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What is up everybody? Welcome back to another exciting
episode of fed watch. My name is Ansel dinner.
I am here with my co-host, CK. How are you doing, CK?
Well, it is up Ansel. I'm doing great.
My man. Doing great excited too.
To chat macro once again and happy holidays.
To everyone out there watching thanks for tuning into Bitcoin
magazine live. Thanks to you for tuning in to
Fed, watch on the show, we talk Bitcoin and macro and we think
about how big when plays in as a bigger part of the macro
ecosystem. So we are one of the only shows
in the world that actually does. This answer, those incredible
research and has been ahead of many elements of At the
developing crisis in Fiat Legacy markets as well as Bitcoins
development. So and so excited to be here
once again with you to chat. Yeah, Merry Christmas to
everybody out there. Thanks for joining us.
The the macro psych news cycle has been a little bit slow over
the last, I would say 48 hours but there was some big news this
week and that was Japan with their relaxation of yield curve
control. So we're going to cover that.
Also this morning we had some revisions to the u.s.
GDP from Q3, so we'll cover that and yeah just rap about some
macro what's going on and you know, sign off for the Christmas
break after that. Yeah, no.
Absolutely. And we got to talk bitcoin
price. It's a it's been scary looking
at that chart, honestly. Ansel, I don't know what you
make of it. You're generally a, you know,
say more bullish in the medium term.
Then many but scary looking chart.
So I'm excited to get your opinion on that as well.
Oh yeah. Well let's shoot me jump right
into the charts. Know before we do that we got to
be remiss. If I don't she'll the Bitcoin
conference Bitcoin, 22, 23 May 18th through the 20th in Miami
Beach, Florida and so is going to be there.
I'm going to be there. I'm excited to get him on the
desk. It's honest.
It's also a long time coming for you to be a part of the
conference content so hopefully we can make that happen but you
know me bitcoiners Bitcoin. Later in life.
Nasser in real life. Like come on.
You cannot beat the Bitcoin conference is the first time I
met Ansel even after interacting with him for years online, that
was in 2021 and you know, it's really an incredible experience.
Bitcoiners our best in person and the Bitcoin conference is
where Bitcoin history is made code BM, live.
That gets you 10% off. Your tickets ticket, prices are
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Where if you have committed code to one of many open source
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can get a free for day ticket to the Big Ten Conference.
It's so apply to that to all the contributors out there.
And again all the bitcoiners out there, be a part of History.
Come to the Bitcoin conference and don't wait because ticket
prices travel costs. All that is going up and that
you can't miss it. That is pretty huge Bitcoin
magazine always taking care of the community, putting a
Community First put in Bitcoin first.
Gotta love that. Yeah, I'm excited.
Man. Every year I've gone now, two
years in a row and it seems like I I have to go back because I
didn't do half the stuff I wanted to do.
There's so much going on. I was talking to the producer
Chris before beforehand and I think this year, I want to spend
more time with bitcoiners so you know maybe not go to as many
talks and spend more time in the social aspect of it.
So yeah it's I can't wait can't wait for Bitcoin 2023.
All right my admin notes are hey join the telegram TDOT.
Amy for such Bitcoin in markets. That is the place where I drop,
you know, multiple pieces of content every day.
I also do a live stream there every single day, so and I'm
putting those out on my podcast app.
So subscribe to bitcoin and markets on your podcast app to
not miss an episode of that. All right, well hey, no I'm
sorry, I got I got a double click on that show and just say
Ansel in my opinion one of the highest signal, individuals out
there and he is putting Out content every single day and
sometimes twice a day. So subscribe to this telegram.
Subscribe to Bitcoin markets. I am an avid listener for a long
time and obviously subscribe to Fed watch or we break down
macaron Bitcoin. Alright Ansel, let's get into
the charts. Like, subscribe this stream
right here. All right.
Yeah, let's go into the charts. The first, the first slide up
CK. Did you see this one?
We're bringing some soccer into here so that I can Charge.
But yeah, the Argentine team is carnivore, man.
So did you see this? No, I mean I don't know how
carnivore but Argentina is All About Meat and when it comes to
when it comes to beef, Argentina is one of the the most famous
places in the world. I'm actually going to be going
to Argentina very soon and I'm excited to indulge in the South
American and Argentinian beef. Oh that's awesome.
Yeah I always see your posting pictures of your awesome meals.
So I thought you would appreciate This this first
little clip here or this first step now, 100% and
congratulations to Argentina, and messy and particular, who
is, you know, if he wasn't already the greatest of all
time, you know, I think he's, he's completed that, and that
was an epic soccer game. So, you know, football game to
all those. Yeah, absolutely.
Cementing his legacy. That's what Chris said in the,
in the chat down here. Absolutely.
And it was, it was just so much fun to watch, so, Here's to them
and, you know, obviously you know that's a cool picture.
I'm glad they're having a good time.
All right. Let's jump into the first chart
in that is the Bitcoin chart. This one, I kind of showed last
week and you can see I put on here all of the major events of
these charts that have happened over the last six months.
So Tara, Luna Celsius FTX of course, we had some other little
ones in there or some other ones in there.
But these are the big major ones and I maintain that if you take
out these big incidents, you know, where the price sold off.
Dramatically because of the fear and uncertainty and doubt in the
market, then Bitcoin would be sideways right?
Then take out these big days down days and Bitcoin has been
very, very strong for most of the year.
I think people need to like at least I think people get too
worried about you know there's going to be some catastrophic
collapse in the price or whatever and like you were
saying there before that it doesn't look good but if you
look at this in the whole year, the only time Bitcoin is really
collapsed has been during these major events.
So there there has to be some other major event.
I think to push the price down lower any comments on this
chart, CK, unfortunately, I feel like there's more major events
come in, but a lot of people have been saying the
catastrophic, bad news is already priced in and maybe that
is the case. But I I don't quite think that
we're out of the woods yet in terms of in terms of The big
over-leveraged ecosystem players at Chris.
We can see your slack on the screen by the way.
Thank you. Yep.
So yeah, I mean, in terms of these big ecosystem players,
it's I don't think we're out of the woods.
I think the the over leveraging is still there and there's
definitely you know a few already that are dead and you
know it's just hasn't you know, come too.
To the a bankruptcy. Yeah, yeah.
I mean like, or scientific that they had this announcement that
they're getting this massive, 70 million dollar, bailout loan,
and then a few days later they filed for bankruptcy.
So yeah. Even even the most optimistic
cases, I think some of these deals are not gonna be able to
go through and and there's going to be more, there's going to be
more dead bodies. Well, looking at this chart to
me, I don't see much Else in this chart.
So when people say you know, Bitcoin is correlated to stocks
or whatever, there's not much else that these those three big
events that I pointed out are really The Story of the Year for
Bitcoin and it's not super correlated with other things
than just I guess the overall climate the overall
macroeconomic climate is such that yeah there's correlation
but really there's no like direct influence between say
that's Np-500 and Bitcoin. Let's go into the way before.
Did you see some of the comments that Chris put up on the screen
from the chat gbtc? People calling that out people
saying race or people saying that micro strategies using
custodians. Yeah.
Oh yeah. They're all getting flashed up
again. Yeah, you know those are those
are just some of the big names. Yeah.
But they're also regulated names, right?
So they have to allow Regulators don't work and then they say
they need more regulation. It's a hilarious clown show.
That's true. That's true.
I mean that it has to stop with somebody, right?
The somebody's got to be that dumped.
The person that holds up that last Domino, and I think that
the companies that are remaining Finance kind of worries me a
little bit but gbtc really Bother me or doesn't worry me
and neither does microstrategy. So I think people are just
there, they have a little PTSD and they want to see the next
thing collapse. So why doesn't gbtc where you,
because they have the big one It's not like they have paper
Bitcoin, on their balance sheet or anything they are not
insolvent. So, They just have a bunch of
angry creditors. We're not a angry stakeholders
shareholders. Well dcg.
Yeah, dcg isn't. It has issues with with Genesis,
he had dcg is a different story but gbtc on its own is you know,
it's a separate entity and it has the Bitcoin.
And so there's it's not like dcg is going to steal from the
Bitcoin out of gbtc to pay something.
So there's no commingling there as as far as I can.
Until so yeah, gbtc itself the trust itself is totally solvent.
Totally fine, great microstrategy, totally solvent,
totally fine. It wouldn't really matter if
they weren't in that case because they just do it to
themselves, I guess. Well, I mean, I guess, I guess
the, the concern is that they're Bitcoin is held by custodian
that might not have the Bitcoin. Well, he talked about that
recently, right? He talked about that, he what
they one of their custodians is coinbase.
Coinbase has like 2 million Bitcoins.
I think they're completely solvent and okay then there's he
didn't disclose the other two but people kind of know what the
other two are and those are companies that I don't think are
having any issues either. So overall I think
microstrategy's Bitcoin is secure and they probably have an
In multisig. So a lot of these custodians
that people are worried about as well.
They are custodians with one key say, right?
And so it's not necessarily that they could all have stolen the
Bitcoins or anything. We don't know the specifics and
people jump to conclusions because of the PTSD in my mind.
Now, I'm not saying I'm 100% sure but I'm 90% sure that all
of these players are fine at this point.
So so you think sideways and up, unless there's another big
moment and I think that there could be another big moment and
we're unsure if it's been priced in or not.
Yeah, yeah, love my little red rocket ship there is, is showing
once we break that 19,000, I think it's clear sailing ahead.
Let's go to the next chart because it's Zooms in a little
bit and You can see that previous trend line, that was
resistance for a long time, has now been support.
And so, if we can hold on there and we can go sideways to
higher, which is, I mean, 90% of the last six months has been
sideways to hire. And if we can continue doing
that, eventually will go into that resistance Zone again back
above 19,000. And that's when I think a lot of
people, the shorts, get squeezed and a lot of people start going
long. Alright, we'll see what happens,
man. We'll see what happens.
But that's the beautiful thing about the show.
We document it every single week and Ansel has been right more
than he's been wrong. That's for sure.
Well, I mean I did think we were we want to crash below 30 then
we crashed below 30. Then I thought we were going to
break out when we had this false breakout with it right before
FTX. So I haven't been right all the
time, but my sideways calls have been, right?
Just not my brake controls. So okay, let's go ahead.
Let's head right here. Let's go to the next next chart
please. So this is the treasury yields
US. Treasury yields, you like this
charts? Okay, sure control.
Yeah. Stair step is showing the upper
and lower bound of the FED funds, target range.
Then of course these are the other like I guess dated
treasuries the two-year five-year 30 and 10, you can see
they're all significant. Even the two-year is below.
The current fed funds, target range, So are they in control
CK? What are your thoughts on this
updated chart here? I mean, I love it man.
It's it's awesome to kind of just see this whole story
falling apart. So I'm excited to see what the
two-year does. And continue following what
these longer-dated bonds are going to do but you know, the
current plan, it seems as though the rate hiking, they're
planning on tapering that and then holding it.
So if that's the narrative and these bonds keep Doing the
opposite. You know this is the big moment
which is will the the the map, like the kind of the lure, the
mystery of the fed, the be exposed and their ability to,
you know, dictate yields and interest rates, you know, will
that their inability of that to do that?
Which is the thesis of the show? Will that become a parent?
So, You know, this is kind of like the test of the thesis of
the show. That's why I think it's such an
important chart because it appears to be confirming it.
Right? Yeah, and speaking of can
Central bank's control. Let's go dive into the Japanese,
yo, curve control. So this is a close up of what
just happened. The horizontal line on the
bottom, was the previous ceiling that was 0.25 percent.
We talk about this back in June CK.
If you remember, when it started to break out Above This yield
curve control Zone and I said back then that you know they
they can kind of control this but they can't they can't win.
Eventually they will fail and we saw that happen just this week,
they announced they're going to increase their ceiling from
zero-point-two-five to zero-point-five and then you can
see what happened on that very first.
Next day, it just shot all the way up from 0.25.
Touching the top of the new Range.
If you go to the next slide, Chris, we see the longer.
This is the chart I showed back in June and The Cone just
continues to get bigger as they can't control it.
That's my position here. And a lot of people are thinking
that oh this the 10-year yield or these yields are going to
blow out in Japan. But I highlighted this one's own
back in 2018 when they increase the window from Or minus 0.1 to
plus or minus 0.2 and you can see it initially.
It did it did go up and test the top of that new range but then
it fell all the way down to the bottom.
So, are we going to see something similar to this?
We also saw, if you look at the next time they increase so
that's 20 21, it looked like it was testing the top of that
range and then it petered out. So the way I kind of describe
this as there is some pressure in the system for rates.
To go higher and when they relax that pressure or when they
relax, they're sealing, the pressure gets initially relieved
and then you have a reverse movement.
So CK, what do you think about these last two charts and about
the Japanese yield curve control in general?
It's honestly kind of fascinating looking what
happened in 2021 where it's you know exactly how you described
the increase. The the ceiling it test up drags
down and then begin to building back up and it coils up and
there's an enormous amount of pressure.
They changed the increase it and it explodes back up.
It's also fascinating seeing how much more violent this is?
It's almost like it's in proportion with The the new
Range being much bigger but you know that's just me visually
looking at the chart. Yeah.
And there's no other basis for kind of saying that I don't
know. Like again for me as a Layman,
I'm looking at this and saying like this is this is why all of
this is wrecked and you know why we need to move to something
much more simple. And that cat doesn't rely on all
this kind of funny business. And that's Bitcoin mining.
So and that's Bitcoins monetary Supply.
So I'm excited, you know, to Usher that in and I'm excited
for the future that that makes possible because all of this on
paper right here, like this, this messes with the economy,
the global economy's ability to do business.
Ultimately, that's what it does. When this financialization,
pretty much creates a distraction from, you know just
the the meat of the what we're Trying to do here which is trade
and become more efficient and and cooperate and build.
So, all of this stuff, it's turning the tool.
It's like, almost like misusing the tools, which is a monetary
system to achieve all the other goals of, you know, the state as
it is today. The Bitcoin magazine podcast is
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Let's dive into what your cruise control is.
And then what exactly happened, I think, how a good way to
interpret what happened here. So, you'll curve control is when
the I don't, I didn't put a chart in here.
I should have had a chart for this, but when they the Central
Bank picks, a certain tenor on the curve.
So in this case, it's the 10 year.
Japanese Government Bond and they pick a certain ceiling that
they, they won't let the yield get above.
And if there's Market pressure trying to push it above that
yield, then they will come in and buy QE, they'll do QE2 push
it back down on the reverse side.
If there is, you know, because this is a window plus or minus
the 0.25 from 0. So, if it goes below, zero point
two five negative 0.25, then they will go in and do QT.
To push the price or push the yield back higher, so they do it
on both both ways, but this is just another form of QE.
I want to make that. Clear, so we have QE Japan.
Has QE. They also have qqe which stands
for qualitative and quantitative easing.
So in quantitative quantitative easing, they buy ASLA usually
government securities or mortgage-backed Securities.
Okay? So they buy treasuries or these
mortgage-backed securities. But qqe, they buy everything
they go out there, they buy ETFs the back stocks, they buy
everything there is probably corporate bonds and all of that
so that's quantitative and qualitative easing, then that
didn't work either. So first QE didn't work for
Japan. Then qqe didn't work for Japan
for decades, right? Then they went to in 2016, we
just saw the chart that they went to yield curve control
which is kind of like QQQ e. It's just unlimited quantitative
easing, and that hasn't worked either because they had to
continually change the range that they're doing.
So they're, they're doing one failed policy after the next.
Now, a lot of people are saying that this was coordinated with
the fed or whatever that they're either responding to the fed or
they're being coordinated with the FED.
But we saw there on the chart that this has been putting
pressure on the top of this. Range and they just move the
range. That's all we can say now, I
think some people say that this could be a net negative on their
economy because as you said it, distorts prices as distorts
business. What happens when yields go up,
that means prices of those bonds goes down, which if you are
holding those Bonds on your balance sheet as an asset, if
you're Japanese bank and or money market, Thunder, whatever,
and you're holding these government, prices of older
bonds, go down. The yeah, the price the existing
bonds issued yet correct the price of the existing bonds goes
down. So you're holding it on your
balance sheet and, you know, you are doing your business based on
0.25 percent as the ceiling. So you're going to make your
plans on this 0.25%, then they do a unexpected surprise
relaxation of that window up to 0.5.
Well the the value of your Bonds on your balance sheet, have now
gone down Down. So now you're insolvent that
this has this triggered some emergency action by the boj.
They came in and tried to save some Pension funds and save some
of these money market funds and it had arrived a lot to what
happened in the UK with the guilt Market that we saw earlier
this year, but the Japanese seem to plan for it and be ready for
that and they smooth out a lot of that volatility.
So yeah, I just wanted To add this in there, on the oh, and
one more thing. So, the way that this could be
good for their economy, so that is the way.
It could be bad, the way it could be good is if you relaxing
the window, that means you're going to have to do less QE most
likely, right? Because you do more QE to hold
it down. Well if you're holding it here,
you're probably going to do less QE.
So that means there's going to be more government bonds out in
the economy, right? Because Cuba Is really, it's
taking sucking up the collateral, it's sucking up the
valuable collateral out of the system.
Well, when you raise the window here, raise the ceiling, you're
going to suck less collateral out of the system.
And so, that could be actually stimulatory to their economy,
which is kind of crazy if you think about it.
So, there's competing forces here, we can't tell.
If this is going to be good or bad, I tend to come down on the
side that this actually going to help Japan a little bit.
It's going to help their economy.
So We'll see, we'll see how it goes.
Any response to that CK. So you think that this is going
to help because it's just more easing and that's, you know,
that's falling in line with where the market is going.
Anyways, it's less easy. Yeah.
Okay because they're they're allowing for a bigger window
where they don't actually have to be active.
Right. Yeah.
And one of the problems Japan has had like I said they failed
over and over with qeq E and yield curve control because
they're just taking this much. Needed collateral out of the
system. So they're perpetuating this
deflationary environment. Yeah.
If they mean it and if you think of like the collateral in the
system, like that's how a debt based system works, is you need
that collateral that's how a modern Financial system.
Has been working his you need that collateral.
So if like the economy is like a body and the collateral is like
the blood of the body and QE where they're buying the
Collateral, they're buying up the blood and taking it out of
the system because they're putting it on their balance
sheets. Rather than allowing it to be
priced and smel, liquid part of the market that it's almost like
sucking the blood out of the body out of the economy.
And I mean, well, I guess what are your thoughts on that kind
of analogy? Yeah, that's perfect man.
I wrote a yield curve control piece back in is like May of
2021 and I was saying like why it wasn't going to work in all
this and I said, Said that yield curve control is economic
bloodletting. That's exactly what it is.
So it's maybe I got that from you.
Maybe. Yeah, maybe you came up with the
same one as me but exactly man, it is.
They are You in a credit-based system, you need a both ways in
the plumbing needs to work in both ways.
Just like a circulatory system and if you if you have a like,
you know, just think if you don't let the blood come back to
the lungs to get real oxygenated or whatever, then you end up
dying, right? So, yeah, it's bloodletting is
what they're doing to the economy right now, through QE.
Now if they're raising that ceiling and they're doing less
QE, that could be good for the The economy, maybe it will cause
some short-term Havoc, but it will end up benefiting their
economy. Also, Japan has not followed the
same Playbook as a lot of the other central banks, like the
FED being Uber hawkish, and the ECB be an Uber hawkish here.
Japan is said, oh no, we're just going to still do our same.
You have curve control and are saying qqe process that we've
always been doing. So they are kind of on the
opposite end of the experiment. I meant as the FED, which is
kind of interesting. So we'll see how that works out.
Bless you. Thank you.
No, it's fascinating. Kind of seeing.
And yeah, absolutely. Japan is has kind of been the
only Central Bank that has a bent to to the FED at least in
Europe pivot with, you know following what the Fed was
doing. You know, we've seen what's
happened and coming out of China, I mean to some degree,
you know, we've seen you know, other Central Banks, the Central
Bank of South Korea, you know saying like hey you know, y'all
are affecting us but here's Japan, you know, kind of just
doing their thing and just going back to that chart, you know,
they've been on this trend which you're saying you know, actually
lessens the need for QE since 2017 2016 where they're kind of
increasing the range of 30 of their yield control.
Can you kind of talk? It's like, you know, I guess
since they've been kind of on this trend since that long, what
was the environment there before they were doing yield curve
control? I guess they just weren't
messing with that at all. I guess.
Well, they were doing. They were doing QE & Qs.
I'm gonna make you eat and they yield curve control was kind of
the next tool and then that that really came into play, you know,
in 2016, right? They were okay.
So the idea behind yield curve control is they want The fed or
Central bank's they want to have a nice sloping yield curve
because then P Banks can borrow short and long, right?
You want to banks will borrow for a week or a month and
they'll lend for 5, 10, 30 years.
So they want to have it this differential and they want to be
able to roll over their short-term loans constantly so
that they can or their short-term sources of capital.
And so that they can, you know, stay solvent basically.
But when the we have a yield curve inversion Obviously the
short and the long term rates are low are below a so you can't
make a profit. That's really bad for banks,
balance sheets, obviously, it makes it means that they're
about to go out of business. And so then what you have
control wants to do is it wants to Peg.
Usually, it's a shorter term rate now, this is a little bit
different with the 10-year, which I'll talk about here in a
second, but the it's usually like say the two year, they'll
want to Peg the shorter term rate.
And what they think that will do is to pay, get, they use QE and
they think okay, that's going to flood money out into the market.
We're doing QE. So it's going to be stimulatory
and inflationary. And what will happen is that
will push up the long end so that then the banks can borrow
short at this suppress rate and they can lend long at these
inflated rates. So they think it's going to make
the force the yield curve into to a nice upward sloping yield
curve. Now, what Japan did was they
pegged the ten year, which is pretty much right smack dab in
the middle of the curve. Why would they do that?
Because they wanted a flat curve.
They have been trying to get inflation forever and they
thought the best way to do it is less just flatten the whole damn
thing. Let's just like they think we
can get inflation by pegging the two-year.
We're going to show them what real inflation is.
We're going to pay The tenure and you know, that's going to be
real inflation, never happened. Okay, never happened, didn't
work, didn't work, initially they had to change the peg, they
didn't work again, they changed it again.
So this is really the third try of yield curve control, which
itself is the third try of QE, and it's none of their plans
ever work out. Yeah, and this is almost like
them or treating back. Yeah, yeah, for sure.
All right, thank you for breaking that down for us.
These are some complex topics here guys.
And and antle is the one who's done the most studying here.
I'm just the guy asking the dumb questions.
Well, for guys, listen on the podcast app you can in the show
notes, I'll put a link to the article that I wrote 18 months
ago about yield curve control and that, you know, it's a
10-minute read but we'll get you up to speed pretty quick.
Yeah. All right.
Should we go into? I only have one more macro chart
and that's the dollar if we want to talk about that let's do it.
Okay. Chris can we go to the next
slide? Please. so, this is Just I mean
the dollar has been kind of boring sitting at 104.
It's been 10 6 to 10 for four months now since basically the
end of October and I'm just reading this question here.
Does Ansel believe the dollar has topped out long-term?
No but for the medium-term. Yes I think the dollar will
eventually enter a new Range just like it did in 2015 for
several years and the way it did after the great financial crisis
for several years, I think the dollar will enter a new Range
around this area and then in the future, Maybe Five years down
the road then it will break out hire again and this is the
script that has been written by a deflationary outcome to this
problem so the dollar will continue to strengthen and that
kind of explains what I think is going on with this chart, we've
kind of bottomed for the time being.
We're trying to create a bottom to a new range that the dollar
is going to sit in. And yeah, that's what I had to
say about this chart. CK, what are your thoughts on
the dollar? No.
I mean I don't have a I don't have really strong thoughts
here. I just, I kind of like seeing
historically and trying to think through the rates and how, and
how the last year of history of kind of played out in
conjunction to this chart. I feel like this chart, like, I
feel like they're there are actual events that are happening
in the world as this chart is making new highs and then
something back. So you know that my mind was
just kind of going. I'm through that as you're
talking through, you know how you think that, you know, we're
creating a new new Range here for the dollar at higher levels.
I mean, it does seem as though the dollar rip.
Sup everyone scrambles to make a lot of different changes to
adjust for it? You know, obviously that has a
little bit of a dampening effect and now we're in a new normal so
that it feels like it fits with the narrative.
But, you know, that's I guess that's all I Have to add.
Yeah. And one of the things that one
of the, there's some forces out here that kind of create this
back and forth with the dollar and why I think that it's just
going to enter a new higher range.
I didn't include it this week, but people that listen on a
regular basis, know the Hong Kong dollar chart that I like to
show and the Hong Kong dollar, is a peg between 7.75 and 7.85.
Hong Kong dollars per dollar and When it's at the top of that
range that is very. That means there's a lot of
dollar pressure in the world. That's a proxy.
I that I use for dollar pressure.
Well, when did that top out that topped out, right with as this
chart, the dollar chart started falling.
And so now we are towards the bottom half of that Hong Kong
dollar Peg, and that means to me, that there is very little
dollar pressure in the world and we'll go back and forth between
those two. Two pegs because that's actual
Market intervention, okay? The Hong Kong monetary
Authority, they go out there and they will sell dollars from
their reserves billions of dollars from their reserves and
by Hong Kong dollars, right to strengthen the, the Hong Kong
dollar and they'll do the reverse at the bottom.
So that is actual monetary force in the world of billions of
dollars. That is keeping this forcing,
the dollar into a new Range. There's also a lot of things
like At the top, when the dollar stress is very cute, the worst
players go bankrupt, the worst players get liquidated and who's
left, well, it's the going to be the people that can know the
people that are in less trouble. So, yeah, there is still a
strong dollar Force, but it's not as acute because all of the
worst players have been liquidated out of the system.
So there's and then at, as the dollar drops, new players come
in, they get more profligate. They get a little bit more risky
with their dollar loans and the dollar strengthens against.
So there's all sorts of ebb and flows here.
Why the dollar should enter a new higher range?
Now, the only argument against that in my opinion is when
people say oh isn't the end of the dollar inflationary?
You know, isn't why doesn't the government just print more
dollars and I got into this on telegram this morning with one
of the guys there. He was asking pretty much that
question and I was like, well, printing money today is not like
printing money in 1975 or whatever.
Because back then there was a lot more productivity per new
dollar today, pretty much every new dollar is printed just to
service the death and so you can print a toll bunch of money but
it's no, it's not a net printing of dollars and that's where
we're kind of at in the world and why the dollar will continue
to strengthen. Nathan and not weakened.
What do you think of that c.k.? yeah, and I mean, it just seemed
like there's a The economic reality around the world is very
different and I think the, the digital nature of a lot of this
technology also is really kind of interesting in terms of a,
like inflationary perspective, it's maybe the mechanism to
distribute funds technologically exist, but seems like there's an
issue Distributing funds right now and distributing currency.
I Know if that if that's actually true from making that
up, but it I feel like there's also kind of a distribution
issue in terms of of inflation, but in terms of all the dollars
are being created. In order to just service debt.
And the fact that inflation today happens when debt is
issued versus just, you know, printing out money from thin air
and kind of giving it to your friends, which is Kind of like
this meme that people Invasion as printing money, you know, I
guess that that that makes sense.
Unfortunately you know, as it's very clear here, I'm not an
expert by any means. So you know, just kind of trying
to make just trying to make Make ends of it, you know, try to
just try to understand what's happening in this very complex
system and to be much more simple.
If we did not have debt based money because with sound money,
you the you get money by earning it.
You know, in a debt-based money especially at the end of a debt
based money like you say printed, give it to your friends
or whatever, there is a distribution problem, but that's
because the most creditworthy people are going to get the
loans and that's where money is printed.
So there is a distribution problem and that is based on
being a credit based system, but the end is not inflationary to
end. Is that, you know, I just had a
long rant on one of my live streams about the old geriatric
and decrepid system, that is what we're going to in this
quote unquote Fiat, system is a slow, grind, 20, economic growth
to debt burden, Such a high debt burden that you can't move and
only source of growth is going to be Bitcoin.
So yeah, we're subscribe to Bitcoin markets.
Go check out the telegram group with some to The Rance.
Yeah, we could go back and forth on this for ages and ages.
But should we go into the last one?
No, just one last comment on that.
And I fully buy into this idea of like I think people have this
this they have different definitions for inflation,
right? And and they both think that
inflation is just like money Printing and the denomination's
on bills going up. And they've seen like, what do
you mean inflation can't happen. They've seen all these countries
hyper-inflated and destroy their for their fiat currency, but
there's this other kind of viewpoint of inflation.
Where's the? You know, inflation is is is
Life its motion. It's the it's the actual dollars
going down in value against Real goods and those good and the
economy growing and in that sense, I fully agree with, you
know, picture that you are painting here, which is that the
system is dying. And the, the issue with this
system is that it is a poor operating system for an economy
to leverage in order to a Allocate and manage resources.
That's like the key here. So as it is now, confronted with
Bitcoin, which is a better system for allocating resources,
that that will become even more apparent and then the growth on
the Bitcoin system compared to the stagflation and the
crippling debt and and the, the inability to create growth.
And to allocate resources, it's going to become very Stark when
you start comparing these two systems in the wild, yeah, great
points man. The way I think of it as There's
been a debate very recently in Bitcoin about, is there going to
be Credit in a Bitcoin standard? You know what form of credit is
there going to be as it could be commodity, credit circulation,
credit, you know, all these different things and people
think that credit is bad in a way but it's not.
I look at credit as that is actual Capital allocation
happening. You know, it's some guy taking
his money and giving it to another person.
That is better. He's allocating the capital and
that entrepreneur is doing the business, right?
So that's capital, allocation. There has to be Credit in the
system, but in a credit-based money, there is no savings.
There is no savings because everything is Credit in the
first place. So you're taking credit and
you're either creating more credit or you are lending out
credit. That's all there is to it.
So that that's the problem and that's system works very well.
When the world is relatively peaceful, there's no world wars
going on. There's not a lot of trade Wars
going on. There's, you know, a lot of
expansion that could be had, right?
A lot of enemies out there, not a lot of enemies low low hanging
fruit in emerging markets and all that stuff, so that's when
that system works really well. But once all of that those
preconditions breakdown, then the the conditions for the
credit-based money also break down.
So that's why we're going. To eventually go back to sound
money just because those preconditions no longer work
anymore. So Man, this is and sound money
will give a better platform for measuring and evaluating and
extending proper credit into the future.
Oh yeah. Definitely, definitely.
Because then you're lending savings at least to a high
degree or lending savings and not creating new money out of
thin air. So so it's like credit with skin
in the game. Exactly.
Yeah. Interest rates will be higher.
Interest rates will be higher for sure.
Well, Again, the whole point here, is you want.
You want your money to reflect reality, because that's the best
way to allocate resources, is in order to either react to or
anticipate reality, so you need the most accurate tool possible.
Exactly. All right last story here we
have is about GDP and Chris can we bring up slide number 8 GDP
was revised upwards again so this is Q 3.
They go through three revisions they have one or two revisions
they have one release which you can see in this highlighted box.
That's the first one then they revised it a little bit up in
their first revision and now we have the second and final
revision for Q3 GDP and it is a little bit higher.
Still I want to read out a little bit from this story here.
And let me just get the proper place here, the update from the
second estimate reflected upward revisions to consumer spending
which rose 2.3 percent in Q3 from 1.7 in the previous
estimate and up from 2% in Q2 as well as upward revisions to
business investment, and state and local government that were
partly offset by downward revisions to inventory
investment. It and exports looking at the
bigger picture to the third quarter increase in Real GDP.
Reflected increases in exports, consumer spending business
investment, and government spending that were partly offset
by decreasing or decreases in housing investment, and
inventory investment Imports which are a subtraction in the
calculation of GDP decreased. Alright.
And then I wanted to do one more chart and that is The next slide
Chris, please. This is showing How these kind
of move here and I did have to expand it out.
So it's a little bit blurred, but you can see it's quarter to
quarter change in prices. The top line is gross, domestic
purchases. The dashed blue line, is gross,
domestic purchases, excluding food and energy, then the orange
solid line is pce. That is like CPI but it's the
one that the FED uses and the government usually uses for
things like real GDP is nominal GDP - inflation or - pce.
So this is the what they use, the dashed orange line is core
pce. So what one thing I said about,
I don't know, maybe six months ago, Was that the rest of the
year was going to be a race between inflation dropping or,
you know, CPI these price index is dropping versus nominal GDP
dropping. And you can see in this right
here from Q2 Q3, we had a steep decline in nominal.
GDP, that's the blue solid blue line.
So from basically eight and a half percent down to 5%.
It is a very steep decline in actual nominal, GDP.
It feels like a recession, right?
It's four and a half percent decline in nominal GDP.
But what else happened was pce or the inflation index dropped
even faster. And so, we had this huge drop,
the ability to force, real GDP into the positive territory.
So that's what I have to say. About this.
I think it's going to continue. Fourth quarter will probably see
something very similar with nominal GDP dropping again, but
the pce is going to drop further still.
So it's kind of a race between nominal GDP and inflation and
it's going to end up where real GDP is positive.
So CK, what are your thoughts on GDP as a measurement?
It's kind of a crap measurement. But what's your thoughts on
this? The revision process and all
that? Who?
Well, I mean, just trying to make make sense of everything
here, you know, really what you're into.
If you're just like looking through this pce has always kind
of been less than GDP and therefore, as long as it stays
below, there's going to be some sort of positive GDP numbers.
Even though, even though from like an overall, like growth
percentage perspective, it slower is that kind of what
you're explaining. And yes, I mean this blue line
isn't exactly nominal GDP because this is just gross
domestic purchases and there's other things like Imports that
are factored into actual nominal GDP.
But this kind of shows that economic activity slow down
dramatically but so did the pce index and that's why we have the
prices. Yeah, yep.
And that a lot of that is baked into.
That is is energy. and because you can see that if you exclude
energy and food, you know, it's relatively flat So I mean is
there a point? So do you think that energy and
food prices continue to drop or DC pce starting to flatten for
the u.s.? I think that energy and food
will probably start coming back down but in other parts of the
country or a sorry, other parts of the world is not going to be
like that. I think they're going to have
continued higher prices, may be continued, price increases in
energy and food. But the u.s. specifically, I
think we can see flat to down on those, you know, non-core
things. Yep.
Not make sense. Absolutely makes sense.
Alright, and so whole this been a technical and information
packed show. Thank you for breaking down some
of these Advanced topics for your boy, I appreciate it.
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