1 00:00:05,100 --> 00:00:08,700 Welcome back everyone. I am Caspian Sea. 2 00:00:08,700 --> 00:00:12,400 I'm joined as usual with my partner in crime Bennett Tomlin. 3 00:00:12,400 --> 00:00:14,100 How are you today? I'm doing well. 4 00:00:14,100 --> 00:00:17,100 Cass, how are you? I'm fighting internet problems 5 00:00:17,100 --> 00:00:20,800 but other than that, I'm great. We're joined by an extra-special 6 00:00:20,800 --> 00:00:24,300 guest again today. Travis Kimmel, how are you? 7 00:00:24,600 --> 00:00:26,700 I'm good. Thanks for having me on. 8 00:00:26,900 --> 00:00:30,400 What's the preferred title? Right now that you're going By 9 00:00:31,700 --> 00:00:34,400 Barrel or it, right? That's the Twitter moniker 10 00:00:34,800 --> 00:00:37,200 Twitter sign me that and I just rolled with it. 11 00:00:37,500 --> 00:00:39,900 If you want to go by bear Lord, we can jump right into it on, 12 00:00:39,900 --> 00:00:41,200 that note, really? Yeah. 13 00:00:41,200 --> 00:00:42,400 Let's do it. Yeah. 14 00:00:42,600 --> 00:00:47,700 So obviously, I think all three of us are very skeptical of all 15 00:00:47,700 --> 00:00:51,000 things cryptocurrency, but really what? 16 00:00:51,000 --> 00:00:55,300 I enjoy about your feed. Our, your macro takes because I 17 00:00:55,500 --> 00:01:00,800 don't understand macro markets as well as you do and Given 18 00:01:00,800 --> 00:01:04,599 where we're at right now with the economy with everyone, 19 00:01:04,599 --> 00:01:10,100 really, I guess livid with Jerome, Powell and Janet Yellen, 20 00:01:10,100 --> 00:01:13,800 and the government in general, it might be good to hear. 21 00:01:14,100 --> 00:01:16,900 Kind of like your understanding of what's going on with the 22 00:01:16,900 --> 00:01:19,100 dollar. What's going on with bonds? 23 00:01:19,100 --> 00:01:22,500 What's, you know, with yields and all this stuff. 24 00:01:22,500 --> 00:01:25,500 So let's start with your dollar takes, which you're pretty 25 00:01:25,500 --> 00:01:28,800 famous for, what's your, what's your current take on the, the US 26 00:01:28,800 --> 00:01:33,900 dollar Well, I am sort of of the opinion that the dollar holds 27 00:01:33,900 --> 00:01:36,700 this really interesting place in the financial system. 28 00:01:36,700 --> 00:01:39,300 You know, it's the reserve currency and if you look back 29 00:01:39,400 --> 00:01:43,000 historically at what the de facto Reserve, currency is at 30 00:01:43,000 --> 00:01:45,700 any point in time. It just has a lot of impact on 31 00:01:45,700 --> 00:01:48,100 kind of everything. And we, you know, in the 32 00:01:48,107 --> 00:01:51,700 previous like big cycle, people talk about these like big, like 33 00:01:51,700 --> 00:01:54,500 the biggest macro cycles of these big debt cycles and, you 34 00:01:54,500 --> 00:01:57,800 know, all that good stuff in the previous cycle, the reserve 35 00:01:57,800 --> 00:02:01,000 currency was arguably go. Old because everything was sort 36 00:02:01,000 --> 00:02:04,100 of, everyone's sort of measured the value of currencies against 37 00:02:04,100 --> 00:02:07,000 gold. And there's a long tradition of 38 00:02:07,000 --> 00:02:08,199 gold. Of course, being used as a 39 00:02:08,208 --> 00:02:11,700 reserve asset, and then over the course of the last, you know, 40 00:02:11,700 --> 00:02:14,900 100 150 years. There's been this slow migration 41 00:02:14,900 --> 00:02:19,600 away from gold as the reserve asset which started with 42 00:02:19,600 --> 00:02:22,500 everybody saying, Well what we'll do is we'll just be we'll 43 00:02:22,500 --> 00:02:25,900 just say we'll be able to exchange the dollar for gold and 44 00:02:25,900 --> 00:02:28,000 then we'll measure everything against the dollar and all was 45 00:02:28,000 --> 00:02:31,100 well and good in the land and then That caused some problems 46 00:02:31,100 --> 00:02:34,100 which like, you know, historians like to dig deep on basically 47 00:02:34,100 --> 00:02:38,300 hard currencies, you know, you go through these phases where 48 00:02:38,600 --> 00:02:42,000 the economy and the population will grow and there's like kind 49 00:02:42,000 --> 00:02:45,200 of not enough money to go around and sometimes that was fixed by 50 00:02:45,200 --> 00:02:47,100 like a gold rush. Like you would just literally go 51 00:02:47,300 --> 00:02:50,200 out into the world and discover more collateral and that was 52 00:02:50,200 --> 00:02:52,200 really useful. This most recent time we 53 00:02:52,200 --> 00:02:56,200 basically just sort of ditched gold and the dollar became the 54 00:02:56,200 --> 00:02:58,200 thing that everybody measured things against. 55 00:02:58,200 --> 00:03:01,700 And so if you look at how we've All you Sovereign currency is a 56 00:03:01,708 --> 00:03:05,700 lot of that is kind of their access to dollars, right? 57 00:03:05,900 --> 00:03:09,200 So like it destroy people store. Treasuries treasuries, are these 58 00:03:09,200 --> 00:03:13,500 large actors arbitraging. Their future need four dollars. 59 00:03:13,900 --> 00:03:17,000 And so I like to look at the at the dollar as if it's this big 60 00:03:17,000 --> 00:03:20,100 commodity market. Like if you think about how 61 00:03:20,200 --> 00:03:23,700 loyal works, the reason we have oil Futures is because these big 62 00:03:23,700 --> 00:03:26,500 producers can go ARB their their production. 63 00:03:26,600 --> 00:03:29,600 They can say, I'm going to sell December contracts right now. 64 00:03:29,600 --> 00:03:31,900 For Delivery because I know we're going to have predictable 65 00:03:31,900 --> 00:03:34,400 production in December and I want to lock in the price right 66 00:03:34,400 --> 00:03:38,600 now and so they go and they basically sell December oil for 67 00:03:38,600 --> 00:03:40,600 delivery and they plan to just deliver it like they're not 68 00:03:40,600 --> 00:03:43,500 traitors, they're just trying to run their PL in a way you know 69 00:03:43,500 --> 00:03:46,500 it's really disciplined and so these commodity markets, allow 70 00:03:46,500 --> 00:03:50,100 producers 2D risk their delivery and they allow people who like a 71 00:03:50,100 --> 00:03:52,500 Refinery. You needs to buy it. 2D risk the 72 00:03:52,500 --> 00:03:54,500 future costs and that's all very useful. 73 00:03:54,800 --> 00:03:58,400 And in the currency markets you see big actors are effectively 74 00:03:58,400 --> 00:04:02,400 able to D risk their entire UDP. So like a sovereign can have a 75 00:04:02,400 --> 00:04:05,000 weird Delta in their balance of trade and they'll be they'll 76 00:04:05,000 --> 00:04:07,600 need dollars. They'll be or they'll have extra 77 00:04:07,600 --> 00:04:10,700 dollars in the use the treasury market to do that because the 78 00:04:10,708 --> 00:04:12,700 treasury market is the price of forward. 79 00:04:12,700 --> 00:04:15,400 Money, I find all this stuff. Super fascinating, you know, 80 00:04:15,400 --> 00:04:19,500 like effectively the dollar and treasuries hold the position in 81 00:04:19,500 --> 00:04:23,500 the current economic system that gold used to historically and 82 00:04:23,500 --> 00:04:26,500 that's kind of the basis. For all of my funny little macro 83 00:04:26,500 --> 00:04:30,100 takes on Twitter is this notion that the Keystone to all of 84 00:04:30,100 --> 00:04:33,100 Economics right now is the dollar and when you see the 85 00:04:33,100 --> 00:04:37,400 dollar strengthening, that is an interesting thing to look at. 86 00:04:37,400 --> 00:04:40,400 In the perspective of these stable coins, be a stable coins 87 00:04:40,400 --> 00:04:43,700 have have made this claim that they're worth a dollar and it's 88 00:04:43,700 --> 00:04:46,400 actually very hard to be worth a dollar. 89 00:04:46,400 --> 00:04:48,900 If you don't just like have a dollar, right? 90 00:04:49,000 --> 00:04:50,200 They haven't proven that they do. 91 00:04:50,200 --> 00:04:53,200 I mean, what one might imagine that they would have, you know, 92 00:04:53,200 --> 00:04:54,800 short-dated debt which would be fine. 93 00:04:54,800 --> 00:04:57,700 This is a common way to do it. You have like, you know, cash 94 00:04:57,700 --> 00:04:59,800 equivalents are like very short dated debt safe. 95 00:04:59,900 --> 00:05:02,100 Three months, right? So you're not taking a lot of 96 00:05:02,100 --> 00:05:04,900 risk on the duration of these things and they're very liquid. 97 00:05:04,900 --> 00:05:07,100 And you can exchange them for dollars whenever you need if 98 00:05:07,100 --> 00:05:10,300 people come in and have a bunch of redemptions on your stable 99 00:05:10,300 --> 00:05:13,400 coin and they're like, yeah, we want dollars short-dated debt is 100 00:05:13,400 --> 00:05:15,600 really effective way to do that, that's very low risk. 101 00:05:15,600 --> 00:05:19,000 In the treasuries, treasuries are considered to have no 102 00:05:19,000 --> 00:05:20,800 default risk at all, right? Governments? 103 00:05:20,800 --> 00:05:23,600 Don't default, that's just sort of the end of that government. 104 00:05:23,600 --> 00:05:27,100 It's so treasuries, we assume the United States is not going 105 00:05:27,100 --> 00:05:31,700 to just end their default free. And then there is duration risk. 106 00:05:31,700 --> 00:05:34,600 The farther out, you go because the base value of these things 107 00:05:34,600 --> 00:05:36,900 can change. And if you are in a situation 108 00:05:36,900 --> 00:05:39,400 where your for seller because people come in and they want 109 00:05:39,400 --> 00:05:41,900 their money back, you don't want to be a force seller on 110 00:05:41,900 --> 00:05:45,100 something with long duration, because it might not be worth as 111 00:05:45,100 --> 00:05:47,200 much as you think it is, depending on where rates are and 112 00:05:47,200 --> 00:05:49,900 all that good stuff. And so I'm sort of a dollar 113 00:05:49,900 --> 00:05:52,800 fatalist rather than a maximalist. 114 00:05:52,800 --> 00:05:56,300 I just think it's inevitable whenever we take on a bunch of 115 00:05:56,300 --> 00:05:59,200 dollar-denominated debt, you have to pay all that debt back 116 00:05:59,200 --> 00:06:01,200 at the base value. Plus a little bit, like, 117 00:06:01,200 --> 00:06:04,200 whatever the interest is. And so there's this constant 118 00:06:04,200 --> 00:06:07,900 sort of insolvency grind that happens across all of the 119 00:06:07,900 --> 00:06:09,800 economy, not specific to stable coins. 120 00:06:10,000 --> 00:06:15,800 But in regulated markets, There are rules about how you say, you 121 00:06:15,800 --> 00:06:18,600 have something worth a dollar. It basically has to be backed 122 00:06:18,600 --> 00:06:22,800 by, you know, a level of these short data, treasuries or cash. 123 00:06:23,200 --> 00:06:28,100 And I think that there is a an open question as to whether the 124 00:06:28,100 --> 00:06:31,900 stable coins are doing at and so I The main reason I pay so much 125 00:06:31,900 --> 00:06:34,500 attention to the dollar in the context of crypto specifically 126 00:06:34,500 --> 00:06:37,800 is that, you know if the dollar appreciates by 5% as has 127 00:06:37,800 --> 00:06:40,300 recently, you kind of Wonder like how are they how are they 128 00:06:40,300 --> 00:06:42,800 be risking that like how are these claims that we see on the 129 00:06:42,800 --> 00:06:47,100 screen that Bitcoin is worth X? Widgets worth a dollar being 130 00:06:47,100 --> 00:06:51,100 backed and so I'm continually fascinated by that aspect of of 131 00:06:51,100 --> 00:06:54,300 crypto markets and expect that we will see a big insolvency 132 00:06:54,300 --> 00:06:57,100 grind both in in like the regular markets. 133 00:06:57,200 --> 00:06:59,000 And you know the yield curve is sort of hinting at that. 134 00:06:59,000 --> 00:07:02,600 I can t keep Laughing which predates recessions and then if 135 00:07:02,600 --> 00:07:05,900 it turns out these claims are not adequately back by dollars, 136 00:07:06,200 --> 00:07:09,400 you would expect to see some know, some pretty impressive 137 00:07:09,400 --> 00:07:12,600 fireworks. One thing you mentioned there 138 00:07:12,600 --> 00:07:16,000 that strike out to me, was how difficult it is to create 139 00:07:16,000 --> 00:07:18,900 something that reliably mimics the dollar and this is true. 140 00:07:18,900 --> 00:07:22,000 Even for more regulated entities like money market funds. 141 00:07:22,200 --> 00:07:25,700 Like in 2008, the prime money market fund broke the buck and 142 00:07:25,800 --> 00:07:28,900 basically blew up when Lehman Brothers was unable to roll 143 00:07:28,900 --> 00:07:31,100 their commercial paper. / after all that went. 144 00:07:31,100 --> 00:07:35,600 Yeah and I think it's plausible that at least the largest stable 145 00:07:35,600 --> 00:07:39,500 coin probably has paper and things on its books that are 146 00:07:39,900 --> 00:07:43,200 meaningfully riskier than Lehman Brothers appeared, before they 147 00:07:43,200 --> 00:07:47,200 were unable to roll their paper. And so it has always struck me 148 00:07:47,200 --> 00:07:49,600 as they are. They're in a very tenuous 149 00:07:49,600 --> 00:07:52,600 position that can get increasingly difficult. 150 00:07:53,000 --> 00:07:54,300 Yeah. I think so. 151 00:07:54,300 --> 00:07:56,900 And and part of the way to think through that is to think of the 152 00:07:56,900 --> 00:07:59,200 incentives of, like, let's imagine we were to start a money 153 00:07:59,200 --> 00:08:00,900 market fund. And we're going to do it in a 154 00:08:00,907 --> 00:08:03,200 way that's totally non-regulated, because that's 155 00:08:03,200 --> 00:08:05,200 awesome. So, we, so, we spin up some 156 00:08:05,200 --> 00:08:07,800 account and, you know, some little island somewhere. 157 00:08:08,200 --> 00:08:10,200 And we're like, okay, well we're going to take in. 158 00:08:10,300 --> 00:08:13,400 We're going to issue these sort of like units of account worth a 159 00:08:13,407 --> 00:08:16,000 dollar shares or whatever. I mean in with tokens it's 160 00:08:16,000 --> 00:08:19,700 obviously a token and then we're going to take in money but we 161 00:08:19,700 --> 00:08:23,300 our goal is to make a yield. So if we are if we are doing 162 00:08:23,300 --> 00:08:27,400 that in sort of a safe regulated environment you know the the one 163 00:08:27,400 --> 00:08:28,800 year we get it. Okay. 164 00:08:28,800 --> 00:08:32,100 Yeah let's say we had A billion dollars and we're going to get 165 00:08:32,100 --> 00:08:34,900 like one percent off of that because we're investing in, you 166 00:08:34,900 --> 00:08:37,400 know, and treasury is that are they're offering us one percent, 167 00:08:37,400 --> 00:08:41,600 that's not bad, but you can go out there and Source riskier 168 00:08:41,600 --> 00:08:44,800 paper and get a fatter yield. And if you're in an unregulated 169 00:08:44,800 --> 00:08:47,700 environment, there's just sort of this constant draw to go do 170 00:08:47,700 --> 00:08:49,700 that, right? So, you could go get commercial 171 00:08:49,700 --> 00:08:52,100 paper from some of these like big Chinese real estate 172 00:08:52,100 --> 00:08:55,400 companies that are paying significantly more and then 173 00:08:55,400 --> 00:08:58,700 Arbitrage the currency risk and Futures are, you know, currency 174 00:08:58,700 --> 00:09:01,800 markets and there's This constant incentive to do that. 175 00:09:01,800 --> 00:09:04,900 And so I suspect like the business model even if we assume 176 00:09:04,900 --> 00:09:09,000 that this is a money market fund that is, you know, relatively 177 00:09:09,000 --> 00:09:12,600 good actors, unless you have regulatory pressure to do this 178 00:09:12,600 --> 00:09:15,400 in a super Safe Way with Regulators looking at and 179 00:09:15,400 --> 00:09:17,900 saying, well we don't want the sir actually hurt the financial 180 00:09:17,900 --> 00:09:19,800 system. And have you be in the position 181 00:09:19,800 --> 00:09:22,100 where you have to liquidate a ton of debt really quickly 182 00:09:22,500 --> 00:09:25,100 because that can get weird if you don't have that regulatory 183 00:09:25,100 --> 00:09:30,000 impulse, I think there is a constant capitalist incentive To 184 00:09:30,000 --> 00:09:34,500 get a little riskier, right to go out, get some paper even from 185 00:09:34,500 --> 00:09:37,900 other sovereigns, perhaps, or paying higher yield, because 186 00:09:37,900 --> 00:09:40,300 it's riskier paper and I would suspect that there's some of 187 00:09:40,308 --> 00:09:42,100 that going on. I mean, of course, you know, 188 00:09:42,100 --> 00:09:44,200 we're working in the dark here, like there's no there's no 189 00:09:44,208 --> 00:09:46,200 actual proof. Either way what's happening here 190 00:09:46,500 --> 00:09:50,000 but the incentives make me suspect that there's this lure 191 00:09:50,000 --> 00:09:53,700 to go yield Farm particularly since that's a conversation that 192 00:09:53,700 --> 00:09:56,200 always happens in crypto. Like how do we go out and farm a 193 00:09:56,200 --> 00:09:59,300 little more yield and love to see that stuff? 194 00:09:59,300 --> 00:10:02,600 Get It so that we could so that we can think about these stables 195 00:10:02,600 --> 00:10:05,200 in a way where we're like, you know, what is the actual risk 196 00:10:05,200 --> 00:10:07,600 you're taking on? If you're holding a bunch of 197 00:10:07,608 --> 00:10:10,700 tether, even for trading purposes temporarily and in the 198 00:10:10,700 --> 00:10:14,000 absence of an audit on that front, I think the best way to 199 00:10:14,000 --> 00:10:17,500 look at this ecosystem is as if crypto and Stables all this as a 200 00:10:17,500 --> 00:10:21,800 whole are almost a uniform singular entity and the thing 201 00:10:21,800 --> 00:10:24,700 that will cause that to come under pressure is if there is a 202 00:10:24,700 --> 00:10:28,500 dollar Redemption, impulse to comes along for whatever reason, 203 00:10:28,500 --> 00:10:31,500 usually Conditions sighting in like people need their money 204 00:10:31,500 --> 00:10:35,200 until people need to Source real dollars out of this ecosystem. 205 00:10:35,200 --> 00:10:38,600 It's not clear to me that there's a problem like, you 206 00:10:38,600 --> 00:10:41,600 know, there's a latent problem, but it doesn't really become an 207 00:10:41,600 --> 00:10:44,900 active present problem until this entire ecosystem as a whole 208 00:10:44,900 --> 00:10:48,600 has to go Source these dollars. And until that point, you can 209 00:10:48,600 --> 00:10:51,800 sort of issue these as if dollars and allow people to 210 00:10:51,800 --> 00:10:54,300 trade back and forth and and everything's kind of fine. 211 00:10:54,300 --> 00:10:57,400 And I think this is the reason that people have a tendency to 212 00:10:57,400 --> 00:11:02,300 call it a Ponzi scheme, I don't really know that that is a 213 00:11:02,500 --> 00:11:04,900 strictly accurate definition. Like, we're being really 214 00:11:04,900 --> 00:11:07,100 pedantic. It's probably not a Ponzi scheme 215 00:11:07,400 --> 00:11:09,900 because it's a group of actors who were kind of all in it 216 00:11:09,900 --> 00:11:13,600 together and there's no overriding entity like, you 217 00:11:13,600 --> 00:11:16,200 know, scamming everyone. It's sort of like, people are 218 00:11:16,200 --> 00:11:20,500 cold, are creating a distributed Collective belief that these 219 00:11:20,500 --> 00:11:23,700 tokens are worth a dollar and investing in that idea and 220 00:11:23,700 --> 00:11:28,200 trading them in an, as if fashion, that is probably not, 221 00:11:28,200 --> 00:11:31,000 sufficiently found it, but You're so the discussion of 222 00:11:31,000 --> 00:11:32,800 rates actually brings up a good point. 223 00:11:32,800 --> 00:11:36,700 Because I remember, as rates were cratering out, that 224 00:11:36,700 --> 00:11:39,900 everyone started talking about how this presented, a really 225 00:11:39,900 --> 00:11:44,000 weird problem for stable coins in general, because they were no 226 00:11:44,000 --> 00:11:45,700 longer especially, I don't even know. 227 00:11:45,700 --> 00:11:48,900 Did rates actually hits zero in Europe. 228 00:11:49,100 --> 00:11:52,600 Yeah, they depends on yes. It depends on where in the 229 00:11:52,600 --> 00:11:55,900 curve, but yeah, like, for instance, there's Euro tethers, 230 00:11:55,900 --> 00:11:57,700 right? And so, if all of those Euro, 231 00:11:57,700 --> 00:12:02,800 two, others were held in, like, in some European bonds, ECB 232 00:12:02,800 --> 00:12:06,600 related stuff or whatever. The yields they would be getting 233 00:12:06,600 --> 00:12:10,100 would just be rock bottom and that presented it. 234 00:12:10,200 --> 00:12:11,900 You had to look at it as like, okay. 235 00:12:11,900 --> 00:12:13,900 So they do have to go find yield somewhere. 236 00:12:13,900 --> 00:12:17,800 What are they going to do? But now, with everyone talking 237 00:12:17,800 --> 00:12:22,100 again about the fed and now hiking rates at some point is 238 00:12:22,100 --> 00:12:26,000 the Assumption with them. The Assumption being that these, 239 00:12:26,000 --> 00:12:29,200 these stable coins did go out and find riskier. 240 00:12:29,700 --> 00:12:33,800 Assets during that period, where rates were so low is is the 241 00:12:34,400 --> 00:12:38,800 running idea that they would just unwind those positions and 242 00:12:38,800 --> 00:12:43,200 then go to something less risk on as rates increase or 243 00:12:43,200 --> 00:12:46,200 something? I wonder, I wonder what the 244 00:12:46,200 --> 00:12:50,100 possible problems could be with the rate hikes occurring. 245 00:12:50,600 --> 00:12:54,300 This stuff ends up being financed is hard and it's part 246 00:12:54,300 --> 00:12:57,600 of why we regulate it so that there are there's a good 247 00:12:57,600 --> 00:12:59,600 framework for actors who want to be good actors. 248 00:12:59,800 --> 00:13:01,600 Space. I mean I you know I'll take the 249 00:13:01,700 --> 00:13:04,200 sort of bull case on stable coins here for a minute and say 250 00:13:04,400 --> 00:13:09,300 I think it's entirely possible to run a really really smart and 251 00:13:09,400 --> 00:13:12,000 disciplined stable Point like that seems totally possible to 252 00:13:12,000 --> 00:13:13,900 me. It's basically just like a money 253 00:13:13,900 --> 00:13:16,900 market on different rails and I think you can make the argument 254 00:13:16,900 --> 00:13:18,400 that those rails might even be better. 255 00:13:18,500 --> 00:13:21,300 And I think, what we're really missing here is a regulatory 256 00:13:21,300 --> 00:13:23,300 framework to ensure that that's the case. 257 00:13:23,500 --> 00:13:26,400 And when we think about like what is the natural effect of 258 00:13:26,400 --> 00:13:30,600 your braids going up, while when rates go up, you get More yield 259 00:13:30,600 --> 00:13:32,600 but the base value that paper goes down. 260 00:13:32,800 --> 00:13:37,400 So as rates, go up the amount that you can sell that debt for 261 00:13:37,600 --> 00:13:40,200 in the moment goes down. And so this is how you get this 262 00:13:40,200 --> 00:13:43,700 sort of like run on the bank type of thing with debt. 263 00:13:43,900 --> 00:13:46,900 We're like, let's say you bought a bunch of paper for a million 264 00:13:46,900 --> 00:13:49,300 dollars and you're getting one percent and all of a sudden that 265 00:13:49,300 --> 00:13:52,500 papers yielding two percent. Well, depending on the duration 266 00:13:52,500 --> 00:13:54,800 of it, it's going to be worth a lot less, right? 267 00:13:54,900 --> 00:13:57,800 Like if you're buying 10-year paper, it's going to be worth 268 00:13:57,800 --> 00:13:59,600 somewhere in the neighborhood of 10 percent less. 269 00:14:00,100 --> 00:14:03,500 The math is a little more subtle than that and so if a bunch of 270 00:14:03,508 --> 00:14:06,300 people come in for redemptions, you're going to need to sell 271 00:14:06,300 --> 00:14:08,700 more of that paper. You're going to sell 110, 272 00:14:08,700 --> 00:14:13,200 percent of what you bought when that when those redemptions come 273 00:14:13,200 --> 00:14:15,800 in and at a certain point you just run out like you don't have 274 00:14:15,800 --> 00:14:18,400 sufficient backing to do all these redemptions. 275 00:14:18,500 --> 00:14:23,000 Now if we imagine an actor in that position, the thing that 276 00:14:23,000 --> 00:14:26,000 you would want to do is really encourage people not to redeem 277 00:14:26,400 --> 00:14:30,700 so that this insolvency stays hidden and And you'll note that 278 00:14:30,700 --> 00:14:34,000 this, you know, the whole little behavior in crypto is this is 279 00:14:34,000 --> 00:14:37,400 the sort of mechanized cultural reinforcement that you never 280 00:14:37,400 --> 00:14:39,900 sell. And if you get enough people to 281 00:14:39,900 --> 00:14:43,900 believe that, the insolvency could remain invisible for a 282 00:14:43,900 --> 00:14:46,800 very, very long time. I mean, arguably forever, like 283 00:14:46,800 --> 00:14:49,400 there is a scenario in which this just never becomes a 284 00:14:49,400 --> 00:14:51,300 problem. I don't really believe in that 285 00:14:51,400 --> 00:14:53,600 because these things have a way of working themselves out, but 286 00:14:53,600 --> 00:14:56,000 it's really about the fluctuation of that, the base 287 00:14:56,000 --> 00:14:59,600 value of of those bonds at a time when you would effectively, 288 00:14:59,700 --> 00:15:03,100 Be a for seller because people are demanding their their money 289 00:15:03,100 --> 00:15:05,900 back and you see this even in being, you know, public 290 00:15:05,900 --> 00:15:09,100 companies or anybody who's running a treasury, really? 291 00:15:09,500 --> 00:15:11,100 There's a limit to how far out the risk curve. 292 00:15:11,100 --> 00:15:14,400 They'll go even on very safe risk freaked out because they 293 00:15:14,400 --> 00:15:17,500 don't want to be in a position where they need that money and 294 00:15:17,500 --> 00:15:19,800 they don't have it. And so, if you're a corporation 295 00:15:19,800 --> 00:15:24,000 and you have say a five year plan on your PML, there's 296 00:15:24,000 --> 00:15:27,000 probably an argument where you ought to go ladder your bonds 297 00:15:27,000 --> 00:15:29,100 outright lie, consider storing, a treasury entirely. 298 00:15:29,100 --> 00:15:31,100 And Us. Treasuries, you could 299 00:15:31,100 --> 00:15:34,100 theoretically project, your Capital needs out 5 years for 300 00:15:34,100 --> 00:15:36,300 all the cash that you have and then go into a bond ladder, over 301 00:15:36,300 --> 00:15:39,400 five years and get a little more yield in the five-year, right? 302 00:15:39,400 --> 00:15:42,100 Because you're essentially making it back, like we won't 303 00:15:42,100 --> 00:15:45,900 need that cash and I think that's probably okay if you're 304 00:15:45,900 --> 00:15:48,500 right, but, if you get caught out and you need to redeem that 305 00:15:48,500 --> 00:15:52,000 like you're going to show a loss because you found yourself in a 306 00:15:52,500 --> 00:15:55,400 solvency crisis at a time when you didn't anticipate it. 307 00:15:55,800 --> 00:15:58,000 And so I think, you know, when we look at crypto, there's this 308 00:15:58,000 --> 00:16:02,200 question of how risky are Are these treasuries these big pools 309 00:16:02,600 --> 00:16:05,700 being with their Capital allocation again if we just 310 00:16:05,700 --> 00:16:08,300 presume that they're good actors which is not at all. 311 00:16:08,300 --> 00:16:11,300 Given, how risky are they being with that Capital allocation and 312 00:16:11,300 --> 00:16:13,500 how much finesse do they have with deploying it? 313 00:16:13,500 --> 00:16:15,000 I mean, theoretically to your question. 314 00:16:15,400 --> 00:16:18,000 Yeah. They could start to go more into 315 00:16:18,000 --> 00:16:21,300 these safer assets, that yield a little bit more, as rates go up. 316 00:16:21,500 --> 00:16:24,700 But that presumes that they were able to time the other debt that 317 00:16:24,700 --> 00:16:27,100 they were holding when it was cheap. 318 00:16:27,100 --> 00:16:30,900 Hold cash for a while, right? I mean like If they can do that 319 00:16:31,300 --> 00:16:33,900 then sure it's all gravy but that's a fairly sophisticated 320 00:16:33,900 --> 00:16:37,200 level of Finance. I mean, I know, you know, you 321 00:16:37,200 --> 00:16:40,800 look around Twitter and like a lot of people did not get the 322 00:16:40,800 --> 00:16:43,000 moves and rates all that correct. 323 00:16:43,200 --> 00:16:46,200 I mean just people running normal, you know, basic funds, 324 00:16:46,200 --> 00:16:48,800 people who are really good at trading fixed income and so you 325 00:16:48,800 --> 00:16:50,500 have to look at these tablecloths, you look how their 326 00:16:50,500 --> 00:16:53,700 staff and it's like do we really think they have a full 327 00:16:53,700 --> 00:16:58,000 complement of staff there that are experts and fixed income and 328 00:16:58,000 --> 00:17:00,800 trading that better? Or than a lot of these big 329 00:17:00,800 --> 00:17:04,200 fixed-income shops and I just I think that's strains. 330 00:17:04,200 --> 00:17:06,200 The bounds of reason at a certain point. 331 00:17:06,900 --> 00:17:08,700 We don't the other things you mentioned. 332 00:17:08,700 --> 00:17:11,800 That is one of the most striking things about Tethered to me at 333 00:17:11,800 --> 00:17:16,000 this point is the incentive to go out and find higher yields, 334 00:17:16,000 --> 00:17:17,900 Zeke Fox and his reporting for Bloomberg. 335 00:17:17,900 --> 00:17:21,599 Businessweek mentioned that John bets told him that Juan Carlo 336 00:17:21,599 --> 00:17:23,800 Davis. Any back in 2017 said he was 337 00:17:23,800 --> 00:17:26,700 interested in going out and finding ways to earn a bunch 338 00:17:26,700 --> 00:17:29,600 more on the tether reserves. We've now seen their ass. 339 00:17:29,800 --> 00:17:33,300 Breakdowns, which give us limited but some information 340 00:17:33,300 --> 00:17:36,600 that suggests they've found ways to increase their yield, but one 341 00:17:36,600 --> 00:17:40,400 of the inexplicable things is that the advantage? 342 00:17:40,400 --> 00:17:42,800 If you're trying to maintain as it to a dollar of going after 343 00:17:42,800 --> 00:17:45,400 higher heel is that you can generate more dollars? 344 00:17:45,400 --> 00:17:48,800 And keep them. So that when your risk your debt 345 00:17:48,800 --> 00:17:52,000 starts to decrease in value, you've still got some dollars to 346 00:17:52,000 --> 00:17:54,600 cover that. However, the tether like assets 347 00:17:54,600 --> 00:17:58,100 over liabilities, that cushion that they should be getting from 348 00:17:58,100 --> 00:18:01,500 the increase yield their Rating does not ever go up. 349 00:18:01,700 --> 00:18:05,800 And so yeah, these stable coins were at least bi-stable coin has 350 00:18:05,800 --> 00:18:10,100 put itself in a position where they're exposed to this higher 351 00:18:10,100 --> 00:18:14,300 risk debt, but do not have the benefit of the additional 352 00:18:14,300 --> 00:18:17,800 dollars generated from it to protect their principle which 353 00:18:17,800 --> 00:18:22,700 seems to enhance the risk of things going, south totally. 354 00:18:22,700 --> 00:18:25,300 I mean one of the most interesting studies you know a 355 00:18:25,308 --> 00:18:28,100 lot of stuff is going on here is like it's stuff that happens in 356 00:18:28,100 --> 00:18:31,100 other markets, right? So If you look at these 357 00:18:31,100 --> 00:18:33,600 peer-to-peer lending platforms, they're fascinating. 358 00:18:33,600 --> 00:18:37,500 I mean, a lot of them are offering peer-to-peer unsecured 359 00:18:37,500 --> 00:18:40,000 Consumer Debt. So unsecured Consumer Debt is 360 00:18:40,000 --> 00:18:42,300 nothing new, I mean, you know, happens in goodbye, credit cards 361 00:18:42,300 --> 00:18:44,600 do this. And part of the reason the rates 362 00:18:44,600 --> 00:18:47,500 on credit cards are high is that they're offering enough padding 363 00:18:47,500 --> 00:18:50,000 their to account for default and still make a profit. 364 00:18:50,200 --> 00:18:53,400 So if you have a pool of loans that the default that's like you 365 00:18:53,408 --> 00:18:58,100 know, risky risky landing and defaults at a 10% rate, but you 366 00:18:58,100 --> 00:19:02,100 can charge that pool of loans. It's 12%, then there's profit to 367 00:19:02,108 --> 00:19:04,100 be made there in aggregate, right? 368 00:19:04,100 --> 00:19:05,900 And this is the kind of stuff that lenders think about. 369 00:19:05,900 --> 00:19:09,300 And it's why, when rates get pushed really low, you see this 370 00:19:09,300 --> 00:19:13,400 become a wealth disparity accentuate, ER, because the 371 00:19:13,400 --> 00:19:18,200 lower rates, are the less room lenders have to Arbitrage these 372 00:19:18,200 --> 00:19:19,400 big pools. And so they're like, well, we're 373 00:19:19,400 --> 00:19:21,600 only going to lend the most solvent of borrowers. 374 00:19:21,800 --> 00:19:24,700 So the lower rates are the more you want to focus on solvency 375 00:19:24,700 --> 00:19:27,800 because you really don't have to your point this cushion to 376 00:19:27,800 --> 00:19:32,000 absorb defaults. So In a, in a low rate rate 377 00:19:32,000 --> 00:19:35,500 World, which were largely in eat, encourages lending to hyper 378 00:19:35,500 --> 00:19:38,500 solving people who don't really need the data's much. 379 00:19:39,000 --> 00:19:41,100 And if we look at the, what happens on these peer-to-peer 380 00:19:41,100 --> 00:19:44,500 platforms, you can decide who you want to lend to, and you can 381 00:19:44,500 --> 00:19:47,100 get really high yields. Make you get, twelve fifteen 382 00:19:47,100 --> 00:19:48,800 percent. But the reason you're getting 383 00:19:48,800 --> 00:19:51,200 this high yields is your lending to really risky borrowers. 384 00:19:51,600 --> 00:19:54,700 And over time, even this sort of peer-to-peer lending, there's 385 00:19:54,700 --> 00:19:57,700 like a proper rate of return. There you build a basket. 386 00:19:57,700 --> 00:19:59,300 You want me to watch? Boob different people with 387 00:19:59,300 --> 00:20:01,200 different Traits. But when you figure in the 388 00:20:01,200 --> 00:20:03,900 default rate and everything else, everybody ends up getting 389 00:20:03,900 --> 00:20:06,400 about the same amount of yield. And if you go, too far out that 390 00:20:06,400 --> 00:20:09,800 risk curve, even with a big Diversified pool, the default 391 00:20:09,800 --> 00:20:13,800 rate goes high enough that it's not a winning proposition that 392 00:20:13,800 --> 00:20:16,100 people just stop paying their, their loans down. 393 00:20:16,100 --> 00:20:19,700 And I think Americans live in a very Equity Centric mindset, 394 00:20:20,100 --> 00:20:22,800 which is very much all about the upside Equity. 395 00:20:22,800 --> 00:20:24,700 Is this funny, little beast where it is? 396 00:20:24,700 --> 00:20:27,300 There it is. A remainder that is left over 397 00:20:27,300 --> 00:20:29,600 after all the debts are settled. So, if you have a really 398 00:20:29,700 --> 00:20:33,700 Profitable business that doesn't have much debt then and they're 399 00:20:33,700 --> 00:20:36,600 generating a lot of money than the equity is worth a lot. 400 00:20:36,600 --> 00:20:40,200 Because you're getting a lot of excess after all this debt stuff 401 00:20:40,200 --> 00:20:42,700 is considered. And if you have a business that 402 00:20:42,700 --> 00:20:46,600 is this really debt-laden in the equity is going up. 403 00:20:46,700 --> 00:20:49,600 That's awesome, unless that business finds itself in a place 404 00:20:49,600 --> 00:20:52,300 where it becomes insolvent and then that equities with nothing. 405 00:20:52,600 --> 00:20:54,900 So Equity values whip around but they're very much. 406 00:20:54,900 --> 00:20:59,100 A bet Equity generally is a very much a bat on the upside, right? 407 00:20:59,200 --> 00:21:02,000 And Dead people. People invest largely in fixed 408 00:21:02,000 --> 00:21:04,600 income, live in a world where they're obsessed with the 409 00:21:04,600 --> 00:21:08,900 downside because the number one thing you want to prevent is 410 00:21:08,900 --> 00:21:12,100 alone defaulting that you try and get as many good loans as 411 00:21:12,100 --> 00:21:14,300 possible and minimize the ones that default. 412 00:21:14,300 --> 00:21:17,100 Because if you're making five percent yield on the pool, one 413 00:21:17,100 --> 00:21:20,500 of those loans going to 0, we have really kind of just as he 414 00:21:20,600 --> 00:21:22,700 leaves a huge hole in your book, right? 415 00:21:22,900 --> 00:21:27,400 So I think that the headset that people think about crypto with 416 00:21:27,400 --> 00:21:29,500 is very much this Equity mindset, right? 417 00:21:29,700 --> 00:21:33,000 The things gone up Bonkers, like everyone is sort of thinking 418 00:21:33,000 --> 00:21:35,900 about the upside more than the potential downside. 419 00:21:36,100 --> 00:21:40,500 But if, if underneath all of that interesting, you know, 420 00:21:40,500 --> 00:21:45,300 remainder upside there is this Iceberg of solvency the desert. 421 00:21:45,700 --> 00:21:49,500 It's an open question. I think you could see the value 422 00:21:49,500 --> 00:21:54,400 of these these tokens go to zero very very quickly because 423 00:21:54,400 --> 00:21:57,400 they're effectively a remainder on all of these implicit 424 00:21:57,400 --> 00:22:01,700 contracts, which are A promise to deliver dollars, right? 425 00:22:02,000 --> 00:22:05,100 Like tether when you're trading in tether or trading in USD, see 426 00:22:05,100 --> 00:22:07,500 your any one of these stable coins, there's an implied 427 00:22:07,500 --> 00:22:11,200 promise buried in there. Did that tether can be redeemed 428 00:22:11,200 --> 00:22:14,000 for a dollar. It's a death and everything, 429 00:22:14,000 --> 00:22:17,200 everything in finance, sort of rests on this notion of debt 430 00:22:17,200 --> 00:22:19,900 because their exchanges that happen, they're not necessarily 431 00:22:19,900 --> 00:22:22,600 in real time. So, like, yes, a Bitcoin is 432 00:22:22,600 --> 00:22:27,200 always worth a Bitcoin, but before the aggregate Bitcoin 433 00:22:27,200 --> 00:22:30,700 ecosystem can settle that. Bitcoin value. 434 00:22:30,700 --> 00:22:34,200 It may need to redeem a bunch of these stable coins at some point 435 00:22:34,200 --> 00:22:35,900 for people who want their money out. 436 00:22:36,100 --> 00:22:38,700 And like, I'm not sure how much money is in that ecosystem. 437 00:22:39,300 --> 00:22:42,700 Yeah, you and dubourg both mentioned that and I think it's 438 00:22:42,700 --> 00:22:46,200 interesting but I also I don't know I hearken back to the 439 00:22:46,200 --> 00:22:49,700 beginning of our conversation about dollars where if you look 440 00:22:49,700 --> 00:22:54,900 at dollars and you go back far enough, it's backed by gold and 441 00:22:54,900 --> 00:22:57,500 at some point the government's like a it's not backed by gold 442 00:22:57,500 --> 00:23:00,700 anymore. And the dollar It can carries on 443 00:23:00,700 --> 00:23:06,000 being like essentially a great way to move value, right? 444 00:23:06,000 --> 00:23:09,600 And so I guess in my mind I continued to wonder so like the 445 00:23:09,600 --> 00:23:12,700 only people involved. First of all you have like be 446 00:23:12,700 --> 00:23:15,700 your own bank as soon as you even enter into cryptocurrency 447 00:23:15,700 --> 00:23:18,600 at also like if you're buying Bitcoin or aetherium or like the 448 00:23:18,600 --> 00:23:21,400 main cryptocurrencies, that's the whole concept is be your own 449 00:23:21,400 --> 00:23:25,900 bank and then on top of that now we've got D Phi, which 450 00:23:25,900 --> 00:23:29,100 decentralized finances attempting to be you know, 451 00:23:29,300 --> 00:23:31,600 essentially Ali lending. Like this is all lending this is 452 00:23:31,600 --> 00:23:36,800 all borrowing lending liquidity pools and to me incredibly 453 00:23:36,800 --> 00:23:43,000 complex things that most people not only don't understand but 454 00:23:43,000 --> 00:23:45,400 aren't interested in ever necessarily understanding. 455 00:23:45,400 --> 00:23:48,600 So you not only do you have now complexity but you have a very 456 00:23:48,600 --> 00:23:53,600 closed system where the amount of people who have any clue 457 00:23:53,600 --> 00:23:57,100 what's actually going on. Is very small and then those 458 00:23:57,100 --> 00:24:00,600 people don't intend on destroying The system that has 459 00:24:00,800 --> 00:24:04,600 created all this wealth. So it's like what you said at 460 00:24:04,600 --> 00:24:09,200 the beginning about tether like I can see a picture where they 461 00:24:09,200 --> 00:24:11,200 just know like oh yeah, they already know. 462 00:24:11,200 --> 00:24:13,600 We're never going to get a dollar from tether ever, but 463 00:24:13,700 --> 00:24:17,900 we're able to utilize together in such a way that that doesn't, 464 00:24:18,000 --> 00:24:20,500 it doesn't even matter to them. Yeah, it did. 465 00:24:20,500 --> 00:24:22,600 That could be the case. I mean, you know, if people 466 00:24:22,600 --> 00:24:26,700 don't want their Fiat back, I guess, maybe there's no problem 467 00:24:27,400 --> 00:24:30,300 but I think everyone sort of does Does because that's how you 468 00:24:30,300 --> 00:24:33,500 buy stuff. That's how you buy the lambo, 469 00:24:33,500 --> 00:24:35,000 it's how you buy, you know, whatever it is. 470 00:24:35,000 --> 00:24:38,000 You're in it for what, you know, the funny thing about crypto is 471 00:24:38,000 --> 00:24:41,000 the implicit promise of the number going up forever. 472 00:24:41,300 --> 00:24:44,200 I mean, like what people want is basic income, that's the Promise 473 00:24:44,700 --> 00:24:47,800 You by a thing. It's sort of like an annuity. 474 00:24:48,000 --> 00:24:51,800 You buy a thing that goes up forever and people are 475 00:24:51,808 --> 00:24:53,900 essentially seeking passive income, right? 476 00:24:53,900 --> 00:24:56,900 It's sort of this like it's yield farming and disguised 477 00:24:56,900 --> 00:25:00,500 Under the Umbrella of cap. Appreciation. 478 00:25:00,900 --> 00:25:03,800 And that's all well and good if it works. 479 00:25:03,800 --> 00:25:05,900 I think the thing that people don't recognize, there's always 480 00:25:05,900 --> 00:25:08,500 this discussion in the crypto sphere of like well what backs 481 00:25:08,500 --> 00:25:11,000 the dollar and people like, oh well maybe it's backed by the 482 00:25:11,008 --> 00:25:14,200 military and whatever else. And at the end of the day, the 483 00:25:14,400 --> 00:25:17,300 thing that backs it is a rule of law and that's why you don't see 484 00:25:17,300 --> 00:25:20,100 a lot of this in crypto because like that's not part of it. 485 00:25:20,600 --> 00:25:23,100 Ultimately, what backs the dollar is this idea that you 486 00:25:23,100 --> 00:25:27,200 have money is sort of this, this, it's a tradition gold was 487 00:25:27,200 --> 00:25:29,500 a tradition and now the new tradition is the dollar. 488 00:25:29,600 --> 00:25:33,100 And it is a subset of a tradition of the rule of law. 489 00:25:33,500 --> 00:25:37,200 And it's why the person with the most powerful military is 490 00:25:37,200 --> 00:25:40,500 typically the reserve currency. It's not about bullying people. 491 00:25:40,800 --> 00:25:43,600 It's about, at the end of the day, if something went down, who 492 00:25:43,600 --> 00:25:46,500 would adjudicate that? Like, who's the biggest dog in 493 00:25:46,500 --> 00:25:49,400 the room who would say, no, this is actually how it goes. 494 00:25:49,900 --> 00:25:53,200 So, if we go back, you know, and we think about like when Rome 495 00:25:53,200 --> 00:25:56,600 was the was effectively the reserve currency. 496 00:25:56,600 --> 00:25:58,800 Well, they had all the roads and that old soldiers who control 497 00:25:58,800 --> 00:26:02,600 the roads If there was a dispute eventually that bubbles up into 498 00:26:02,600 --> 00:26:04,300 use of force, it doesn't always get there. 499 00:26:04,700 --> 00:26:09,900 But like, if you're going to store your accrued Val wealth in 500 00:26:09,900 --> 00:26:13,200 a currency, you want to store it in the currency that is going to 501 00:26:13,208 --> 00:26:17,100 decide what has value, right? It's like the rule of law is 502 00:26:17,100 --> 00:26:19,800 this is this primary thing comes before money? 503 00:26:19,800 --> 00:26:22,800 Even enters the table, right? So if you're if you're a 504 00:26:22,808 --> 00:26:26,400 nation-state and you're like, well I might get into a dispute 505 00:26:26,400 --> 00:26:29,800 with another nation state about trade having a bunch of Dollars 506 00:26:29,800 --> 00:26:32,400 in that scenario and transacting in dollars is good. 507 00:26:32,400 --> 00:26:35,200 Because at the end of the day like the US Navy is going to 508 00:26:35,208 --> 00:26:38,500 blockade the loser like they're just going to be sanctions. 509 00:26:38,500 --> 00:26:40,800 There's going to be there's always a biggest dog on the 510 00:26:40,800 --> 00:26:43,600 world stage and the reason that that tends to be the reserve 511 00:26:43,600 --> 00:26:46,100 currency is like you kind of have to go with their decision 512 00:26:46,100 --> 00:26:48,300 anyway. So why would you store money in 513 00:26:48,300 --> 00:26:51,200 some little like, off-brand currency, who doesn't really 514 00:26:51,200 --> 00:26:55,900 have the sort of global rule of law backing that eventually 515 00:26:55,900 --> 00:26:58,900 comes down to kind of Might makes right? 516 00:26:59,200 --> 00:27:01,900 I mean I'm not, I'm not a proponent of it. 517 00:27:02,300 --> 00:27:05,800 I'm more of an observer of the idea that, like, Whoever has the 518 00:27:05,800 --> 00:27:10,200 biggest armies, or police force or whatever it is, they kind of 519 00:27:10,200 --> 00:27:14,800 decide how things go. And in a benevolent regime, the 520 00:27:14,800 --> 00:27:16,900 way things go, is communicated in advance. 521 00:27:17,100 --> 00:27:20,400 There is if there's a dispute, you know that this large 522 00:27:20,400 --> 00:27:22,800 powerful actor will say, hey, here's how we think this is 523 00:27:22,800 --> 00:27:26,900 going to resolve because that's conducive to trade like trade 524 00:27:26,900 --> 00:27:29,700 happens, best in a stable environment and so if we all To 525 00:27:29,700 --> 00:27:32,400 prosper. Then this big actor needs to 526 00:27:32,400 --> 00:27:36,300 basically be more or less benevolent and say, here are the 527 00:27:36,300 --> 00:27:39,400 rules that we're going to enforce on the global stage in 528 00:27:39,400 --> 00:27:42,600 there is a an incentive that comes out of that to just sort 529 00:27:42,600 --> 00:27:46,200 of like go with whatever they call currency because if it ever 530 00:27:46,200 --> 00:27:48,500 comes down to a ruling, that's what they're going to say. 531 00:27:48,700 --> 00:27:51,700 It is a known predictable, quantity, you know, this, this 532 00:27:51,700 --> 00:27:54,000 El Salvador things, fascinating. I don't know how that's going to 533 00:27:54,008 --> 00:27:55,800 go, nobody knows how that's going to go. 534 00:27:56,300 --> 00:27:59,700 And so, how can you as a business in El Salvador has An 535 00:27:59,700 --> 00:28:02,000 option to transact between dollars in Bitcoin. 536 00:28:02,000 --> 00:28:05,600 Say yeah, I'm going to hold it all in Bitcoin because I'm 537 00:28:05,600 --> 00:28:10,400 banking that this small country is going to sort of like win out 538 00:28:10,400 --> 00:28:13,700 in an international dispute. I mean it's just seems nuts to 539 00:28:13,700 --> 00:28:17,000 me. The IMF is already flagging in 540 00:28:17,000 --> 00:28:19,400 the spirit of saying. If practically saying like we 541 00:28:19,400 --> 00:28:22,700 don't think this is going to go well that it might not go well 542 00:28:23,000 --> 00:28:25,800 and so if you're holding Bitcoin as your, is the way that you 543 00:28:25,800 --> 00:28:28,800 store, the value you gain from your your labor or whatever. 544 00:28:29,100 --> 00:28:33,300 There is Material risk that that could undergo some some real 545 00:28:33,300 --> 00:28:36,800 price impact just from things like sanctions or a country 546 00:28:36,800 --> 00:28:39,800 legalizing it. And so I think that the implied 547 00:28:39,800 --> 00:28:43,800 value of the dollar is the fact that it is backed up by a legal 548 00:28:43,800 --> 00:28:46,500 and Regulatory framework. That is a known quantity. 549 00:28:46,700 --> 00:28:48,200 You see this play on other fields, too. 550 00:28:48,200 --> 00:28:51,300 Like when we started our business originally we thought 551 00:28:51,300 --> 00:28:54,000 we were going to be really clever and so we incorporated as 552 00:28:54,000 --> 00:28:57,400 a Colorado LLC we're like Yay, Colorado Colorado, spaz, right? 553 00:28:57,500 --> 00:28:59,000 And that works for a little while. 554 00:28:59,600 --> 00:29:02,800 We got real investors who were like now you're actually going 555 00:29:02,800 --> 00:29:07,000 to be a Delaware LLC because Delaware c-corporation have a 556 00:29:07,000 --> 00:29:09,900 body of case law that is just really well known. 557 00:29:10,100 --> 00:29:12,900 If we were to if there were ever to be a dispute in Colorado we 558 00:29:12,900 --> 00:29:14,800 just don't know how that would go now. 559 00:29:14,800 --> 00:29:17,200 It's not like they were anticipating a dispute but they 560 00:29:17,200 --> 00:29:22,300 were unwilling to invest if the Specter of a future dispute you 561 00:29:22,308 --> 00:29:25,700 know legal framework that nobody understands was part of the deal 562 00:29:26,100 --> 00:29:30,100 and so we had to reincorporate as a Delaware LLC and then it 563 00:29:30,100 --> 00:29:33,900 was weedy risk that potential legal challenge in an unknown 564 00:29:33,900 --> 00:29:36,600 environment, right? And so a lot of what you see 565 00:29:36,600 --> 00:29:39,100 with this with this Reserve currency discussion is literally 566 00:29:39,100 --> 00:29:41,500 just like what is the most known environment? 567 00:29:41,600 --> 00:29:45,300 Where do we go to be operating within a set of knowns so that 568 00:29:45,300 --> 00:29:48,200 we can focus on our business which is what we're good at my 569 00:29:48,200 --> 00:29:51,400 next question is a bit of a transition away from this topic 570 00:29:51,400 --> 00:29:56,500 but I'm curious how you came to bitcoin and crypto and how your 571 00:29:56,500 --> 00:29:59,000 views on it have evolved over time. 572 00:29:59,600 --> 00:30:03,200 Look, it's been a long road. I mean I think I first found I 573 00:30:03,200 --> 00:30:05,400 bought my first big point it was like 10 cents or something. 574 00:30:05,400 --> 00:30:07,800 So, it was a long time ago. I think I initially got 575 00:30:07,800 --> 00:30:10,900 infatuated with the idea that I could, like justify buying an 576 00:30:10,900 --> 00:30:15,500 expensive video card because I was mining Bitcoin and so I did 577 00:30:15,500 --> 00:30:18,100 that for a while as I don't even know in this was this would have 578 00:30:18,100 --> 00:30:22,500 been like 2011-2013, you know, and then you find out that it's 579 00:30:22,500 --> 00:30:25,200 just like cool little weird World near like looking on. 580 00:30:25,300 --> 00:30:28,000 And I remember the Silk Road a as we're like everyone I knew 581 00:30:28,000 --> 00:30:30,700 was like buying drugs online I'm like, this is crazy. 582 00:30:31,600 --> 00:30:34,200 So there was I think early there was this, there's this sort of 583 00:30:34,200 --> 00:30:36,600 kind of rebellious libertarian in. 584 00:30:36,600 --> 00:30:39,700 Like the benign kind of like all drugs should be legal way which 585 00:30:39,700 --> 00:30:41,800 like, you know, that's an interesting concept. 586 00:30:41,800 --> 00:30:45,300 I mean, a few years later, we legalize weed and Colorado and 587 00:30:45,300 --> 00:30:47,400 like Society didn't fall apart and it seems like it's been 588 00:30:47,400 --> 00:30:49,400 generally, good thing. We were paying for elementary 589 00:30:49,400 --> 00:30:51,900 schools with it, you just go to a store and get it. 590 00:30:51,900 --> 00:30:54,600 And so there's this really sort of upside Narrative of like like 591 00:30:54,600 --> 00:30:56,500 weed is harmless. We should be able to buy it and 592 00:30:56,500 --> 00:30:59,400 by God we're going to do it. I thought that was interesting. 593 00:30:59,600 --> 00:31:03,900 You know, I think it's still a compelling for many people. 594 00:31:03,900 --> 00:31:05,800 I think there's something compelling about that about 595 00:31:05,800 --> 00:31:08,900 crypto and like I get that and I think I'm some of that stuff 596 00:31:08,900 --> 00:31:11,300 that I had mind and it's just sitting around at one point. 597 00:31:11,300 --> 00:31:15,600 I saw it go to like 300 bucks and I was a starving 598 00:31:15,600 --> 00:31:17,700 entrepreneur at the time and I was like, dang. 599 00:31:18,000 --> 00:31:20,000 Yeah, we're like so poor right now. 600 00:31:20,000 --> 00:31:23,300 I can I can sell this for whatever it was like, I didn't 601 00:31:23,300 --> 00:31:25,200 have that much extra Grand or something and put food on the 602 00:31:25,208 --> 00:31:27,100 table for a month. I would like this awesome. 603 00:31:27,300 --> 00:31:29,300 So, sold all of it and then didn't pay. 604 00:31:29,500 --> 00:31:32,700 Attention to it for a while. And then in I think I have the 605 00:31:32,700 --> 00:31:35,800 big March crash. I had sort of thought that the 606 00:31:35,800 --> 00:31:38,100 narrative around the having and all that was going to pick up 607 00:31:38,100 --> 00:31:40,500 steam. So I actually do traded Bitcoin 608 00:31:40,500 --> 00:31:44,100 long in 2020 because I thought it was like this interesting 609 00:31:44,100 --> 00:31:47,400 height trade that was fairly benign and then went on Twitter 610 00:31:47,400 --> 00:31:49,700 and, you know, start talking to people on Twitter which is of 611 00:31:49,700 --> 00:31:53,700 course, an apocalyptic hellscape and a bunch of people. 612 00:31:53,700 --> 00:31:59,000 Say, yeah, I basically as a sort of contrarian by Nature I 613 00:31:59,000 --> 00:32:01,400 started kind of Taking the opposite side of that while 614 00:32:01,400 --> 00:32:05,200 having crypto cell just to poke around and see if I could like 615 00:32:05,300 --> 00:32:08,000 get a read on what the counter case is because all these Smart 616 00:32:08,000 --> 00:32:10,200 Finance people saying, you know, maybe it's not a good idea to 617 00:32:10,200 --> 00:32:11,900 have a lot of it. I'm like, well, screw you, I'll 618 00:32:11,900 --> 00:32:12,800 fight you. Right? 619 00:32:13,100 --> 00:32:16,300 And then in the course of that and getting told to like do the 620 00:32:16,300 --> 00:32:22,700 research someone pointed me at tether and after digging into 621 00:32:22,700 --> 00:32:25,600 the whole stable coin thing, I kind of realized that my a lot 622 00:32:25,600 --> 00:32:28,500 of my fundamental assumptions around Bitcoin, we're basically 623 00:32:28,500 --> 00:32:32,500 just false I like it looks to me like it ended up looking to be 624 00:32:32,500 --> 00:32:37,000 like the Bitcoin ecosystem which at the time was largely Bitcoin. 625 00:32:37,000 --> 00:32:39,200 Now there's all these new tokens and whatever but like Bitcoin 626 00:32:39,200 --> 00:32:41,800 was the dominant token of the time it looked like it had been 627 00:32:41,800 --> 00:32:46,600 infested with this sort of shadowy debt like figure that 628 00:32:46,600 --> 00:32:50,800 was just injecting debt into the crypto ecosystem in a way that 629 00:32:50,800 --> 00:32:54,100 was very disingenuous. I still hold that view. 630 00:32:54,400 --> 00:32:58,300 I think that there is a lot of defacto debt being pushed into 631 00:32:58,300 --> 00:33:01,000 crypto. Is responsible for a huge part 632 00:33:01,000 --> 00:33:03,000 of its value. And this was the moment where I 633 00:33:03,000 --> 00:33:05,600 sort of turned into a crypto are basically unloaded the position 634 00:33:05,600 --> 00:33:07,100 realizing that I didn't understand it. 635 00:33:07,200 --> 00:33:09,700 It wasn't that I was like bearish, but I was deeply 636 00:33:09,700 --> 00:33:12,400 skeptical. I don't like having investments 637 00:33:12,400 --> 00:33:14,400 in things. I understand it's generally gone 638 00:33:14,400 --> 00:33:19,600 poorly and so from that moment, I began to think of crypto as 639 00:33:19,600 --> 00:33:23,500 this as an ecosystem that was creating the thing that it was 640 00:33:23,500 --> 00:33:27,000 worried about. So if you, you know, the 641 00:33:27,000 --> 00:33:29,300 paranoia they cryptos trying to address is this. 642 00:33:29,400 --> 00:33:31,300 Like, why am I are hyperinflation thing. 643 00:33:31,800 --> 00:33:36,400 And if you think about crypto as its own, as a non territory 644 00:33:36,400 --> 00:33:39,500 country, like this sort of this country, which is crypto and a 645 00:33:39,500 --> 00:33:43,200 bunch of people opt into being citizens of that country, right? 646 00:33:43,200 --> 00:33:47,100 Then I think that it is the volume our Republic, like you 647 00:33:47,100 --> 00:33:50,500 have a series of actors in there who were printing funny money 648 00:33:50,800 --> 00:33:54,100 that has not been proven to be backed and running all the 649 00:33:54,100 --> 00:33:56,000 numbers up. And I think what we're seeing 650 00:33:56,000 --> 00:34:00,500 with these crypto price explosions is a Wheelbarrow full 651 00:34:00,500 --> 00:34:02,600 of cash needed to buy a loaf of bread. 652 00:34:02,900 --> 00:34:06,100 He said for Bitcoin is the loaf of bread and that's really only 653 00:34:06,100 --> 00:34:08,199 happening within that country like when the whole 654 00:34:08,199 --> 00:34:10,900 hyperinflation thing happened, it wasn't like why I'm are 655 00:34:10,900 --> 00:34:13,400 hyperinflation cause hyperinflation in the u.s. 656 00:34:13,800 --> 00:34:17,100 It was very localized to the people who are transacting in 657 00:34:17,100 --> 00:34:21,300 that currency, that was being spun up without any real ability 658 00:34:21,300 --> 00:34:23,699 to back it. So I think this is what this is 659 00:34:23,707 --> 00:34:25,000 my view. And what's happening in crypto 660 00:34:25,000 --> 00:34:29,300 is that there is a sort of Weimar Republic style scenario. 661 00:34:29,400 --> 00:34:32,600 Learning where the goods traded in the Crypt of ecosystem, which 662 00:34:32,600 --> 00:34:37,400 are all these tokens are hyper inflating inside that country in 663 00:34:37,400 --> 00:34:39,400 a way that will not work out well. 664 00:34:39,699 --> 00:34:42,500 Like just because you paid a loaf of cash, or sorry, a 665 00:34:42,500 --> 00:34:44,500 wheelbarrow full cash for a loaf of bread in Germany, doesn't 666 00:34:44,500 --> 00:34:47,800 mean, you can go take that loaf of bread, go to the United 667 00:34:47,800 --> 00:34:49,900 States and get a wheelbarrow full of dollars. 668 00:34:50,000 --> 00:34:54,100 Like, that's just doesn't work. So, I think that the end of all 669 00:34:54,100 --> 00:34:57,400 this, what we'll see, is a very similar scenario where the 670 00:34:58,300 --> 00:35:01,900 claimed value Spin the crypto ecosystem is not portable. 671 00:35:02,200 --> 00:35:05,600 It's not portable into an economy that has regulations and 672 00:35:05,600 --> 00:35:08,100 controls. I'm not entirely sure how that 673 00:35:08,100 --> 00:35:11,900 unwinds. But boy, am I here for it. 674 00:35:12,300 --> 00:35:14,800 I think it's going to be fascinating, to watch to be 675 00:35:14,800 --> 00:35:16,800 fair. It's not the, it's not the first 676 00:35:16,800 --> 00:35:21,200 time that that has happened in crypto currency either. 677 00:35:21,200 --> 00:35:25,200 Like, Michael patran, just came up again recently with this hold 678 00:35:25,500 --> 00:35:29,100 Abracadabra Wonderland, magic internet money thing. 679 00:35:29,400 --> 00:35:35,000 And quadriga CX is super famous for Gerald cotton, having 680 00:35:35,000 --> 00:35:37,300 something called, I think quadriga bucks. 681 00:35:37,300 --> 00:35:41,200 They were essentially tether on quadriga but there was nothing. 682 00:35:41,200 --> 00:35:45,500 There is absolutely nothing backing, quadriga bucks and 683 00:35:45,500 --> 00:35:48,200 people just traded like they were dollars it's not something 684 00:35:48,200 --> 00:35:52,400 that's new to crypto either and I suspect that eight I suspect, 685 00:35:52,400 --> 00:35:55,100 this is why there's always certain you know like Bitcoin 686 00:35:55,100 --> 00:35:58,400 maximalist talk about what is it like key day or something. 687 00:35:58,700 --> 00:36:02,300 Where All supposed to, like they never had, like, they never, I 688 00:36:02,300 --> 00:36:05,100 don't know what the rate is, but it's not like it ever does what 689 00:36:05,100 --> 00:36:07,600 it's supposed to do. But the idea is that everyone is 690 00:36:07,600 --> 00:36:10,900 supposed to withdraw their cryptocurrency funds from the 691 00:36:10,900 --> 00:36:13,100 crypto currency exchanges on the same day. 692 00:36:13,400 --> 00:36:15,500 It's not a bad idea and it's a good stress test. 693 00:36:15,500 --> 00:36:18,100 It's a good idea. If you want to possibly not 694 00:36:18,100 --> 00:36:20,600 ever, see your funds again because you have no idea what's 695 00:36:20,800 --> 00:36:22,400 going on. That's great, the currency 696 00:36:22,400 --> 00:36:24,300 exchange. Yeah, we'll just try a run on 697 00:36:24,300 --> 00:36:27,200 the bank, try it out. See what happens. 698 00:36:29,400 --> 00:36:32,200 Yeah, I mean it's a good idea if you want to. 699 00:36:32,500 --> 00:36:35,300 Yeah, I don't know. It's it's, there's something 700 00:36:35,300 --> 00:36:37,500 theoretically right about like many things in crypto. 701 00:36:37,500 --> 00:36:39,000 Right. There's an element of 702 00:36:39,000 --> 00:36:40,800 theoretical correctness there. Yeah. 703 00:36:40,900 --> 00:36:44,100 Which I think if I think a proper stress says there would 704 00:36:44,100 --> 00:36:48,100 be disastrous especially since historically, we know many 705 00:36:48,100 --> 00:36:52,300 exchanges have ended up running like partial reserves on their 706 00:36:52,300 --> 00:36:55,900 cryptocurrencies, quadriga btc-e. 707 00:36:56,700 --> 00:36:58,700 Yeah, so there's just a bunch of crypto currency exchanges that 708 00:36:58,700 --> 00:37:00,700 have done that. Asked including other ones who 709 00:37:00,700 --> 00:37:04,000 currently forgetting. And so it makes sense why they'd 710 00:37:04,000 --> 00:37:07,100 want to try that. But I think the idea of the idea 711 00:37:07,100 --> 00:37:09,200 fractional Reserve as well gets played with a lot. 712 00:37:09,200 --> 00:37:11,700 Like there's this funny pattern matching thing that happens 713 00:37:11,700 --> 00:37:13,300 where the crypto ecosystem will say. 714 00:37:13,300 --> 00:37:15,200 Well look, fractional Reserve is happening over there. 715 00:37:15,200 --> 00:37:17,300 It's the fact that it's happening over here is not a 716 00:37:17,300 --> 00:37:22,500 problem and it's like, you know, I entirely reject that is if it 717 00:37:22,508 --> 00:37:25,700 is very thin understanding of how this fractional Reserve 718 00:37:25,700 --> 00:37:27,800 stuff works. You know, that the way that it 719 00:37:27,800 --> 00:37:31,600 works in the banking system is There's a level that Banks need 720 00:37:31,600 --> 00:37:34,600 to maintain in case, there's a wave of redemptions, right? 721 00:37:34,600 --> 00:37:36,400 In case. Like, in the real economy, 722 00:37:36,400 --> 00:37:39,300 people decided to have key day and go in and be like, I want to 723 00:37:39,308 --> 00:37:40,700 go home a cash under my mattress. 724 00:37:41,700 --> 00:37:45,300 And, and the bank's take on risk. 725 00:37:45,300 --> 00:37:48,200 When they engage in this, right? Like the risk, when you, when 726 00:37:48,200 --> 00:37:51,500 you make a loan as a bank, you make people post collateral. 727 00:37:51,700 --> 00:37:53,600 You know, they're posting our house and they're signing a 728 00:37:53,600 --> 00:37:57,000 personal guarantee and like they are on the hook for that and the 729 00:37:57,000 --> 00:38:01,700 bank needs to believe. That in the event of a default, 730 00:38:01,800 --> 00:38:04,300 they're okay with actually receiving that set of assets. 731 00:38:05,000 --> 00:38:06,900 So they got like, look out in the world and say, like yeah, 732 00:38:06,900 --> 00:38:09,200 this house is valued, fairly like, if you roll into a bank 733 00:38:09,200 --> 00:38:12,200 and you're like, you just buy your house for five hundred 734 00:38:12,200 --> 00:38:14,600 thousand dollars and you're like, I want to take a two 735 00:38:14,600 --> 00:38:16,600 million dollar loan out against my house. 736 00:38:16,600 --> 00:38:18,600 They're going to be like there's no there's no way we're going to 737 00:38:18,600 --> 00:38:20,900 do that. They are effectively buying your 738 00:38:20,900 --> 00:38:22,900 house like that's what I'm worried. 739 00:38:22,900 --> 00:38:24,500 The bank is buying your house from you. 740 00:38:24,500 --> 00:38:26,800 Handing you the cash and then allowing you to buy it back 741 00:38:26,800 --> 00:38:28,400 slowly. And so the all this stuff is 742 00:38:28,400 --> 00:38:31,300 backed like this Dia that, you know, Fiat has not backed by 743 00:38:31,300 --> 00:38:33,400 real assets? I'm like, of course it is. 744 00:38:33,500 --> 00:38:35,400 It's backed by all the real assets. 745 00:38:36,500 --> 00:38:39,700 Like it is Fiat is backed by nothing but hard assets. 746 00:38:39,700 --> 00:38:41,800 It's backed by claims on real assets. 747 00:38:41,800 --> 00:38:44,900 That's why we have collateral. That's why we have personal 748 00:38:44,900 --> 00:38:47,000 guarantees. And when you see these sort of 749 00:38:47,000 --> 00:38:51,200 like bad copies ported over the crypto ecosystem, you know, one 750 00:38:51,200 --> 00:38:54,000 another one is this over collateralization thing it's 751 00:38:54,000 --> 00:38:56,800 like yeah well these loans are over over collateralized. 752 00:38:57,200 --> 00:38:59,200 I'm like yeah they're over collateralized by an asset. 753 00:38:59,400 --> 00:39:02,300 That just lost half its value in a month. 754 00:39:02,300 --> 00:39:06,000 I mean it's not I think if you would have a hard time saying 755 00:39:06,400 --> 00:39:08,400 that if thing is over collateralized by something that 756 00:39:08,400 --> 00:39:12,400 volatile, without limiting that to a very specific moment in 757 00:39:12,400 --> 00:39:15,000 time because it could change by five to ten percent had a 758 00:39:15,100 --> 00:39:18,200 Francis Coppola talk to us about, you know, a haircut and 759 00:39:18,200 --> 00:39:21,100 and all of that stuff and how a lot of these things would 760 00:39:21,100 --> 00:39:25,500 essentially need 100% haircut to be properly collateralized which 761 00:39:25,500 --> 00:39:28,900 is yeah. Yeah nuts I mean yeah and even 762 00:39:28,900 --> 00:39:31,900 that's a Trade because if you get a you get a selling cycle 763 00:39:32,100 --> 00:39:35,300 there's a there's the potential for a self reinforced 764 00:39:35,700 --> 00:39:39,600 self-reinforcing selling cycle where because the collateral is 765 00:39:39,600 --> 00:39:42,600 lowered. It forces a liquidation, which 766 00:39:42,600 --> 00:39:45,200 if that happens enough in aggregate like the whole thing 767 00:39:45,200 --> 00:39:48,300 just implodes, that's what a deflationary crisis. 768 00:39:48,300 --> 00:39:50,700 Is this with the feds always trying to prevent with their 769 00:39:50,700 --> 00:39:53,400 little, you know, their interventions and stuff, but the 770 00:39:53,400 --> 00:39:56,000 specific thing you're describing was that you one of the things I 771 00:39:56,000 --> 00:39:58,600 discussed when make redoubt first came out, because back 772 00:39:58,600 --> 00:40:00,800 when died was A collateralized by Ether. 773 00:40:00,900 --> 00:40:03,600 If it got sufficiently large enough, it was at risk of that. 774 00:40:03,600 --> 00:40:05,000 Yeah. And so that their own 775 00:40:05,100 --> 00:40:07,700 liquidations selling off, their collateral would further 776 00:40:07,700 --> 00:40:11,200 liquidate people further down and you just get into a cycle. 777 00:40:11,600 --> 00:40:14,100 Yeah, and cats to your point, the bank of international 778 00:40:14,100 --> 00:40:17,700 settlements recommended haircut, for crypto is 100% yet, they 779 00:40:17,700 --> 00:40:20,400 don't recommend banks. Allow anyone to collateralize 780 00:40:20,400 --> 00:40:23,000 alone with crypto because of what we're talking about here, 781 00:40:23,000 --> 00:40:26,200 it's bullet old and the likelihood of a margin call is 782 00:40:26,200 --> 00:40:29,100 pretty high. Yeah, I mean you look at the 783 00:40:29,400 --> 00:40:32,900 Some things that are in the, in the banking system, there is a 784 00:40:32,908 --> 00:40:36,900 whole set of how much you can land against things. 785 00:40:36,900 --> 00:40:39,300 Like there's the, I mean, the regulations that are very 786 00:40:39,500 --> 00:40:42,900 complex like you get different haircuts for different assets, 787 00:40:42,900 --> 00:40:44,300 right? And this is how the whole thing 788 00:40:44,300 --> 00:40:48,200 hangs together today is that we have a set of norms that the 789 00:40:48,200 --> 00:40:50,600 basically say, yeah. Be somebody brings in a gold bar 790 00:40:50,800 --> 00:40:53,900 like you can, if you're lending against gold like, yeah, it's 791 00:40:53,900 --> 00:40:55,500 pretty good. If you're lending against 792 00:40:55,500 --> 00:41:00,300 treasuries, it's great. And I think that the failure in 793 00:41:00,300 --> 00:41:04,500 the crypto because I'm ecosystem to respect the evolved 794 00:41:04,500 --> 00:41:06,800 complexity. There is really kind of at the 795 00:41:06,800 --> 00:41:09,800 core of like what's, what's wrong in crypto is it's a, you 796 00:41:09,800 --> 00:41:13,700 know, it's a bunch of upstarts who want to reinvent a banking 797 00:41:13,700 --> 00:41:16,600 system out of whole cloth and I'm not entirely sure that can 798 00:41:16,600 --> 00:41:19,000 be done. I mean, I think of it like like 799 00:41:19,000 --> 00:41:22,200 Esperanto, you know, languages don't just get interested down 800 00:41:22,200 --> 00:41:25,300 with a piece of paper and like invented language because 801 00:41:25,900 --> 00:41:28,200 there's no nobody knows how to talk to one another that way. 802 00:41:28,500 --> 00:41:34,000 Like it's in its Involved Trope, taking evolved incremental human 803 00:41:34,000 --> 00:41:36,500 trouble, like government and money is one of those. 804 00:41:36,700 --> 00:41:38,900 I'm fascinated to see how the stuff plays out. 805 00:41:38,900 --> 00:41:41,500 You know. I certainly don't wish anyone in 806 00:41:41,500 --> 00:41:44,400 crypto ill like I hope everyone prospers and you know 807 00:41:44,400 --> 00:41:46,200 everything's great. And I'll add, you know, take 808 00:41:46,200 --> 00:41:49,300 small bats, whenever gambling is fine, think I'm not against 809 00:41:49,300 --> 00:41:53,800 gambling, it seems like a fun gambling ecosystem, but you know 810 00:41:53,900 --> 00:41:58,500 that I see people on Twitter who like, they are, like, you take a 811 00:41:58,500 --> 00:42:01,200 mortgage out on your House and you put it all in crypto and 812 00:42:01,200 --> 00:42:03,800 their up 100% And it's like they got a free house. 813 00:42:04,100 --> 00:42:06,500 I feel like that's a very tenuous situation. 814 00:42:07,000 --> 00:42:09,700 I feel like maybe you should take pay off the mortgage at 815 00:42:09,700 --> 00:42:12,400 that point and let the rest ride totally. 816 00:42:12,600 --> 00:42:15,800 And that's it reminds me of someone taking out a bunch of 817 00:42:15,800 --> 00:42:18,700 corporate debt to buy Bitcoin for their company. 818 00:42:18,700 --> 00:42:21,200 You know, and it makes you wonder, it makes you wonder if 819 00:42:21,200 --> 00:42:24,200 the thought process was just fully conceived. 820 00:42:24,200 --> 00:42:27,100 Actually, you know, the freest you can be is when you don't 821 00:42:27,100 --> 00:42:29,200 have any debts if you live in a house. 822 00:42:29,400 --> 00:42:31,900 It has paid off. It's hard to become a Force 823 00:42:31,900 --> 00:42:33,900 seller. So even if your goal is to 824 00:42:33,900 --> 00:42:36,100 rival, encrypt is going up and it's going to go through these 825 00:42:36,100 --> 00:42:39,000 big trough sand like, you know, spikes and it's going to be 826 00:42:39,000 --> 00:42:42,900 really great ride like having a house paid off, so that you 827 00:42:42,900 --> 00:42:45,000 don't become a for seller of this asset that you really. 828 00:42:45,000 --> 00:42:47,800 Like, when it goes through these really volatile times, it's a 829 00:42:47,808 --> 00:42:50,300 great idea, it's a great way to be bullish on. 830 00:42:50,300 --> 00:42:53,700 Things is to be like defensive in a way where you never become 831 00:42:53,700 --> 00:42:55,900 a for seller. I mean, we think about my story 832 00:42:55,900 --> 00:42:59,100 they were with Bitcoin, I was effectively for cellar. 833 00:42:59,300 --> 00:43:02,000 Like I was a poor entrepreneur that's why I didn't hang on to 834 00:43:02,008 --> 00:43:04,800 my my coins, right? And like continue forgetting 835 00:43:04,800 --> 00:43:07,800 about them. I found this asset in the time 836 00:43:07,800 --> 00:43:11,100 when I when having that money, then was more important to me. 837 00:43:11,200 --> 00:43:14,400 And I think that this is another interesting thing about cryptos. 838 00:43:14,400 --> 00:43:17,000 You have that Dynamic is not really price in. 839 00:43:17,000 --> 00:43:19,800 It's the same reason. Gold can go down fairly quickly 840 00:43:19,800 --> 00:43:22,100 is because people just need the, you can't eat gold. 841 00:43:22,400 --> 00:43:25,400 You gotta go trade that for for food to feed your family in the 842 00:43:25,400 --> 00:43:28,600 real economy, even if you're bullish on gold, so you can 843 00:43:28,600 --> 00:43:30,700 remain bullish. On an asset and still find 844 00:43:30,700 --> 00:43:33,300 yourself in this position where like you got to sell some. 845 00:43:33,500 --> 00:43:37,300 So anyway, I think everyone should just play safe and like 846 00:43:37,400 --> 00:43:40,100 stop repeating these things about how you should be levered 847 00:43:40,100 --> 00:43:43,400 to the gills on debt and it's just a very poisonous idea. 848 00:43:43,600 --> 00:43:45,000 Yeah. I think that I think that whole 849 00:43:45,000 --> 00:43:49,100 concept is going to start start getting renounced very quickly. 850 00:43:49,100 --> 00:43:52,900 If rates start to go up because rates don't have to go up much 851 00:43:52,900 --> 00:43:56,900 from near zero for people to freak the hell out. 852 00:43:56,900 --> 00:43:59,100 Yeah, we're already seeing it to my mind, the front-end rates. 853 00:43:59,300 --> 00:44:01,300 Almost the most interesting because that's the stuff that's 854 00:44:01,300 --> 00:44:03,500 used on a day-to-day basis, by business. 855 00:44:03,600 --> 00:44:06,100 Like, when you're running a business, you basically, you can 856 00:44:06,100 --> 00:44:08,300 do things like factoring your invoices, so you have a million 857 00:44:08,300 --> 00:44:10,900 dollars in receivables. You can go get a million dollars 858 00:44:10,900 --> 00:44:14,100 worth of debt pretty easily, but if front-end rates go up, it's 859 00:44:14,100 --> 00:44:16,500 all short-term debt. So front-end rates go up. 860 00:44:16,500 --> 00:44:19,700 It's more expensive to do that. You pay a little bit more, so 861 00:44:19,800 --> 00:44:22,700 there's less appetite for it. It impacts profitability. 862 00:44:23,000 --> 00:44:25,100 I think we're starting to see some of that and especially in 863 00:44:25,100 --> 00:44:27,300 earnings are coming on now. Like, you're seeing some hits to 864 00:44:27,300 --> 00:44:30,900 profitability across sport. Last thing I want to ask about 865 00:44:30,900 --> 00:44:34,000 this is this is it. I promise is just a lot of talk 866 00:44:34,000 --> 00:44:37,700 about inflation right now. You're a dollar. 867 00:44:37,800 --> 00:44:40,100 I don't know if you want to call yourself a dollar bill but you 868 00:44:40,100 --> 00:44:43,700 like the dollar, I think all of us here enjoy using the dollar. 869 00:44:43,700 --> 00:44:46,900 So I don't have I don't take issue with it in that regard at 870 00:44:46,900 --> 00:44:49,700 all. What are your expectations in 871 00:44:49,700 --> 00:44:52,200 regard to inflation and this next year, too? 872 00:44:52,500 --> 00:44:54,900 So, well, first of all, let's bucket this into two categories. 873 00:44:55,000 --> 00:44:59,100 One is supply chain and sort of like the economy being in a 874 00:44:59,600 --> 00:45:03,100 tough spot with regard to just general mobility of people 875 00:45:03,100 --> 00:45:05,500 moving stuff and that causes some inflation. 876 00:45:05,900 --> 00:45:07,400 Like there's less stuff on the shelves. 877 00:45:07,400 --> 00:45:11,100 So people charge more, and then the other side is monetary 878 00:45:11,100 --> 00:45:13,700 inflation. And I think that, you know, this 879 00:45:13,700 --> 00:45:15,500 is the one that's least understood. 880 00:45:16,200 --> 00:45:19,900 I think the thing to know about monetary inflation is that when 881 00:45:20,200 --> 00:45:22,600 is that money is really about duration money. 882 00:45:22,600 --> 00:45:24,700 There's not a just a quantity of money, there's a quantity of 883 00:45:24,700 --> 00:45:28,900 money now and forward through time and what we've been doing 884 00:45:28,900 --> 00:45:33,000 some With this Q. 8qe staff is pulling the duration of money 885 00:45:33,000 --> 00:45:35,300 forward. So imagine you take a CD out a 886 00:45:35,308 --> 00:45:39,700 CD to pay is like 1% and that's locked up for five years. 887 00:45:40,400 --> 00:45:43,500 And then all of a sudden, the economy gets in a tough spot and 888 00:45:43,500 --> 00:45:45,000 the bank comes to you and says, hey we're going to allow you to 889 00:45:45,000 --> 00:45:46,900 liquidate the CD Now with no penalty. 890 00:45:46,900 --> 00:45:49,400 Typically, this penalty. Well, it's not like, there's 891 00:45:49,400 --> 00:45:53,600 more aggregate value there, there's just more liquid now. 892 00:45:53,600 --> 00:45:56,300 Money is money, that was locked up, sort of saved for the 893 00:45:56,300 --> 00:45:59,100 future, paying a little bit. Is now all available. 894 00:45:59,200 --> 00:46:01,800 Double in your checking account immediately and is Flowing 895 00:46:01,800 --> 00:46:03,800 around really fast and it's like hot money. 896 00:46:04,000 --> 00:46:07,700 I do think we're seeing a little bit of monetary inflation from 897 00:46:07,700 --> 00:46:11,300 that where it's like there was a bunch of money future money that 898 00:46:11,308 --> 00:46:14,200 was pulled forward into now it's like sloshing around a lot more. 899 00:46:14,400 --> 00:46:18,200 It is not an aggregate increase in the wrong amount of money. 900 00:46:18,800 --> 00:46:21,100 In the incentive structure, there is changing as rates. 901 00:46:21,100 --> 00:46:23,200 Go up, it gives people an incentive to ghosts or some of 902 00:46:23,200 --> 00:46:25,000 that money. So you know, like one and 903 00:46:25,000 --> 00:46:28,100 two-year rates are paying like, you know, relative to recent 904 00:46:28,100 --> 00:46:29,100 history. Decent. 905 00:46:29,800 --> 00:46:32,200 So there's an incentive to go by these treasuries and lock that 906 00:46:32,200 --> 00:46:33,600 money up. And I think that those 907 00:46:33,600 --> 00:46:36,300 incentives are, what kind of rebalance the inflationary 908 00:46:36,300 --> 00:46:38,300 impulse. So typically what you see after 909 00:46:38,300 --> 00:46:42,200 a supply shock like we're having is you see a pretty nasty 910 00:46:42,200 --> 00:46:44,600 deflationary hit and I still think we're going to go through 911 00:46:44,600 --> 00:46:46,700 that and it's going to suck because everyone's offsides, 912 00:46:47,200 --> 00:46:49,200 like everyone is betting on inflation. 913 00:46:49,400 --> 00:46:52,800 You know, it's been a good bad and I think the natural 914 00:46:52,800 --> 00:46:56,000 consequence of that is that it incentivizes a lot of 915 00:46:56,000 --> 00:46:59,100 production, incentivizes people to get all these supplies. 916 00:46:59,200 --> 00:47:01,300 Change back online. And when they come back online, 917 00:47:01,300 --> 00:47:03,400 we're going to find that. People have already bought a lot 918 00:47:03,400 --> 00:47:06,400 of things, they wanted peloton's and all these things that are 919 00:47:06,400 --> 00:47:09,100 not recurring purchases and that's going to hit earnings and 920 00:47:09,100 --> 00:47:11,900 it's going to hit consumer spending and that results in 921 00:47:11,900 --> 00:47:16,400 recessions obviously. So so I think we are teeing up a 922 00:47:16,400 --> 00:47:17,900 kind of a double-dip recession here. 923 00:47:18,000 --> 00:47:19,800 That's still my read. Sweet. 924 00:47:19,900 --> 00:47:24,200 Well that's a scary note to end on but let's go ahead and run 925 00:47:24,200 --> 00:47:27,000 with it scary know from the barrel or take. 926 00:47:28,000 --> 00:47:30,100 What was wonderful. Having you On, thank you for 927 00:47:30,100 --> 00:47:31,700 joining us. Do you were the first one to 928 00:47:31,707 --> 00:47:35,200 have me on a podcast. So I also thank you so much for 929 00:47:35,400 --> 00:47:37,100 for joining us. It's been a real pleasure. 930 00:47:37,300 --> 00:47:40,100 You can let people know where to find you if you want them to 931 00:47:40,100 --> 00:47:44,200 find you. Yeah, that's like sweater is 932 00:47:44,200 --> 00:47:45,400 Colorado. Travis. 933 00:47:45,600 --> 00:47:49,500 I mean, look, I'll take all comers on Twitter if you enjoyed 934 00:47:49,500 --> 00:47:51,500 our interview with Travis, go ahead and give a listen to some 935 00:47:51,500 --> 00:47:53,600 of our other episodes. We recently interviewed Doom 936 00:47:53,600 --> 00:47:55,400 Berg, we've been talking about Dalles. 937 00:47:55,400 --> 00:47:58,000 We've been talking about Michael patran, if you're already a 938 00:47:58,008 --> 00:48:00,000 listener and you've been listening, Sitting for awhile. 939 00:48:00,000 --> 00:48:03,300 Please give us a review. Give us a rating And subscribe. 940 00:48:03,300 --> 00:48:05,200 So thank you and talk to you soon.