All right. Hey, everyone, this is Plum
Constan and you're listening to Bitcoin for Millennials.
Together with my guests on this podcast, I go on a journey to
discover how our current financial system works, why it's
flawed, and why Bitcoin is the most relevant technology that
you should understand and adopt. Today, I'm joined by James
Levitch. He's a reformed hedge fund
manager with over 25 years of institutional investing and risk
management experience, having worked for investment banks and
hedge funds. Currently, he's the Managing
Partner at the Bitcoin Opportunity Fund, a hybrid hedge
fund that makes investments in companies and assets in the
Bitcoin ecosystem. He also teaches financial
fundamentals and the benefits of Bitcoin through this newsletter
called The Informationist, and as a Co founder of the
educational platform Lookingglass Education.
As someone without a background in economics and finance, your
content has helped me a lot in learning about these topics as
they are pivotal to understanding the potential of
Bitcoin. So I'm super excited to to talk
to you. Welcome James.
Thanks for for coming out. Yeah.
Welcome, welcome to Bitcoin, right.
So thank you for having me. First of all, I I I sincerely
appreciate it and I'm I'm glad to hear that my work and others
work has has helped you on the learning path that that's
awesome. Yeah.
Well, I I think in the past I've also made like digital products
that I launched and saw how it reached people, like all over
the world, right? So I think, like the magic of
the Internet is just really cool, right?
Like when you spend your own time and try to help or educate
other people like you never know how far it travels.
So I know the feeling but I still wanted to give it, wanted
to give you props for, for, for for teaching me.
So much like as we just talked before before I hit record like
you said welcome to yeah, you said welcome to Bitcoin.
Like the the topics of global macro understanding, finance,
economics, investing, like those are eventually touch points and
elements you know that that you run into.
And as someone like me without a background in this, I think I
actually avoided it for a long time, last 2-3 years, you know,
especially after COVID and stuff like yeah it just really got on
my radar. And I think in general like when
people talk about this a lot, a lot of the people obviously talk
about the the US, right, because it's the still the quote UN
quote best currency in the world, but it's actually that
really going so great, right and and also the the problems in the
US will affect other countries. Yeah, no question about it.
The thing is is and look I I say reformed hedge fund manager
because I, I, I was used to that system, have been used to the
system that has benefited some a small portion of people greatly
over the years and yeah and so. When I came to Bitcoin in
particular, it it it helped me realize just how just how deeply
flawed and broken the system really is and how the, you know,
just the way that we have central banks manipulate the
currency continuously. It's problematic and greatly
problematic for for people who don't own assets and so.
Understanding why the money is broken is it?
It's essential to understanding Bitcoin.
There's just no, there's just no way other way to put it.
Bitcoin isn't just something you want to trade and make money off
of, like you know, like a meme stock or one of the other crypto
currencies. That this is actually something
that is important. It's incredibly important for
people who are especially outside the US.
Who are in countries that are that are bearing the burden of
of their own central banks making massive mistakes and
decisions that hurt them really been hurting them these last
number of years places like Lebanon and Venezuela and
Argentina that these the the citizens have been hurting and
Bitcoin is a is a way out for them and.
That's why it's so important to to me and other people who have
been kind of trying to educate others about why the money is
broken here. Yeah, but people there already
know it. They understand the money is
broken and they're looking for something else.
So yeah, very interesting. Like first of all, I know you
know Greg Foss as well, right? You you work together is also
big inspiration for me. But what I love that has also
helped me in my own kind of like, you know, the humility
that you come across when you learn about Bitcoin is that
people like Greg and also like you.
You know, you spent over 2 decades in in in a financial
system that you actually were able to, you know, turn your
view around in a sense, right? You know, I don't.
I don't think that's that's easy and it's well, especially when
you thought you understood something and and we're doing
something well positively, you know like it's interesting that
that you like see the other side.
And so I can also imagine I've talked a lot in this podcast
about like that teaching you or well studying Bitcoin takes a
long time It takes it's it's still taking me time even after
10 years. I'm learning every day, right.
But I think it's very admirable when you're a bit older and you
have a long like career in in trat fi that that you were able
to like turn this around, like what was that turning point for
you like what was your starting starting point let's.
Be honest, it was not easy. I had.
I had heard about Bitcoin years and years before.
In fact, my wife had been listening to a podcast.
I think it was Tim Ferriss or something.
They were talking about Bitcoin. I can't remember.
It was. It was.
It was early. It was 2015 or 2017.
It was in those years I read you dismissed it right.
And I dismissed it. I just and there was no look I I
deeply respect my wife it wasn't that it was just I I thought
yeah you know podcasts or talking about some you know fly
by night get rich quick thing. I'm just no, I, I I'll take care
of the finances you know. And she's.
She's very smart. She's a she's an author.
She's a New York Times bestselling author.
She's not a dumb person. So but I'm like, I'll just take,
I'll take care of the finances, don't worry about it.
And stupidly, I dismissed it. And then, you know, a couple
years later I was flash forward to 2019 ish and.
Or 20. Actually it was, it was a couple
years. It was about 2017 and I'm
looking at Bitcoin thinking. There is.
I wanted to get out on the risk curve a little bit and and
invest in something that was a little bit riskier than the
things that I've been doing normally in in the hedge fund
private equity world. And so I I did my research on it
by talking to the experts in my industry, you know the the
technology experts and analysts and portfolio managers and they
all dismissed it. So that's it's a Ponzi scheme.
It's worth nothing. You know you're going to lose
all your money. There's no underlying value.
And I mean everybody, every single professional I spoke to
said the same thing. One of them said.
I've got some, but I had to buy it for the briefcase of money
and I don't even know what like he's like, it's it's worth
nothing. I don't whatever.
So I ignored it and it's it's been the the greatest.
Financial mistake of my life. I mean I've invested things and
lost all my money and this is even bigger a mistake because
this is something that if I had done what I was considering
doing back then it it been life changing.
But you know we we we get the price of Bitcoin that you
deserve, right? So it took me humbles you from
the start. Almost it does and so, but what
I didn't understand about it is and no, none of them did is how
it's not just. I mean, at that time, Bram, I
didn't know the difference between Bitcoin, Bitcoin, cash,
Ethereum. I didn't know that these things
were all different. I was just like, they're all
cryptocurrencies. What's the difference?
Bitcoin's the oldest, That's what I always heard.
But we still hear that. We still hear that from people
that, oh, it's just Bitcoin's the oldest, it's the biggest,
it's the most boring because you're not going to get 1000 X
on it. But if I buy this other coin,
maybe I'll get 1000 X on it, so. There's still a quite a bit of
of understanding that to be had out there, especially in
developed areas like in Europe and in in United States and
Australia because their citizens are in a system that has worked
well enough for them and they're they're the the guys of of the
system working for them. Is it it?
It's. It's thick enough that they
don't see behind the veil to see exactly what's going on.
So but anyways, I did come around to it and I got it.
I get into it very late. I got into it around the same
time as Michael Saylor, maybe a few months after him.
So that's when I really dug in, listened to him listen to others
and the breaking point. For me and I had been so when we
got, when we got locked down in the in the in COVID, I was I I
was leaving my job because my job was in Dallas and I and I
had moved out to be with my wife out in Nevada.
And so I was leaving and I wasn't sure what was going to
do. And my son who's in college.
He was like, hey dad, I think you ought to give this
cryptocurrency another look because we had talked about it
before and and so I dug in and started buying some things and
bought some Ethereum and Cardano and, you know, and Bitcoin.
And then as I was doing my research, I quickly learned
that, oh, I I need to move everything into Bitcoin and get
out of it. What was that?
What was that the what was that, that that realization?
Yeah. How did you get there?
I got there when I understood, when I when I first understood,
OK, that Bitcoin is completely decentralized and it wasn't
controlled by one party. Once I understood that, then I
moved all my investments in in cryptocurrency into Bitcoin.
I was like, I don't want one person to be able to do, you
know, it's bad enough if you have a board of directors, so,
so I did that. And then as I was digging in
deeper and this is what we this is what we do in Wall Street you
call legging into a trade. I just you buy a little bit and
it forces you to go do some research, really do research in
order to build on that position. That's basically what I was
doing. And so as I was building that
position, there was a there was a great.
Discussion between Jeff Booth and Pomp and he was explaining
to pomp the he was walking pomp through his book basically Jeff.
So Jeff Booth wrote the book the Price of Tomorrow fantastic book
and and it what it does, it's not about Bitcoin.
It's about, it's about the broken market forces of
inflation versus deflation, how technology should be
deflationary and we should be getting the benefit of advances
of technology. Where you know where you can
have your iPhone now, or you can take thousands and thousands of
photos and not have to have them developed or send them off and
buy the paper and you know they're right there.
You can have them up on your computer in an in an instant.
That's that's the advancement of technology and takes the price
of photography down to basically zero.
And it's the same thing with music.
You're paying pennies on the dollar for when I was a kid,
before you were even born brown. I was we would have to buy CDs
and we would have to buy cassette tapes on music and it
would cost it would cost $1415 back then which is a lot of
money back then. Just business model also.
For 1099 to 12 songs, right? Yeah.
Yeah, so. And then if you want to tape.
You didn't make mix tapes and spread them around.
It was kind of like bootlegging them.
And that was and that was. I did that in nice school.
Technically but yeah so yeah so that's what we but that's The
thing is that he I was listening to that conversation and he was
talking about those forces colliding and and how that
inflationary force of the central banks versus the
deflationary forces of. Technology and how they're
colliding and and that's where we're at right now and that's
why you see the central banks struggling and we're we're just
we're taking on more and more debt where we are printing more
and more money because we have to absolutely must have
inflation in order to manage that and and when he when he
walked through that. I finally just like, that was
it. Then I really, that took me over
the the hump. And I was like, OK, I'm all in.
I understand it. I get it.
I understand why this is so important now.
And that's when I turned my attention.
Yeah, nice. I yeah, two things.
I would love to talk about the depth spiral with you.
But before I think the CDs are actually a great example, right,
Because actually what you're saying is like true and and also
what Jeff is saying in the boot right book, right, like true the
advancement of technology, current players in the market
who chose another technology that was best at another time
right to to run their business. So they chose the, the CDs right
through digital technology and phones and MP3 S and whatever,
you know they're the competition started to rise for the CDs,
right. And I thought a long time about
it A. Long time you know, if you, if
you look at what is it the Spotify documentary or The
Pirate Bay documentary and all that stuff like that and that.
Makes the same stuff, yeah, same stuff actually.
Yeah, well, they solved their own struggle, right, by going
digital. But but what is actually
proposed here is right like through the advancement of
technology you you are automatically challenged as a
player in whatever markets right to adapt to that technology.
But when you say like the central bank is is battling the
advancement that technology brings is basically they're
trying to stall it or something before the technology makes them
obsolete or exposes their their, their scheme basically.
Yeah. Or it Yeah, it's it's it's
extraordinarily disruptive these types of advancements in
technology. And so when, when, and that was
what it came down to is I understood that how Bitcoin is
really disruptive it it's disruptive as a as a base layer.
It's disruptive from all the way from individual transactions up
to banks up to central banks and.
It disrupts the entire business model and that's the and that's
really the crux of it and but understanding that and
understanding how integrated that all is and why it's so
different. This is why when you know when I
talk to somebody and they ask me what I do and I tell them I'm a
I'm a hedge fund manager. I've.
I've got a Bitcoin opportunity fund and I educate people on
finance, well they they ask about Bitcoin.
They're like yeah, this Bitcoin thing.
So. Is that you do you expect it to
really you expect to really make a lot of money out of that And
and my answer is always, well, yes, I do expect that it will,
that people will make fortunes with it, but not just off the
Bitcoin price. It's because the dollars maybe,
right? Not a value, but.
That's a good point. Yeah, exactly.
And so, and the and my and I and I walk through how the money is
really broken. And why it's so important and
then it begins to click, but there's there's a tremendous
amount of resistance of of mental and emotional resistance
to that truth from and so especially from my, from my old
industry, from the traditional banking, traditional investment
world, there is a tremendous amount of resistance to that
because they just can't wrap their heads around how the
system could be broken. When it's benefited them so
greatly to now it is done. They've done so well with this
system, why would they want to change?
That's why you hear people like Jamie Dimon and Warren Buffett.
And even Elizabeth Krugman. Or is that Krugman?
Yeah. Krugman Well, he's a yeah, he's
a yeah, he's a Well a still. Mouthpiece for the Yeah, the
White House. But.
And that's right. And that's and that's the point
is that they they're they they've benefited tremendously
from this system and even even Fed governors say it.
Even Fed presidents say it. Like Mary Daly said, well, I
don't feel inflation. It doesn't touch me because I
have enough money. And that's one of our that's
that's one of the people who is who's who's deciding policy for
this nation and arguably for a lot of the world.
I mean that's just it makes you realize that there's there's a
there's a there's a club and as close as you you can get to it
you're you're you're really not in it.
And so and that's why they're fighting it.
They're fighting it because. They know the how disruptive it
is so that your point of CDs versus cassette tapes versus and
then Spotify versus CDs, Spotify versus CDs and Apple Music and
all that that was so tremendously disruptive it and
and you can see how those industries the there there's
certain areas the middle men collapsed out of that.
Right. And so that's the that's the
point is that the middle men collapse out.
But do you think it's an do you think it's harder for this topic
because money is like what makes the world go around and the
technology that we use to to exchange information and value
with each other? Like is this the the biggest
fight in a sense that could be picked by by a technology then?
I would, I would, I would say yes because there's no, there's
there's no hiding from it. That's a good point.
And so and it's a very intimate thing, right?
Money is a very intimate thing. We don't talk about how much we
make with each other. It's just, you know, often
parents even tell their kids how much they make And so it's
almost taboo. You don't talk about it, but you
deal with it. And the crazy thing is, is that
you make money. And if you're lucky enough, if
you're fortunate enough to make enough that you can that you
have some leftover, you can't just put that in the bank and
let it sit there and wait for you to decide when you want to
use it. You can't just accumulate it.
If you get every minute and it sits there, it is getting eaten
away by inflation. And so the system forces you to
take risk in order to keep what you have built so by.
Taking risk by the way, by. Taking risk?
Exactly. So imagine that you you build a
house. And every day it, the weather
eats it away. Every single day, every single
day. Unless you do things that that
shored up and you, you know you, you have to protect it.
But the difference is here, you it.
It's not that you're just you're spending your you literally have
to take risk in the market in order to protect what you've
created and for the first time in history.
That's not the case because you have something that that can't
that that that is anti inflationary.
And so when when I explained it to people that way the difficult
part though is promise. They don't.
They people typically have a very they have a very difficult
time making that mental leap of this is actually this.
This is not just a Tulip. It it's it's not something that.
Is you know it's not just a a fad it it's not just the the
next thing that is going to that's going to collapse.
And so the trust is a difficult thing to get over, especially as
they turn on the TV and every single day they see, they see
people saying, oh, it's going to 0.
Oh, these people are crazy. They're going to lose all their
money and and the fear mongering is the hard part to get over
often. Yeah, yeah, lots of things I
would love to touch upon. Like what?
What you said. They turn on the TV and they see
everything is a OK, you know, no, go back to go back to go
back to sleep. It's all well.
But I wanted to touch upon what you said about, you know, your,
your your generational peers and also career peers.
Like they have a hard time because they built a career in
in a system that's basically broken.
They are. We're lucky enough to benefit
from it, right? What?
How? How did that make you feel?
Like, what was your fight there in a sense?
It's the same thing I I didn't. I didn't believe in it.
I didn't believe it was real. I didn't believe there was
actually anything to it. I I thought it's a speculative
asset, just like a just like tulips were.
You know, and I thought or Beanie Babies or whatever, and I
thought there's nothing to this. So what if it's digital?
It's just a bunch of, you know, computer nerds that are trading
around this, this so-called coin.
They're probably using it in games.
And of course, at the time it was all over the news about it
being used for illicit activity, for smuggling, for human
smuggling, for drug smuggling, for and so.
I thought that's not something I want to get mixed up in and it's
not really it it it's just a fad.
It's going to fade because it I I couldn't believe that was
real. Now, every single day that it
doesn't have to go from here to 100,000 this year, every single
day that Bitcoin is here and there's and it's talked about,
it solidifies its place in the in the choices of assets around
the world, because I can use it. You can use it.
Someone down in Argentina can use it.
We could, we could send, I could send you some Bitcoin.
You could send it to somebody in Lebanon who sends somebody in
Argentina, send to somebody in Venezuela who sends it to
somebody in Japan. All within, you know, if we do
it block to block within an hour, which is just crazy to
think about. Try doing that with a bank,
right So or gold. Or gold.
You can't do it. You can't do how I love how when
when you start to talk about Bitcoin, you already, oh, we're
talking for 20 minutes. Like you, you touch upon so many
different subjects, right. And that's also why, or like I'd
say like the dimensions basically of Bitcoin, right?
Like, it's technology, it's finance, it's economics, It's
personal development in a sense, right?
I find it super interesting that there's that, that Bitcoin is
not about intelligence, right? I think it's more about.
I'm not the smartest one. Well, no, me neither.
Definitely not. But I think it's more about like
some sort of intellectual curiosity and and honesty in a
sense, right. That also that you that you now
can recognize that you were perhaps a bit dishonest.
Right. Because of your ego at a certain
moment but that later on you realize Oh yeah that was the
journey that I I I went through that's also yeah Bitcoin is just
it it's it takes time to understand and it's hard and I I
I think it's great where you start with you know the money is
broken. I love I I also really follow
this analogy of you know, you take risk with a job or a
venture to to to to do, to give away physical energy and mental
energy, and you earn energy in return.
That's what we call money now, right?
And if you don't want to buy anything right now or spend it
on something, or maybe you want to save for your kid.
And you would expect in a logical world, maybe you know
that that same, that that energy would be worth the same when
your kid goes to college. But when you're actually part of
a system that's purposefully debases that energy, then you're
also kind of, yeah, intruded in your freedom in a sense, because
you have to go out there and mitigate, well, 2% on paper the
risk, right. Yeah.
And that's. Another point, Yeah, that's
another point. Absolutely.
That's right. So you you expend that energy to
then create enough that you have an abundance of it.
Store some of it to keep for. Later use or for your children
or whatever and yeah and that's exactly right and so but the the
and that and that's the thing about about Bitcoin is that when
people start to understand that look it's not about I mean we
could easily make it about number go up technology because
it's it it's it's up over 100% you know.
This year it's it's up thousands of percent over the course of a
few years. Like, it's easy to look at it
that way, but rather than that, it's the IT.
When you look at all the facets that we've already touched on,
it just makes it the the the soundest form.
Of money that's ever been created.
And that's the point, right? So yeah, And which means, you
know, the money that is the least if influence able.
Is that the word for like, yeah, that's just corruptible in a
sense. Is corruptible, that's right.
Yeah. And and that's the point.
So when people start to understand that it's not about
the technology, it's not about number go up.
It's not about just inflation. It's not about just being able
to to hold on to, it's about it being actual store value and an
actual form of money that is not is not corruptible.
And when people start to understand that, but it's
difficult, that is a very high bar for for people to understand
and get to. And so everybody has to do their
own homework to understand it, yeah.
Why? I mean, why does the world use
the US dollar? Why?
It's simple. They trust that I I can take AUS
dollar and bring it to Europe and and and exchange it for
goods and services there. I can take it.
To Thailand and and exchange it for goods and services in in
Taiwan or in China or even in Russia, you can take a dollar
and they want it. Why?
Because it it's the most it's it's it's the most trustworthy
money out there currency out there, right.
And so Bitcoin doesn't have that yet.
And actually the dollars also this is a whole nother
direction. I don't think we want to go
there. But what I like about the energy
analogy actually is that if you want to store your energy in our
money, shouldn't the money also be backed by energy, right.
So because then you can match it, you know, it's almost as as
like the calories or KJ or whatever.
So, so can you, can you match it in a sense and and also I think
and I think the dollar is actually the only Fiat currency
that is somewhat or was somewhat backed by energy, right, because
it was connected to to the oil that that was kind of like the
trick, right, how it became the world's, the world currency.
So in that sense, it's interesting to see that people
already pick the money currently with the most energetic
potential or something right like that.
It that that already is happening without them even
understanding Bitcoin, obviously, but it's interesting
to see that that is the human. Well, they knew it they that
right And back in the 1971 when Richard Nixon took us off the
gold standard for good and and had an agreement with Saudi
Arabia to basically only transact.
In in U.S. dollars for for oil trade, that's when they they
knew it. But in reality, going back to
your inflation comment, which is the 2% inflation, we know it's
not 2% or 3% or 4%. We know it's not 4%.
Go and do some grocery shopping and tell me that the grocery's
only up 4% from last year. Inflation on TikTok?
Absolutely. But they they also know that
they can only get away with so much.
They keep. We have this thing now in media
which in this is a whole nother problem where if if you say it,
it's true, until it's and until it's proven untrue and and if
you say it enough times, people just believe it, you know.
And so that's one of the major problems that we have.
Is that you've got mainstream media, you've got the White
House and and both parties. This is not, this is not
Democratic or Republican. Both parties are complicit in
this. The entire system is complicit
in this, where they just gaslight the American public and
Europe is doing the same thing as bad or if not worse.
Gaslighting the people about the reality of inflation, The
reality of the of the money and just how much is it has expanded
and just how badly this Cantown effect has taken place.
Where the the whoever's closest to the spigot, the the the
faucet of money, whoever's the closest gets the biggest
benefit. And of course those are the
large, those are the large, they're the politicians and
large banks. That's the way it is.
And but they don't want you to know that.
So they hide that by telling you that inflation is lower than it
really is. And they and so it is, it's
systematic to manipulate those numbers because it's what they
believe they can get away with because they know that they
can't say, well, you know what, in this nation, in this world
now we think that 4 or 5% inflation is OK because people
wake up and go, wait a minute, 5% inflation, you know.
That means in in 10 years my, my money's worth even less than 50%
of what it what it was. That's not fair, you know, and
so they they they know that they can't get away with that.
And so that's why there's this big, you know, this big, I want
to say it's a charade, but it is a bit of a charade in in public
about getting the inflation rate down and.
We'll see. We'll see exactly what it
settles out to be. Yeah.
Well, we'll get to that in a minute.
Because once the people know they would want their money,
right. But but the money is not in the
banks. But we'll get to that in a
second, I think. And and also to, you know why we
think Bitcoin is, is the solution.
I think and I agree, like the people should understand the
problem first, right. And especially in Western
countries like I'm also from a Western, Western country and I
talked about this a lot already like there's no problem.
We don't have a problem. We have a very luxurious life
and everything is there and we have a a roof and food and water
and kids go to school and you know we don't have 100% or what
was it 100% inflation in Lebanon, I think it was
overnight 11 nice, it just got valued in half, right.
So we we don't have that. We haven't had that in very long
time, right. So it's also it it I think it
also feels very far away for people right.
Even if you have all the rationale and all the all the
all the explainers it still feels like yeah that's that's
what happens in you know for a third tier countries or
something. But in the US currently and and
you talk a lot about this about the debt spiral.
Can you explain in a bit more layman terms like what that is
and and why people should pay attention?
And this of course also ties into like how a government gets
its funding, what the rates of those fundings, what the, what
the rate of that funding is, and how attractive it is for other
countries to buy debt from from countries.
Absolutely. So basically in in a nutshell,
very simply, if the if, if the United States will just look at
the United States because it's supposedly the best one.
OK. Yeah.
If the United States was a company lists on the on the
floor of the New York Stock Exchange, we would call the
zombie company. Why?
The reason is that it doesn't. It doesn't generate enough
income to cover its its interest burden on its debt and so
thinking through like if, if we just break it apart.
And I'll use numbers for people to to grab on to but if you
figure that the the United States if if we're looking at
what these are the actual estimates from from the
Congressional Budget Office if the if the United States expects
to take in $4.4 trillion this year by income right.
What's that in income. In income.
And we also expect to spend $6.1 trillion.
So that so the income is revenues, it's it's it's a
taxes, it's tax revenues and so it's it's it's taxes off of our
productivity, that's what it is. But the problem is we have, we
have a lot of entitlements, and these entitlements are things
like Social Security, Medicare, Medicaid and the social
programs, unemployment, stuff like that.
And and those all add up to over $4 trillion.
So let's call $4.2 trillion. Then we've got a military
expense because we're in war everywhere.
So we've got $800 billion of military expense.
But the entitlements, that first layer, the entitlement layer
that's those are those are expenses that are mandatory,
they're signed into legislation and in order to not pay them.
You have to sign them out of the legislation.
You have to remove them from the legislation.
You have to have a new bill passed that does not include
that. So those have to be paid.
If we don't pay those, we default basically because that's
first that the the taking it out of the legislation is never
going to happen. It's never going to happen.
Like that's a that's a revolt. It's basically suicide, right.
Exactly. I agree.
So. The the military that's not,
it's not mandatory but in this country it seems to be mandatory
#1, #2 if these are long term contracts that with with defense
contractors that they're they're going to pay those.
And then the third thing is interest expense, OK, so
military is $800 billion. The interest expense, when you
net it out between what we're paying on interest and what
we're receiving back at the Treasury because they have
internal measures there. It's about $700 billion of net
interest expense. So now add up all of that and
then the other expenses which come up to be about $400 billion
and add back the the accounting gimmick that they use because of
the student loan debt forgiveness of last year, they
added back this year. Well, you actually get to about
$6.4 trillion of spending, which gives us a. $2 trillion deficit.
That's $2 trillion that we're spending over what we're taking
in on tax revenue. So what?
So what can we do? Well, you can either cut
spending, which is austerity. We saw what happened with Greece
and and we've seen Italy try to do that before.
It does not work. Number one is political suicide.
Nobody's going to do it here. #2 you could do, you could raise
your taxes. We hear this all the time.
Raise the taxes, Raise the taxes.
Well, that doesn't really work either, because it ends up
disincentivizing and disabling the ability for companies to add
to productivity, do research, research and development, build
out production lines on certain products and services, hire more
people, and so they wind up being less productive.
And so even higher taxes on less productivity, you get to the
same spot. It doesn't really same gap,
right? Yeah.
Exactly. OK.
And then the third thing you could do is just issue more
debt. If you just borrow more than you
can borrow more pay off pay off, pay off the the the that now
listen remember you you not only do you have that that spending
gap but you also have bonds that are that are maturing that
you've got to pay for as well. So that like that all that.
Ends up you have to issue more debt.
It's the easiest thing to do. You just borrow more.
You raise the debt ceiling. You raise the debt ceiling.
You just keep borrowing more,
borrowing more, borrowing more and so you and but the issue
there is from when you get especially when you get into
situations now where we printed a lot of money during the the
COVID downturn and we flooded the the banks and the system
with. 5.5 almost $6 trillion worth of of of extra money.
Well then we have inflation. Well then we have to raise
interest rates to battle that inflation.
So as the as the the central bank as the Fed raises interest
rates, what does that do? Well, the Treasuries out there
issuing bonds now, they're issuing bonds at a higher
interest rate than they were just two years ago, And so as
these bonds mature. And they have to issue bonds at
a higher interest rate. Well, now their interest expense
goes up. So the interest expense last
year was under a trillion dollars and now it's it, it was,
it was maybe $300 billion net 350, now it's about $700 billion
net. So like the the analogy, there's
of course if you have a credit card, so you take another credit
card, pay off the other, and you go on and on and on, you're
basically the the subject of your own Ponzi in a.
In a sense, that's right. So if you're.
Yeah, if you're a yeah, if you're a single parent and
you're trying to make it through and you've got your your
mandatory expenses of your mortgage and your car payment
and your you've got to pay for gas and food, you've got kids,
you got to put clothes on their back.
And so those are mandatory. And if you're if you're if
you're not able to make enough money to pay for all that you
have to you, you do whatever you do you you can do, you take out
a credit card, then you wind up. You, you wind up filling up that
credit card, maxing it out, and then you have to take out
another credit card and then you actually take out another card
and the interest expense gets so big that now all of your income
is going towards the interest expense and you're in this debt
spiral. And that's where we are.
We're mathematically there in the United States where our debt
has gone up from 31 1/2 trillion dollars last year to 33.7
trillion. Actually, it's only it's it's in
just a few months, like 5 months.
It's gone up over 2.2 trillion, $2.3 trillion in just four or
five months. So.
Amounts, right. Like how it's unfathomable how
much that is. So people say, yeah, yeah, but
our GDP is going up. Well, yes, our GDP is going up
because of inflation. Our tax revenue is not going.
To that's a good point. Sorry to interrupt, but that's a
good point, right, because in the beginning we set prices and
value and so, so the GDP goes up in the numbers you see.
But if all the numbers go up, then that's right.
That doesn't really. Matter, right this The gap is
still growing. The debt is still growing faster
than than our GDP and tax revenue.
And so the issue there is that as it grows more and more, it's
unsustainable. I don't know when it breaks.
Not tomorrow, not next year not the year after.
But it it eventually is just gets to the debt burden gets to
be too big. And so going back to what we
talked about at the beginning of our conversation was then people
start to lose confidence in the dollar at some point.
I'm not saying that's happening today or tomorrow because the
dollar is still going to swallow other currencies.
We're watching happen last night you know you had you had a yeah
in Argentina you got to win the Argentinian election and now is
saying that he wants to abolish the central bank and and fix
their finances and and go on the US dollar as their as their
currency, as their reserve currency.
Well, the issue there is it's going to be very painful for
them. But the dollar that basically
just swallowed Argentina then and this is going to, this is
going to happen over and over and over again.
And so the dollar will continue to to to exist.
But you can see how this game is just going to continue.
OK. Yeah.
But so this is, I think, two things.
Like he wants the dollar because it's less worse than the
Argentinian peso, right? I also read something about, you
know, this is a different conversation, but how about you?
Can he? He could dollarize before he de
dollarizes again or something like that, right?
Just to fail or or make sure that the the the damage of the
peso, the Argentinian peso is not, you know, going to be more
what you just said about the depth spiral, right?
It's like you want to have more depth so you can stay afloat
basically. But there's two things, I think
if we go back to the analogy of the credit card, you slowly see
that not everyone wants to give you a credit card anymore,
right? Or it becomes harder to get a
credit card. So you need different, different
rates, right, to actually get a new credit card to pay off the
old stuff. But also what you mentioned is
if. I don't know, like the the
points on the credit card would be a currency.
Then there's also people who don't want to pay with that
currency anymore, right. So there's basically 22 problems
where in Argentina, well, they would want the dollar because
the peso is way, way, way worse. But in BRICS area, I just read
something about, I think China and Saudi Arabia or something
like they're going to exchange trades, which is not in the
dollar, so they are. So the dollar is being ditched
in some places as. The tradable currency, but
there's also less trust in the paying off of the debt.
And the reason for that is that we look, this is all
geopolitical stuff and so they're BRICS knows they're not
going to create a currency tomorrow that rivals the dollar.
That's not the point. They just want to minimize the
amount of treasuries they have to own while they while when
they have to make across border trade.
So if they don't have to do their non energy trade in
dollars that helps them because they don't have to go buy U.S.
Treasuries and why do they not want to buy treasuries.
They're looking at our our balance sheet growing and
they're seeing this the the the amount of debt that's just
expanding so rapidly that they don't they don't want to be
sitting on something they know. So going back to the the debt
spiral, there's the fourth option.
After you issue more debt, what you do, you introduce inflation.
You allow inflation. You actually want to you, you,
you want to have inflation. You want to create inflation.
Because then you create those nominal dollars.
Like you just said, it's fake. GDPGDP goes up, but it's fake.
It's in dollars that are worth way less than when you issue
that debt. So this is what we saw happen
out in Greece, right. So eventually the, the people
who own Greek debt, they they they when they when Greece
wanted to issue more debt, it was at a higher interest rate
and then a higher interest rate and a higher interest rate
because people just stopped trusting it.
And so eventually they had to, you know, they had to have an
austerity program, they had to reset and it was ugly.
And so people lost life savings banks took money from them.
A lot of their deposits they just seized their deposits and
it was so it was it was ugly and those are the things that
happened and so but that and that is the ultimately the issue
exactly where the confidence is lost when that happens in the
United States. Again I don't know but it is
that is a big red flag what you just mentioned that the BRICS
nations are trying to trade with each other and and I I I think
what I saw and I haven't read the article yet, it's been a
busy day but I think what I saw was that they're doing about a
$6 billion transaction in not. One of main goods, right.
And so that makes sense that Saudi Arabia's not going to
cause an uproar doing you know oil trades and agreed to do oil
trades in in non-us dollar that that would be it would it would
cause a lot of tension but doing minimizing the amount of of
treasuries they have to hold makes sense.
There's another reason for it. I mean when you're when you're a
non ally close ally of the United States and you hold
treasuries you're not sure if we don't just seize those or stop
you being able to make payments on on the SWIFT network because
we decide that well you've done something we don't agree with.
And of course in invading Ukraine and killing people
that's that's off there's no there's no way to to frame that
positively. But when you have this essential
bank says that we're going to freeze your assets, then it it
the unfortunately in game theory, it makes countries who
are not our close allies. Yeah, they don't wanna play.
Think twice about accumulating treasuries, which is quite,
quite the reason that China is not out there accumulating
treasuries anymore. It's a big reason for that.
So, yeah, so that's that's kind of where we're at.
But yeah, it's very. Big.
It's a very so you go from this little thing of Bitcoin to you
understand like, wow, this. The system is really is is
perverse. It's damaged, it's manipulated
and it benefits just a few people at the top and it's and
it's it's all about control. And and yeah, would you say it
also became? Worse, after America went off
this gold standard, because also gold right is made through
energy in the ground by the nature's forces, right?
So in some way and you've got to go spend money to go mine it and
get it out. Exactly.
So the the proof of work. And that's right.
Like is is this where we are now?
Is this the result of that? Or is that too, too too simple
to say that oh. We're introduction of the Fiat
money. It's absolutely that it's it's
caused by the the the US coming off the gold standard and
allowing the central bank to manipulate currency the way it
has. We shouldn't have such drastic
recessions and expansions, but we do because of the
manipulation of interest rates and and availability of capital.
And so and so as we continue to have that, it only gets worse
and worse. And you see these contractions
and expansions, they they they get almost violent and so
absolutely. And that's and that's kind of
where we're at. So when when you look at
Bitcoin, my belief is that Bitcoin first becomes like
digital gold. That's the first step.
We it doesn't go to the step of OK, now it's the reserve asset
money it's it's perfect money it's it's got multiple layers
and lightning that it it doesn't just happen overnight.
The first thing that has to happen is for people to broadly
understand it in the investment community, not just on the
ground in places where they're trying to protect their money
like the the countries that we've listed the the small, the
the Lebanon's and the Venezuelans and and you know the
went. Once you get to the point where
in my belief is that once you get to the point where you have
broad, broad understanding in institutions all the way down to
individuals, that's where it becomes digital gold.
And that's the major first step. And when it has enough, it has
enough value in it. The the, the market value of
Bitcoin, of the network, It has enough money in it to to dampen
that volatility. That's when it becomes a true
store value and then it. Then it can really grow from
there. Yeah, before we talk about that
further, I had one one question to ask you about like the
current situation. Also one of the things why I
actually moved more of what I had into Bitcoin.
You you. I saw an article of you that
talked about. How the bank deposits are
decreasing. And one of the topics I talk a
lot about with people is that the money in the bank is not
yours. That's what I learned when I was
30 and had a mortgage and was working at a bank actually.
And a colleague told me and explained to me how how the
fractional reserve banking works, Right.
And so the money in the bank is not even yours.
If you have money in the bank and you believe that they have
it, it's probably not even there.
Which is. Even crazier, I'd say, and I saw
your article and I wanted to ask you, why are the bank deposits
decreasing and what does it mean for, you know, this podcast is
geared toward my, my millennial peers, you know, who want to
invest and save. How does this impact them?
And also then perhaps like how does it correlate to what we
just talked about with the, yeah, the recent drawdown in in
bank deposits is pretty simple. People are taking money out of
the bank and they're putting them in into money markets and
CDs where they're investing in money in in treasury basically
or T-bills. And so they're they come out of
there, they go into investment accounts that that are that are
generating an interest. Why are they doing that?
Because the banks are being piggy and they're refusing to to
raise the interest rate on deposits.
So remember, the banks borrow from the short end and lend on
the long end of the curve. And So what we have seen is that
the long end of the curve has been lower than the short end,
but the banks have been refusing to move the deposit rates up in
line with Fed funds. So it used to.
Be the interest that consumers get.
You mean? Yeah, exactly.
So you put money in a bank and you you get your paycheck.
You loan it to the bank. You you you loan it to the bank.
You put it, you put it, it gets deposited into the.
You don't even get to see it. Your your company sends it to
the bank and puts on the deposit in the bank.
And you know, let's say it's $10,000.
Well, there's a few things that go on here.
First of all, assume that's $10,000 after taxes.
If you get that paycheck it goes in, there's $10,000 after taxes.
If you want that money, will you?
The bank has to notify the government that you took you're
$10,000 from the bank. OK, that's.
Start with your risk taking and energy expenditure.
They have a clear, they have a clear, you know, line.
Yeah, exactly. Of transaction.
And do you want that money? They have to first they have to
tell the US government that why? And then they'll ask you a bunch
of like, why do you need this money, what are you doing with
it, you know? And so that's that.
And then the second thing is that money goes in there and
you're you should be making an interest on that because you're
loaning it to the bank, you're loaning that money to the bank
and they're going to use it for their purposes.
So but they're paying more. Exactly.
They're not even paying you like half a percent on that like .2%
or something on the on the like. It's it's abysmal.
It's it's almost criminal. And so if you're not
understanding that and you just have money sitting in the bank
and you don't think about this, you're being robbed and you
didn't even realize it. So, but people are waking up.
I think this is the biggest thing people need to understand
now. Like the the they wake me up few
ways. They don't want their money in
the bank because they saw what happened in Silicon Valley.
So you saw Bitcoin really rise in value when Silicon Valley
bank went under and you there was a lot of talk of other banks
going under. So you saw Bitcoin go up and
people were taking money out of the bank and putting it in
Bitcoin and saying I don't care if it's volatile, at least I
know. That's also how I view it.
Moving the wealth, not. You're not buying Bitcoin,
you're taking what you own from system A, storing it.
Else for system B, yes, exactly. You're storing it elsewhere and
yes, it's volatile to get in and out, but at least it's not going
to 0 in my belief. Yeah.
And then the second thing is the, the deposits are being
drawn down with people who want to stay in the traditional
system and being moved into into treasuries via the money market
accounts. Yeah.
So that's why the US Treasury is borrowing on the on the short
end of the curve. They're borrowing and borrowing
and borrowing and using T-bills. They're they're auctioning off
T-bills because they can use that money for T-bills basically
in the money markets. Yeah, and so yeah, yeah, this
topic, I'm very adamant about it, like this specific part,
because I try to not talk about Bitcoin then, but just share
this exact. Part what we just talked about
right like the money in a bank is not yours.
If you want what you think you own, they will ask you questions
like what do you think about that you know?
And I've talked to friends also said this a few times on the
podcast like I have some friends who have a lot of money.
They are not bitcoiners and they don't see a problem that I don't
know if they want to take 100K cash from the bank.
I had that as an example right? And I said like, well, if you
would want to do that, like. Do you think you would get it?
And then my friend said, well, maybe I have to wait two days,
but that's more like a nuisance or something.
And it's just so like he's very smart and I admire him, you
know, And it's just he just sees it as a nuisance.
And then I just kind of say like, well, if you see it as a
nuisance, then there's not much else we can talk about, right?
Like for me, it's kind of like the first step of the of the
bigger problem that you actually experienced experience and see
that a third party has control over that what you earned.
That's right. And that you've conceded control
of that? Exactly, Yeah.
So you're not a sovereign individual anymore and and all
these things and that doesn't even talk about Bitcoin.
That's just trying to understand like how the current system
works. But again, you know if.
On paper you see it and if you want to send me 100K you can do
it. You you will by the way still
get a call probably. Why are you doing that, you know
so it still works like it's not really it's not really broken in
that sense for them. So I I find that like an
interesting like topic to to start talking about and see you
know how that resonates with with people.
So if we talked about this, how do we transition to Bitcoin?
Like how does Bitcoin offer a solution for how that current
system works? Well, long, long, long term it
offers a a reserve asset that currencies can be pegged against
and that can be can be transferred for.
So you can redeem your your money certificates for that for
Bitcoin rather than just another currency.
And so that's the. Money certificate and that's the
point right. So that's it you could it's that
certificate you can take and say I want my I want Bitcoin and
they you know and so and that's and that's really the that's the
ultimate I think that's the ultimate end game where it
becomes Bitcoin becomes the global reserve asset and it it
it, it won't be gold. Gold is is too difficult to
transfer it's too difficult to audit.
It's too difficult to trust that that you know a a bank, a
central bank has the right amount of gold in its vaults
that it's not counterfeit. It's just hard where is Bitcoin?
You can see the transactions, the the addresses.
You can see everything in the wallets and you'd know and so
that that makes it ultimately the the I, I believe in the
future and the global reserve asset when we get there, it's
going to be a long time. It's going to be a very long
time. I don't think we get there in 10
years or 15 years. It's going to be decades.
But you may see it, you know, I may see it, I may see it it it's
possible. But but between now and then I
still do believe that that's the the ultimate, the the the
ultimate next step is going to be the the digital gold step and
people believing in it. But once you have that belief,
then then it can. It can start expanding and and
becoming a much more than than just that.
Well the step to trading, trading it as a money will be
way smaller I think. Like if people are start to view
it as not storing my wealth in system A but I'm storing it in.
In this new system that is provably more, yeah, easier to
use, more transparent, ultimately transparent, I would
say 24/7, 365, audible, all all these things that this other
system is not right, permissionless what we just
talked about, right where someone else asks you why are
you coming to use this money. It's just do you still find it
difficult? Like I find it difficult in some
sense. Like I see all these things.
But I still want to teach it and share it with other other people
and still challenge myself to like, OK, how do I word this?
Like how do I say this? How do I explain it so that I
can kind of like retrace my own steps and hopefully touch
someone at some point, right where they start pulling that
thread on whatever they whatever dimension they run into.
Like how, how's that for you? You are in education.
You have your newsletter and company.
Like what? What's your biggest challenge
there? Well, I for me, I like, like I
said, I always start with the money and just they can't
understand. You can't understand Bitcoin if
you don't understand the money and how it's broken.
And so for me when we sit around and talk about the things that
could be fixed with Bitcoin that that helps.
And so those are that's that's really what it comes down to for
me and when, you know, teaching my kids.
How the system is is is not working for them and how it's
working for some other people that that really opens their
their mind up to understanding. Oh OK I understand.
So the Fiat system is for the those old people in charge and.
And Bitcoin is really for the next generation and that's and
that's kind of the way that I frame it and that's it's for the
next generation of of wealth. If you view it like that and you
teach your kids, then I think you're definitely gonna see it
in your lifetime. And I mean like they are gonna
work for Fiat and they're gonna save in Bitcoin.
That's right. If you taught them the right
way. Right.
So I think you will definitely see it.
And I think that's actually great.
You know, to go back to what we talked about with the different
generations. Like your generation has the
insights to already educate their children, right.
And so your, your generation's children will start that, that
wave I think of saving in in another system, which is first
time I thought about that, actually.
Very cool, yeah. Yeah.
Since I'm Gen. X, my generation is like we
didn't, we don't have the benefits that the boomers got
from the Fiat system. So we do understand how it's
broken and we're we're trying, we're scrambling to make sure
that we retain our savings and and protect our wealth because
it's not so much that that we can just sit on it and spend it
until we die like the boomers, but.
We understand that we're not going to have Social Security.
We're not going to have the that safety net those benefits we're
we're going to have to really figure out a way to save.
And so it means it, it means something to us.
It it really means something to us.
And so we're the first generation for to to to need it.
And then we're teaching the millennials who need it
desperately, and we're teaching our kids, the Gen.
ZS that. OK, you guys really need to
understand how the money's broken and where, where, where
the future is. So love that.
All right, to end this conversation, the last question
that I asked everyone what's a core belief that you will never
let go? My core belief that I will never
let go, truly, it's that you can achieve anything you set your
mind to and that's. You know that I I've, I've
always believed that and and though I have not achieved
everything that I that I have set my goals on, I've gotten way
further than I ever thought I would.
And so anybody who wants to do something, just if you put your
mind to it and you do the work, you can get there.
Awesome. Love that.
Well, thanks so much for this conversation.
Thanks again for coming on and I will link to everything you do
and your social accounts in the in the show notes so people can
learn more from you. Just like as I learned a lot
from you. Yeah.
So thanks again and I hope to stay in touch.
Yeah. Thank you so much, Brahma.
It's great to be here. And I look forward to our next
conversation. Cheers.
Likewise, I hope you enjoyed this episode.
If you did, it would be amazing if you could rate, review and
subscribe on the podcast platform of your choice.
It will help us educate more millennials on the importance of
Bitcoin. You can follow and connect with
me on Twitter. I'm Brom K that's at Bramk.
And if you are or know someone who has an interesting
perspective on Bitcoin that's worth sharing, hit me up.
I read and reply to every single message.
I appreciate your support and hope you'll be here for the next
episode. Thanks for listening.
Bye.