, okay, first of all, I'll, I'll caveat this w-with, this first opening statement. I, I wrote this, and one of my, my most, like, I guess, one of my most viral pieces was called \"Financial Gravity,\" where I talked about, you know, what the Fed did post 2008, how it hurt the real economy, how they propped up the financial economy and just made asset prices go" }, { "speaker": "stephan", "time": "53:14", "start": 3193.68, "text": "1970 definition, the, the NBER's definition, National Bureau of Economic Research, technically after 2008 we were in depression because we were underperforming GDP potential for more than two years, for more than eight quarters, and so we were technically in a depression, but the Fed didn't call it depression, they changed the definition to just call it a, a recession or a, a great recession, right? and, you know, post 2020, it's kind of been a replay of the same thing, where the stats, the underlying stats of the real economy aren't looking good, but the Fed is able to tape to, to, the Fed and the BLS and the other government agencies that report statistics are able to paper it over by creating a rising stock market and then kind of fudging all the jobs numbers to make things look better than they actually are. I mean, for example- On that recent piece I did diving into the jobs numbers, you know, not only was there that weird anomaly where there's five weeks in a row of the exact same payroll number that usually fluctuates by twenty thousand or thirty thousand, you know, or not payroll, sorry, unemployment filings, but that usually fluctuates by twenty or thirty K and it's the exact same number for five weeks in a row, but Their employment statistics are severely broken. So they, they, they can change what they consider to be unemployed and what they consider to be in the labor force. And so if you haven't looked for work in more than twelve months, they can take you out of the labor force bucket, and that means you're not seeking employment, yeah. You're not seeking unemployment or seeking employment, and so the, the bucket shrinks. And so even though there might be, you know, a change in the actual number of unemployed, the rate can go down Because the entire bucket is shrinking, right? You're going from, like, let's say, a hundred million people in the labor force to ninety-five. And, there's a guy named Daniel, Amin, Amin or something like this, who did a research piece on this in twenty twelve and showed, like, he's like, \"Look, the government removed in six months one point one million people from the workforce, and in-- because of that, the, the employment numbers look decent, looks like employment, unemployment's been falling, but in reality, it's not Or even the, the broadest definition of unemployment, which just takes the whole, you know, basically everybody except for people who are severely disabled or, you know, hospitalized. Post-great, post-great recession, we were north of fifteen percent unemployment. We were ranging between fifteen and nineteen percent. And I think that that's more accurate. Like most, a lot of young people I know don't have jobs or find it difficult to find a full time job. And in the past two years, the only reason the employment number has even been anything sort of, you know, anything remotely good, is because part time workers have been increasing. So we've, we've had a drop of, you know, several hundred thousand in full time, up to a million, we don't really know because the BLS numbers are so bad. I mean, again, like last November, the, the New York Post He's saying, \"Hey, the BLS overestimated, jobs numbers by four hundred and ninety thousand during this year, which is like half of the growth, quote unquote growth that we saw. And even the New York Fed, or the, no, it's the Philly Fed, they have an algorithm, and their algorithm, you know, crunched the jobs numbers and said, \"Hey, you overcounted. In twenty twenty-three, you overcounted it by, one point one million people. There's one point one million people less employed than you said beca- you know, based on the statistics you showed me. It, you know, it doesn't make sense.\" And so- I think that their numbers are kind of scammy, and I think if you look at the real economy, you know, you see this all over the place, the amount of homeless arising, drug addicts, you know, depression, anxiety, all these mental health disorders are increasing. And just anecdotally, I know people that just you can't find a full-time job, everyone just can get part-time work. I can get a part-time finance, you know, analyst job or I can do a part-time contracting for software, like it's, they're laying off a bunch of full-time people and Yeah, I think, I think we're in a recession. You know, if we're not in a recession right now, we're probably slowly entering one. The last GDP print for Q1 was one point six percent, which was fifty percent miss to the downside. and that was with the government adding jobs, right? Like, I mean, there's a stat, like, this is crazy, but like last September, we had a, you know, a, jobs payroll number of something like two hundred and thirty K, and over half of that was government jobs or connected to government, So it's like, are we really seeing growth or is it just the government deficit spending is exploding and that's creating jobs growth because the government's hiring people to do their programs and, and that's what's quote unquote propping up the economy? But again, we know this from Austrian economics, this can't, this can't last forever, right? The private sector needs to grow. They're stuck in a, they're stuck in a conundrum, they're stuck in a, in a rock and a hard place. There's, there's not really any way out other than them just letting this thing slowly deflate and letting the currency slowly die." }, { "speaker": "jpy_peruvian_bull", "time": "58:10", "start": 3490.21, "text": "Yeah, sad to see. as you said, the government can quote-unquote prop up the numbers and people were, I guess, recently pointing out, \"Oh, look, see, the US government, US, sorry, US GDP recently rose above European GDP,\" and it's sort of like, \"Yeah, but...\" What, I wonder what these numbers would look like if you factored out the government spending. Now, to be clear, I'm sure the EU has a ton of government spending too, but, it's kind of, people talk about GDP like it represents some real thing, but there are actually a lot of Austrian critiques of the GDP, number because, yeah, because it can get manipulated in certain ways, and it only counts final outputs and not intermediary goods also. So that's like another, angle of critique. But, yeah, I guess, I mean, it all" }, { "speaker": "jpy_peruvian_bull", "time": "58:58", "start": 3538.34, "text": "So I'm curious if you have any thoughts on where things are going Bitcoin-wise?" }, { "speaker": "stephan", "time": "59:03", "start": 3542.62, "text": "Yeah, sure. No, I've, I've been, you know, massively bullish Bitcoin, like I said, since I started, you know, reading and actually understanding it. I was unfortunately fudged out of Bitcoin in twenty eighteen after reading a book, that was saying that the transaction speed's too low, so it, it can't work as global money. but once I read Nick Bata's book and Layered Money, I was like, \"Wow, this makes a lot of sense. To handle Visa, level transactions, it just needs to handle basically global, global reserve currency level transactions or Fed wire, which coincidentally is Actually, just about, you know, the throughput of Bitcoin, you know, five to six transac-- to seven transactions a second. And so Bitcoin can exist as the global reserve asset or the large transaction, money, and then we can use Lightning and other, other protocols as, as the second layer for, for microtransactions. And, you know, I wrote a piece, you know, Bitcoin solves Triffin's dilemma, and so I was kinda postulating what I talked to you about earlier, like what happens when these large, you know, nation state level actors, and we're talking like Russia, China, Japan, start deciding, hey, like our US foreign currency reserves are falling, our US Treasury bonds are falling, our own, we're having our own problem with inflation, what if we acquired Bitcoin on our balance sheet? What if we use that to settle international trade instead of using, you know, dollars? And And that would completely change everything, because it would speed, it, it, you know, speed up the death of the dollar itself. but it would also accelerate Bitcoin adoption massively. and we may not like nation state actors to, you know, getting their hands on, on Sats, but if they do, that would force-- it would create a flywheel effect, forcing more and more countries to come into the Bitcoin fold and to start, to start buying Bitcoin and then to encourage their, their citizens to use Bitcoin, and likely if they did that, they would have to make want to have, you know, a, as a nation state, they want to have earnings in Bitcoin so that they could fill up their treasury and use that to settle trade and so, or to use as, you know, currency reserves, and so that would speed up the death of basically every single fiat currency, but obviously, you know, foremost the US dollar, and the Bitcoin price that, in that case, could be huge, right? We're talking, you know- There's four hundred trillion dollars of global debt, there's around a hundred trillion dollars globally of central bank assets and global FX reserves, so if all that money flows into Bitcoin, you know, who knows where the price will go? but again, this is the long term thing. For the short term, you know, this cycle, we're- I would say it's been massively bullish, right? We're already above, we hit all-time, we, we beat all-time highs before the halving, and that's huge. And right after the halving is actually usually, I, I was looking at some charts yesterday, like the pool multiple usually It usually falls right after the halving. We usually see a pullback, so these next few weeks, I'm, I'm, you know, I don't expect that the price will move, you know, anywhere higher than where it's at right now. but I think again, like long term, as these institutional flows start moving into Bitcoin, and furthermore, as the Fed is e- reaching the end of their hiking cycle and we're, as we begin to cut and liquidity really comes back in earnest, you know, Bitcoin's gonna rip to the moon, like this thing is gonna And I've been encouraging all my family members to do the same, because I think, you know, Bitcoin solves so many of these problems globally, right? Like it's unfair that a single country can issue a reserve currency and profit from the work and labor of other countries. And that's what the US has been doing for the last thirty years. We've been issuing US Treasury debt, we've been issuing dollars, printing dollars. And those dollars go to buy goods that people work for, and then once those people work for those goods, they get those dollars, they recycle them into US treasuries, which further strengthens US dollar hegemony. And so the US has been the bully of the system for the last thirty, forty years, and it hasn't worked out well for anyone, and least of all, least of all us, right? Like we've offshored our manufacturing base, we've created a, a You know, I would say like a mental health epidemic, especially in the Midwest, where all the manufacturing jobs have left, and that, that doesn't need to be the case. Under a Bitcoin standard, every country will just compete purely based on their, you know, productivity and, and innovation levels. You don't need to worry about currency flows. No curre- no country will devalue itself to make itself more competitive and drive jobs to itself at the expense of other countries. and so globally, you know, Bitcoin solves, like, you know, it's that mean Like Bitcoin solves this, like, but truly, like, on the, on the macro side, globally, Bitcoin solves almost every dilemma. It solves Shifting's dilemma, you know, it solves the impossible trinity, it solves the import-export, you know, issues, current account deficits and surpluses, and, you know, loss of jobs from, bigger than neighbor policies of just devaluing your currency. It solves all of them. And so I'm really bullish for the future, I'm excited for what's happening and for, you know, the coming adoption." }, { "speaker": "stephan", "time": "01:04:16", "start": 3856.72, "text": "and I dealing with can finally be fixed and we can move on to a better world." }, { "speaker": "jpy_peruvian_bull", "time": "01:04:21", "start": 3861.65, "text": "Well, I think that's fantastic. I think, yeah, as you said, it's, it may be, let's say, given Bitcoin's current size of, let's say, one point one or one point two trillion in that range, it may be small for some of the larger governments to really be interested, at least for now, but that's it. I mean, there are governments already hold Bitcoin. In some cases, it's because of seizure, like the US government, you know, And, North Korea's rumored to have some. El Salvador is openly stacking Bitcoin. but I think maybe for this cycle, it's more about, you know, ETFs and, just everyday people buying, right? Whether that's at Swan or wherever else, like people just buying, you know, Bitcoin. So I think it'll just be a, a time thing, but, yeah, I, I think- In some ways, people can be really doomo and like, \"Oh no, it's all over.\" But on the other hand, you can sort of stack stats and look forward to something positive. So I think that's probably a great spot to finish up. Just before we, finish up, where can people find you online and, and we'll put them in the show notes?" }, { "speaker": "stephan", "time": "01:05:24", "start": 3924.18, "text": "Sure, yeah. So I have a Twitter which is at Peruvian underscore Bull. I have a Substack which is dollar endgame dot substack dot com. That's where I cover all, all the macro stuff. So I talk about what's happening in Japan, I talk about what's happening in China and the US and our debt crisis. I've had, like I said, some pieces on Bitcoin if you're interested in reading those. and I also have a Noster, Tweeted the link a couple times, but I'll probably just pin it in my, in my bio, on Twitter, and you can find that. And the notar is also linked on my Substack. And then I also have a YouTube, so I've been creating, slowly but surely, creating YouTube video versions of some of my pieces so that people can just like watch it instead of having to read a long, you know, twenty page like essay on, financial gravity and the Fed's dilemma. so that's, that's the best place to find me." }, { "speaker": "jpy_peruvian_bull", "time": "01:06:18", "start": 3978.48, "text": "the chart, make sure to share this episode and press like and give us a thumbs up if you enjoyed this episode. Thanks, and I'll see you in the citadels." } ] }