1
00:00:00,100 --> 00:00:01,966
welcome to money is freedom

2
00:00:02,033 --> 00:00:02,866
a podcast

3
00:00:02,866 --> 00:00:06,000
exploring how finance and freedom connect in our lives

4
00:00:07,000 --> 00:00:08,833
created from thoughtful research

5
00:00:08,833 --> 00:00:11,266
and narrated by notebook lmaai

6
00:00:11,400 --> 00:00:13,266
this series brings you clear

7
00:00:13,266 --> 00:00:15,966
meaningful insights into finance and beyond

8
00:00:16,100 --> 00:00:17,766
in Episode 45

9
00:00:17,766 --> 00:00:20,400
we dive into Lynn Alden's gripping framework of

10
00:00:20,400 --> 00:00:22,133
Nothing Stops This Train

11
00:00:22,300 --> 00:00:25,733
a hard hitting analysis of America's fiscal trajectory

12
00:00:26,500 --> 00:00:30,166
with federal deficits locked in at 6 to 8% annually

13
00:00:30,366 --> 00:00:33,033
Social Security running dry by 2035

14
00:00:33,033 --> 00:00:34,433
and the Fed stuck in a trap

15
00:00:34,433 --> 00:00:36,700
where rate hikes fuel the problem

16
00:00:36,800 --> 00:00:39,300
we're witnessing the rise of fiscal dominance

17
00:00:39,500 --> 00:00:41,033
this isn't just about debt

18
00:00:41,033 --> 00:00:42,633
it's about an economic structure

19
00:00:42,633 --> 00:00:44,766
running on unsustainable momentum

20
00:00:45,000 --> 00:00:46,500
tune in to uncover why

21
00:00:46,500 --> 00:00:48,666
the only way forward may be inflation

22
00:00:48,700 --> 00:00:50,033
currency debasement

23
00:00:50,033 --> 00:00:52,500
and a flight to scarce assets like Bitcoin

24
00:00:53,000 --> 00:00:54,400
okay let's dive in

25
00:00:54,500 --> 00:00:57,566
there's this phrase nothing stops this train

26
00:00:57,866 --> 00:00:59,766
uh it's quite a striking image

27
00:00:59,766 --> 00:01:00,566
it really is

28
00:01:00,566 --> 00:01:02,666
and it comes from one of the sources we looked at

29
00:01:02,666 --> 00:01:05,766
describing the current state of US physical deficits

30
00:01:05,766 --> 00:01:07,766
right so our topic today

31
00:01:07,766 --> 00:01:11,200
America's finances we're talking government spending

32
00:01:11,366 --> 00:01:13,400
deficits the national debt

33
00:01:13,566 --> 00:01:14,866
and we've got these sources

34
00:01:14,866 --> 00:01:17,066
essentially arguing that this spending

35
00:01:17,066 --> 00:01:19,033
these deficits well

36
00:01:19,033 --> 00:01:20,633
they're on an unstoppable path

37
00:01:20,633 --> 00:01:22,366
doesn't matter who's in charge apparently

38
00:01:22,366 --> 00:01:25,366
yeah the argument is it inevitably leads towards

39
00:01:25,366 --> 00:01:27,566
you know inflation or devaluing the currency

40
00:01:27,566 --> 00:01:28,766
that's the core idea

41
00:01:28,766 --> 00:01:31,666
so our mission here is to really unpack those arguments

42
00:01:31,666 --> 00:01:32,500
we wanna understand

43
00:01:32,500 --> 00:01:34,833
why they think this fiscal train can't be stopped

44
00:01:34,833 --> 00:01:35,866
the dynamics involved

45
00:01:35,866 --> 00:01:37,900
and what they see is the consequences

46
00:01:38,100 --> 00:01:39,600
the aim is to help you get a solid

47
00:01:39,600 --> 00:01:42,200
grasp of this specific and let's be honest

48
00:01:42,200 --> 00:01:44,566
pretty concerning viewpoint definitely

49
00:01:44,700 --> 00:01:45,600
and uh

50
00:01:45,600 --> 00:01:46,900
to get their perspective

51
00:01:46,900 --> 00:01:49,200
you have to see what they call a fundamental shift

52
00:01:49,266 --> 00:01:50,100
see historically

53
00:01:50,100 --> 00:01:53,166
US deficits usually ballooned when the economy was weak

54
00:01:53,166 --> 00:01:53,800
right yep

55
00:01:53,800 --> 00:01:55,666
like during recessions high unemployment

56
00:01:55,666 --> 00:01:57,633
tax revenues fall spending goes up

57
00:01:57,633 --> 00:01:59,066
make sense exactly

58
00:01:59,066 --> 00:02:01,100
and then when the economy recovered

59
00:02:01,100 --> 00:02:04,200
unemployment low deficits would shrink

60
00:02:04,633 --> 00:02:06,133
there was this um

61
00:02:06,366 --> 00:02:09,200
predictable correlation but that's changed

62
00:02:09,200 --> 00:02:10,533
that's what the sources argue

63
00:02:10,900 --> 00:02:13,900
a big break starting around 2017 or so

64
00:02:13,966 --> 00:02:16,000
we started seeing really high deficits

65
00:02:16,066 --> 00:02:20,066
like 6 to 8% of GDP even with low unemployment huh

66
00:02:20,066 --> 00:02:21,566
so the link is broken yeah

67
00:02:21,566 --> 00:02:22,766
they call it a decoupling

68
00:02:22,766 --> 00:02:26,166
it's not the old pattern it's a new era

69
00:02:26,166 --> 00:02:28,500
some sources label it fiscal dominance okay

70
00:02:28,500 --> 00:02:29,900
so if the old rules are out

71
00:02:29,900 --> 00:02:32,666
why is this train supposedly unstoppable

72
00:02:33,000 --> 00:02:34,100
what's uh

73
00:02:34,266 --> 00:02:36,033
the first big reason they give

74
00:02:36,033 --> 00:02:37,600
well the first reason is pretty stark

75
00:02:37,600 --> 00:02:40,266
they argue the economy itself has um

76
00:02:40,500 --> 00:02:42,066
become dependent on this constant

77
00:02:42,066 --> 00:02:43,433
high level of government spending

78
00:02:43,433 --> 00:02:45,300
and these deficits dependent how

79
00:02:45,300 --> 00:02:48,333
the idea is if you tried to suddenly pull back

80
00:02:48,566 --> 00:02:49,966
cut spending significantly

81
00:02:49,966 --> 00:02:52,033
the sources argue the shock would be huge

82
00:02:52,033 --> 00:02:54,600
asset prices crashing unemployment soaring

83
00:02:54,600 --> 00:02:55,800
which would hit tax revenues

84
00:02:55,800 --> 00:02:56,266
exactly

85
00:02:56,266 --> 00:02:58,566
tax revenues would collapse and kind of ironically

86
00:02:58,566 --> 00:03:00,066
the deficit might actually get worse

87
00:03:00,066 --> 00:03:01,466
wow so hitting

88
00:03:01,466 --> 00:03:03,666
the brakes doesn't slow things down smoothly

89
00:03:03,666 --> 00:03:05,566
no it triggers a crash

90
00:03:05,566 --> 00:03:07,433
derails the train that's the analogy

91
00:03:07,433 --> 00:03:09,900
yeah it's the opposite of a soft landing

92
00:03:10,300 --> 00:03:12,300
the system as they describe it

93
00:03:12,300 --> 00:03:14,500
needs this fuel just to keep running

94
00:03:14,600 --> 00:03:16,400
cutting it off becomes self defeating

95
00:03:16,833 --> 00:03:18,833
okay so the economy needs the spending

96
00:03:18,833 --> 00:03:20,100
according to this view

97
00:03:20,266 --> 00:03:23,400
but surely we still have the Fed raising interest rates

98
00:03:23,400 --> 00:03:26,033
that's the classic way to cool things down right

99
00:03:26,033 --> 00:03:27,566
that is the traditional playbook

100
00:03:27,566 --> 00:03:29,466
absolutely but uh

101
00:03:29,500 --> 00:03:32,066
the sources argue that even that tool

102
00:03:32,766 --> 00:03:34,366
it doesn't work like it used to

103
00:03:34,366 --> 00:03:37,066
that's the second reason the brakes are well broken

104
00:03:37,400 --> 00:03:38,233
so well

105
00:03:38,233 --> 00:03:39,500
think about the debt level

106
00:03:39,566 --> 00:03:42,366
federal debt is over 100% of GDP now

107
00:03:42,433 --> 00:03:44,533
one source mentioned over 120%

108
00:03:44,600 --> 00:03:48,400
it's massive so when the Fed raises interest rates

109
00:03:48,900 --> 00:03:51,566
yes it might slow down private borrowing a bit

110
00:03:51,700 --> 00:03:53,866
but it massively increases the government's own

111
00:03:53,866 --> 00:03:55,700
interest payments on all that existing debt

112
00:03:55,700 --> 00:03:56,400
ah

113
00:03:56,400 --> 00:03:58,466
so the government's interest Bill goes through the roof

114
00:03:58,466 --> 00:04:01,366
precisely so the irony is tighter monetary policy

115
00:04:01,366 --> 00:04:04,066
higher rates actually makes the federal deficit worse

116
00:04:04,066 --> 00:04:05,166
the interest expense just

117
00:04:05,166 --> 00:04:06,833
it explodes you're kidding

118
00:04:06,833 --> 00:04:08,600
so stepping on the monetary brake pedal

119
00:04:08,600 --> 00:04:10,300
actually feeds the physical engine

120
00:04:10,300 --> 00:04:13,733
more gas it's like backwards

121
00:04:13,766 --> 00:04:15,200
exactly they use terms like

122
00:04:15,200 --> 00:04:17,100
through the looking glass or wonderland

123
00:04:17,266 --> 00:04:19,266
the old rules work in reverse yeah

124
00:04:19,266 --> 00:04:21,900
the very action meant to slow things down

125
00:04:21,900 --> 00:04:24,733
ends up making the government need to borrow even more

126
00:04:24,733 --> 00:04:26,300
it's a feedback loop okay

127
00:04:26,300 --> 00:04:30,133
that's quite a twist so reason 1

128
00:04:30,300 --> 00:04:33,733
economic dependency reason two

129
00:04:34,166 --> 00:04:35,766
broken monetary brakes

130
00:04:36,300 --> 00:04:38,400
what's the third big driver they highlight

131
00:04:38,400 --> 00:04:41,266
sounds like it's more about um demographics

132
00:04:41,266 --> 00:04:42,700
yeah this one feels very concrete

133
00:04:42,700 --> 00:04:45,300
almost mathematical it's demographics and entitlements

134
00:04:45,300 --> 00:04:48,333
the big factor is the baby boomer generation retiring

135
00:04:48,333 --> 00:04:50,500
okay that's been talked about for years right

136
00:04:50,500 --> 00:04:53,300
but it's happening now the sources point specifically

137
00:04:53,300 --> 00:04:54,666
to the Social Security trust fund

138
00:04:54,666 --> 00:04:56,300
about $3 trillion uh huh

139
00:04:56,300 --> 00:04:57,866
it's currently being spent down

140
00:04:57,866 --> 00:05:00,466
the math the actuarial projections cited

141
00:05:00,466 --> 00:05:01,966
suggest it'll be empty around uh

142
00:05:01,966 --> 00:05:07,166
2035 and fixing that is politically difficult extremely

143
00:05:07,166 --> 00:05:09,066
the sources argue it's basically off the table

144
00:05:09,066 --> 00:05:11,566
politically both parties have largely pledged

145
00:05:11,566 --> 00:05:14,666
not to touch Social Security benefits significantly why

146
00:05:14,800 --> 00:05:17,100
because older Americans vote in huge numbers right

147
00:05:17,100 --> 00:05:19,366
so these outflows they're just baked in

148
00:05:19,466 --> 00:05:22,266
they're set to grow regardless of election outcomes

149
00:05:22,500 --> 00:05:24,866
it's presented as pretty much set in stone

150
00:05:24,900 --> 00:05:27,600
driving deficits higher locked in spending

151
00:05:27,600 --> 00:05:29,533
feels very hard to stop that train

152
00:05:30,066 --> 00:05:32,866
okay what about the engine of economic growth itself

153
00:05:32,866 --> 00:05:34,066
has that changed yes

154
00:05:34,066 --> 00:05:35,666
that's their fourth major point

155
00:05:35,666 --> 00:05:37,400
for decades you know

156
00:05:37,400 --> 00:05:39,966
economic growth was largely fueled by

157
00:05:39,966 --> 00:05:41,700
the private sector taking on debt

158
00:05:41,966 --> 00:05:43,766
bank loans corporate bonds

159
00:05:43,766 --> 00:05:46,100
businesses expanding people buying houses

160
00:05:46,100 --> 00:05:48,900
exactly private credit growth was the main engine

161
00:05:49,266 --> 00:05:52,066
but the argument is since the 2008 crisis

162
00:05:52,066 --> 00:05:56,400
that's fundamentally shifted and it's like permanent

163
00:05:56,400 --> 00:05:58,033
how so federal debt

164
00:05:58,033 --> 00:05:59,066
government borrowing

165
00:05:59,066 --> 00:06:01,200
has effectively become the primary engine

166
00:06:01,200 --> 00:06:03,366
driving growth and why the switch

167
00:06:03,600 --> 00:06:06,266
well the reasoning is the private sector households

168
00:06:06,400 --> 00:06:08,466
companies that are already heavily leveraged

169
00:06:08,666 --> 00:06:09,900
capped out you might say

170
00:06:09,900 --> 00:06:12,066
there's just limited capacity for them to borrow

171
00:06:12,066 --> 00:06:13,366
massively more

172
00:06:13,366 --> 00:06:14,833
not on the scale needed

173
00:06:14,833 --> 00:06:16,366
to drive the whole economy forward

174
00:06:16,366 --> 00:06:17,466
like before okay

175
00:06:17,466 --> 00:06:20,200
so if the private sector can't borrow much more

176
00:06:20,300 --> 00:06:23,166
the only player left who can borrow on that scale

177
00:06:23,166 --> 00:06:24,766
is the federal government

178
00:06:24,766 --> 00:06:27,233
that's the argument it becomes the borrower

179
00:06:27,233 --> 00:06:29,300
not just of last resort for crises

180
00:06:29,300 --> 00:06:31,500
but the borrower for basic growth

181
00:06:31,500 --> 00:06:33,266
which leads us into the fifth reason

182
00:06:33,266 --> 00:06:35,433
and this is where the language gets pretty intense

183
00:06:35,433 --> 00:06:37,533
they talk about a Ponzi nature

184
00:06:37,800 --> 00:06:40,333
lack of an off switch what's that about

185
00:06:40,366 --> 00:06:42,066
yeah they argue the system

186
00:06:42,066 --> 00:06:43,300
just how it's built

187
00:06:43,400 --> 00:06:47,200
requires constant growth to even function like a shark

188
00:06:47,200 --> 00:06:49,766
you know it has to keep swimming or it sinks

189
00:06:49,800 --> 00:06:52,500
constant growth of debt essentially yes

190
00:06:52,600 --> 00:06:54,066
they point to the sheer numbers

191
00:06:54,066 --> 00:06:56,266
total debt in the system public and private

192
00:06:56,266 --> 00:07:00,000
over $100 trillion compare that to the monetary base

193
00:07:00,000 --> 00:07:01,866
the actual underlying central bank money

194
00:07:01,866 --> 00:07:04,633
maybe $6 trillion that's huge leverage

195
00:07:04,633 --> 00:07:07,166
like 17 to 1 now and it was even higher before

196
00:07:07,166 --> 00:07:07,500
oh yeah

197
00:07:07,500 --> 00:07:09,866
it peaked here 50 to 1 back in 2008

198
00:07:09,966 --> 00:07:12,866
and when the system buckled then under that strain

199
00:07:12,966 --> 00:07:15,100
the response wasn't really deleveraging

200
00:07:15,100 --> 00:07:16,900
not shrinking the debt it was

201
00:07:16,900 --> 00:07:18,966
as the sources put it acceleration

202
00:07:19,000 --> 00:07:21,566
zero interest rates q E

203
00:07:21,833 --> 00:07:24,233
quantitative easing printing money to buy bonds

204
00:07:24,233 --> 00:07:25,766
and now these huge deficits

205
00:07:25,800 --> 00:07:26,800
total debt

206
00:07:26,800 --> 00:07:29,700
actually only dipped for a tiny moment in 2008

207
00:07:29,700 --> 00:07:33,200
like 1% before they hit the accelerator hard

208
00:07:33,200 --> 00:07:34,566
to prevent a total collapse

209
00:07:34,566 --> 00:07:35,633
by expanding the base

210
00:07:35,633 --> 00:07:37,300
and there's historical data on this right

211
00:07:37,300 --> 00:07:39,166
that debt almost never shrinks

212
00:07:39,166 --> 00:07:40,466
that's a key point they make

213
00:07:40,466 --> 00:07:42,566
in over 110 years of data

214
00:07:42,566 --> 00:07:45,566
total debt has only actually decreased in five years

215
00:07:45,566 --> 00:07:47,500
five years out of 110 yep

216
00:07:47,500 --> 00:07:50,300
four during the absolute worst of the Great Depression

217
00:07:50,300 --> 00:07:52,133
and that one year 2008

218
00:07:52,200 --> 00:07:53,100
they argued this

219
00:07:53,100 --> 00:07:53,400
shows

220
00:07:53,400 --> 00:07:56,333
the system has virtually zero tolerance for shrinking

221
00:07:56,433 --> 00:07:57,833
for actual deleveraging

222
00:07:57,833 --> 00:08:01,300
so the argument is the system can't handle contraction

223
00:08:01,300 --> 00:08:03,500
it has to keep expanding the debt

224
00:08:03,500 --> 00:08:05,466
it can only inflate the debt away

225
00:08:05,466 --> 00:08:07,066
that's the conclusion they draw

226
00:08:07,066 --> 00:08:09,800
the structure things like fractional reserve banking

227
00:08:09,966 --> 00:08:12,100
it just inherently creates debt

228
00:08:12,100 --> 00:08:14,200
that needs more debt to sustain it

229
00:08:14,433 --> 00:08:16,566
the only way out the error correction

230
00:08:16,566 --> 00:08:18,466
as they call it isn't fixing the debt level

231
00:08:18,466 --> 00:08:21,400
it's just creating more money or credit printing

232
00:08:21,400 --> 00:08:22,233
basically okay

233
00:08:22,233 --> 00:08:23,233
so let's put it all together

234
00:08:23,233 --> 00:08:24,766
if you can't pay off the debt

235
00:08:24,766 --> 00:08:26,366
without crashing the economy

236
00:08:26,366 --> 00:08:27,766
and you can't really use

237
00:08:27,766 --> 00:08:29,166
interest rates to slow things down

238
00:08:29,166 --> 00:08:31,600
because that makes the government's own debt problem

239
00:08:31,600 --> 00:08:32,833
worse yeah

240
00:08:32,833 --> 00:08:35,566
what's the only path left according to these sources

241
00:08:35,566 --> 00:08:36,866
well given those constraints

242
00:08:37,033 --> 00:08:39,100
they conclude the only path is inflation

243
00:08:39,566 --> 00:08:41,033
you inflate the debt away

244
00:08:41,033 --> 00:08:42,266
how does that work exactly

245
00:08:42,266 --> 00:08:45,200
it means keeping interest rates relatively low

246
00:08:45,233 --> 00:08:47,466
lower than inflation and lower than what would

247
00:08:47,466 --> 00:08:49,800
be needed to truly stabilize the debt

248
00:08:50,166 --> 00:08:52,566
you let inflation run hotter than interest rates

249
00:08:52,800 --> 00:08:53,866
over time

250
00:08:53,866 --> 00:08:56,466
this erodes the real value of the outstanding debt

251
00:08:56,466 --> 00:08:57,666
the dollars you pay back

252
00:08:57,666 --> 00:09:00,000
are worth less than the dollars you borrowed

253
00:09:00,033 --> 00:09:05,000
so it's a quiet default almost devaluing the currency

254
00:09:05,000 --> 00:09:06,166
that's one way to look at it

255
00:09:06,166 --> 00:09:08,366
they contrast this with the last few decades

256
00:09:08,366 --> 00:09:10,333
where interest rates were generally falling

257
00:09:10,366 --> 00:09:12,166
which helped manage rising debt

258
00:09:12,266 --> 00:09:14,800
but now debt is so high even kind of

259
00:09:14,800 --> 00:09:18,066
moderate rates create a huge interest expense problem

260
00:09:18,166 --> 00:09:21,100
it's a different world they compared it to the 1940s

261
00:09:21,300 --> 00:09:22,400
yeah they draw a parallel

262
00:09:22,400 --> 00:09:24,966
back then you had private debt issues

263
00:09:24,966 --> 00:09:26,200
rates hit zero

264
00:09:26,200 --> 00:09:28,466
and the government took over as the growth engine

265
00:09:28,466 --> 00:09:31,266
during and after the war that massive war

266
00:09:31,266 --> 00:09:33,166
debt was ultimately inflated away

267
00:09:33,166 --> 00:09:34,600
over the following decades

268
00:09:34,766 --> 00:09:36,666
okay so if this is the outlook

269
00:09:36,666 --> 00:09:39,300
ongoing deficits inflationary pressures

270
00:09:39,300 --> 00:09:41,500
a system needing constant fuel

271
00:09:42,500 --> 00:09:45,033
what does this mean for you know

272
00:09:45,033 --> 00:09:47,000
people's investments girl redheads

273
00:09:47,000 --> 00:09:48,166
that's a huge focus

274
00:09:48,166 --> 00:09:50,500
they argue it has profound implications

275
00:09:50,600 --> 00:09:52,766
especially for assets that are scarce

276
00:09:53,166 --> 00:09:55,800
things that can't just be printed or created easily

277
00:09:55,800 --> 00:09:58,000
like gold gold is the classic example

278
00:09:58,000 --> 00:10:00,600
they discuss the historical link between gold and real

279
00:10:00,600 --> 00:10:01,100
interest rates

280
00:10:01,100 --> 00:10:04,066
that's interest rates after accounting for inflation

281
00:10:04,366 --> 00:10:06,266
traditionally if real rates were high

282
00:10:06,300 --> 00:10:09,033
savers got a good return so gold wasn't as attractive

283
00:10:09,033 --> 00:10:10,866
if real rates were low or negative

284
00:10:10,866 --> 00:10:12,666
gold looked better as a store of value

285
00:10:12,666 --> 00:10:13,466
makes sense

286
00:10:13,466 --> 00:10:15,166
but you mentioned something changed recently

287
00:10:15,200 --> 00:10:16,633
around 2022 yes

288
00:10:16,633 --> 00:10:19,900
one source highlights a decoupling since about 2022

289
00:10:19,900 --> 00:10:21,433
Bold has performed really well

290
00:10:21,433 --> 00:10:24,033
even soared at times despite real interest rates rising

291
00:10:24,033 --> 00:10:25,633
so the old relationship broke down

292
00:10:25,633 --> 00:10:29,400
seems like it to them this suggests something else

293
00:10:29,400 --> 00:10:32,100
something bigger is driving things now

294
00:10:32,100 --> 00:10:34,100
and that bigger thing they argue

295
00:10:34,100 --> 00:10:36,266
is this whole fiscal dominance story

296
00:10:36,266 --> 00:10:37,633
the unstoppable train

297
00:10:37,633 --> 00:10:39,900
and this is where Bitcoin comes into their analysis

298
00:10:39,900 --> 00:10:42,466
exactly they really challenged the narrative

299
00:10:42,466 --> 00:10:45,366
that Bitcoin was just a zero interest rate phenomenon

300
00:10:45,366 --> 00:10:45,766
right you know

301
00:10:45,766 --> 00:10:47,866
only valuable when money was free

302
00:10:48,466 --> 00:10:49,600
they point out that recently

303
00:10:49,600 --> 00:10:51,600
the Fed was incredibly aggressive

304
00:10:51,600 --> 00:10:53,600
hawkish raising rates fast

305
00:10:53,600 --> 00:10:55,233
even breaking some banks right

306
00:10:55,233 --> 00:10:56,700
so look on Valley Bank and others

307
00:10:56,700 --> 00:10:57,800
yeah and yet

308
00:10:57,800 --> 00:10:59,900
during that high rate stress period

309
00:11:00,000 --> 00:11:02,566
both gold and bitcoin didn't collapse

310
00:11:02,566 --> 00:11:03,966
they actually soared so

311
00:11:03,966 --> 00:11:06,066
bitcoin doing well when rates were high

312
00:11:06,066 --> 00:11:08,366
suggests it's not just about cheap money

313
00:11:08,366 --> 00:11:09,800
that's their interpretation

314
00:11:09,800 --> 00:11:11,666
they see it as evidence that the underlying

315
00:11:11,666 --> 00:11:13,900
fiscal situation the unstoppable deficits

316
00:11:13,900 --> 00:11:16,866
the need to inflate is a more powerful driver

317
00:11:16,866 --> 00:11:19,000
than just the Fed's interest rate policy

318
00:11:19,000 --> 00:11:20,566
so the rational move

319
00:11:20,566 --> 00:11:21,166
in their view

320
00:11:21,166 --> 00:11:24,166
is to own assets that are outside that system

321
00:11:24,166 --> 00:11:26,500
yeah assets that can't be debased or diluted

322
00:11:26,500 --> 00:11:28,300
when the government needs to create more currency

323
00:11:28,300 --> 00:11:30,566
or credit gold has been that historically

324
00:11:30,666 --> 00:11:32,866
why Bitcoin specifically well

325
00:11:32,866 --> 00:11:34,700
they see gold as having limitations

326
00:11:35,233 --> 00:11:36,700
bitcoin they argue

327
00:11:36,800 --> 00:11:38,400
is potentially better suited for

328
00:11:38,400 --> 00:11:40,500
this digital age it's easily portable

329
00:11:40,500 --> 00:11:42,866
it's programmable and crucially

330
00:11:42,866 --> 00:11:46,366
it has absolute mathematically enforced scarcity

331
00:11:46,966 --> 00:11:48,300
something gold doesn't quite have

332
00:11:48,300 --> 00:11:51,166
said you can always mine more gold

333
00:11:51,466 --> 00:11:53,833
bitcoin supply is fixed and known

334
00:11:53,833 --> 00:11:55,166
so they see it as like

335
00:11:55,166 --> 00:11:57,600
the ultimate hard asset for this environment

336
00:11:57,600 --> 00:12:00,600
the mirror image of the flexible fiat system

337
00:12:00,600 --> 00:12:03,800
that's the framing a system built on a flexible Ledger

338
00:12:03,833 --> 00:12:05,533
where you can always add more units

339
00:12:05,766 --> 00:12:08,166
versus Bitcoin's fixed transparent Ledger

340
00:12:08,166 --> 00:12:09,866
and that's why they think it's thriving now

341
00:12:09,866 --> 00:12:12,700
even with 5% interest rates available elsewhere

342
00:12:12,700 --> 00:12:15,433
it's a bet against the future value of the dollar

343
00:12:15,433 --> 00:12:16,833
driven by these fiscal issues

344
00:12:16,833 --> 00:12:18,833
an embrace of sound money

345
00:12:18,833 --> 00:12:20,233
that seems to be the core argument

346
00:12:20,233 --> 00:12:21,433
yes in a world

347
00:12:21,433 --> 00:12:23,666
where the main currency is expected to lose value

348
00:12:23,666 --> 00:12:26,533
over time due to these unstoppable pressures

349
00:12:26,666 --> 00:12:28,600
something with a truly fixed supply

350
00:12:28,600 --> 00:12:30,600
becomes very attractive to some people

351
00:12:30,600 --> 00:12:31,066
okay so

352
00:12:31,066 --> 00:12:32,066
let's just quickly recap

353
00:12:32,066 --> 00:12:34,600
the main pillars of this unstoppable train argument

354
00:12:34,600 --> 00:12:35,900
from the sources sure

355
00:12:35,900 --> 00:12:37,100
two big categories really

356
00:12:37,100 --> 00:12:38,300
first it's systemic

357
00:12:38,300 --> 00:12:41,166
almost mathematical the sheer size of the debt

358
00:12:41,166 --> 00:12:43,200
the structure of feudal and fractional Reserve Bank

359
00:12:43,966 --> 00:12:46,033
it just requires constant expansion

360
00:12:46,300 --> 00:12:47,633
deleveraging is too painful

361
00:12:47,633 --> 00:12:49,933
so the default is always to create more units

362
00:12:49,933 --> 00:12:51,900
the mass of the system right

363
00:12:51,900 --> 00:12:54,533
and second it's human nature politics

364
00:12:54,700 --> 00:12:56,500
nobody really wants higher taxes

365
00:12:56,500 --> 00:12:58,733
nobody getting government benefits wants cuts

366
00:12:59,100 --> 00:13:01,100
politicians respond to those incentives

367
00:13:01,100 --> 00:13:03,733
making truly deep painful cuts

368
00:13:03,733 --> 00:13:06,066
is rarely a winning strategy in the short term

369
00:13:06,066 --> 00:13:07,566
and the contrast with Bitcoin

370
00:13:07,566 --> 00:13:09,833
again is that Bitcoin is designed differently

371
00:13:09,833 --> 00:13:12,433
absolute scarcity transparency

372
00:13:12,433 --> 00:13:15,300
and a way to handle adjustments like deleveraging

373
00:13:15,366 --> 00:13:17,200
without needing to debase the actual unit

374
00:13:17,200 --> 00:13:20,266
the Bitcoin itself fixed Ledger versus flexible Ledger

375
00:13:20,266 --> 00:13:21,366
and the time frame

376
00:13:21,366 --> 00:13:24,633
they see this playing out over this unstoppable phase

377
00:13:24,766 --> 00:13:27,033
the analysis suggests this path

378
00:13:27,033 --> 00:13:28,800
these kinds of deficits around say

379
00:13:28,800 --> 00:13:30,166
7% of GDP

380
00:13:30,200 --> 00:13:33,033
is likely locked in for at least the next 10 years

381
00:13:33,033 --> 00:13:35,066
hmm it doesn't mean nothing ever changes

382
00:13:35,233 --> 00:13:36,666
but they don't see any force

383
00:13:36,666 --> 00:13:38,166
strong enough on the horizon

384
00:13:38,166 --> 00:13:39,833
to meaningfully alter this trajectory

385
00:13:39,833 --> 00:13:41,833
soon the train keeps rolling

386
00:13:41,866 --> 00:13:44,133
maybe speeds up or slows down a bit

387
00:13:44,133 --> 00:13:45,733
but doesn't stop great

388
00:13:45,833 --> 00:13:47,533
so wrapping up this deep dive

389
00:13:47,533 --> 00:13:50,433
the core message from these sources is stark

390
00:13:50,733 --> 00:13:54,133
the US fiscal path looks like an unstoppable train

391
00:13:54,233 --> 00:13:55,600
driven by uh

392
00:13:55,600 --> 00:13:57,266
the economy needing the deficits

393
00:13:57,266 --> 00:13:59,566
monetary policy breaks not working right

394
00:13:59,566 --> 00:14:00,800
the math of demographics

395
00:14:00,800 --> 00:14:02,800
federal debt becoming the main growth engine

396
00:14:02,800 --> 00:14:05,433
and the basic structure of the financial system itself

397
00:14:05,433 --> 00:14:07,566
and the main outcome predicted from this view

398
00:14:07,800 --> 00:14:09,033
ongoing high deficits

399
00:14:09,033 --> 00:14:10,833
leading inevitably to more inflation

400
00:14:10,833 --> 00:14:12,900
and a devalued currency over time

401
00:14:12,966 --> 00:14:14,866
which leads them straight to the idea that scarce

402
00:14:14,866 --> 00:14:16,166
assets things like gold

403
00:14:16,166 --> 00:14:18,700
and particularly Bitcoin with its digital scarcity

404
00:14:18,933 --> 00:14:19,633
could be really

405
00:14:19,633 --> 00:14:21,433
important hedges in this kind of environment

406
00:14:21,433 --> 00:14:23,200
so understanding this perspective

407
00:14:23,200 --> 00:14:24,800
even if you don't fully agree with it

408
00:14:24,800 --> 00:14:27,566
is pretty valuable as you navigate what's happening and

409
00:14:27,633 --> 00:14:29,833
think about the future it's one distinct view

410
00:14:29,833 --> 00:14:31,500
drawn from the material we reviewed

411
00:14:31,733 --> 00:14:33,233
and it leaves us with a big thought

412
00:14:33,233 --> 00:14:34,400
for you to mull over

413
00:14:35,000 --> 00:14:37,400
if this analysis is even partly right

414
00:14:37,400 --> 00:14:39,933
if the system really struggles with deleveraging

415
00:14:39,933 --> 00:14:42,266
and the path of least resistance is inflation

416
00:14:42,733 --> 00:14:44,766
what does that really mean for how you think about

417
00:14:44,766 --> 00:14:47,600
saving investing and value over the long haul

418
00:14:48,033 --> 00:14:49,633
and maybe more fundamentally

419
00:14:49,633 --> 00:14:51,800
given the roles of math and political incentives

420
00:14:51,800 --> 00:14:54,133
described here is there any realistic

421
00:14:54,133 --> 00:14:55,400
way within our current system

422
00:14:55,400 --> 00:14:57,966
to actually change this trajectory significantly

423
00:14:57,966 --> 00:14:59,100
something to think about