55. POLITICS | Will Bitcoin Save You From Financial Repression? - Transcripts

September 12, 2022

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Timestamps:
(00:00) Intro & Arthur Hayes
(02:47) Arthurs Thoughts
(06:25) Are We At "War" Right Now?
(09:45) Defining Financial Repression
(19:20) Is War Required for Financial Repression
(27:25) Is Arthur Hayes Theory Correct?
(34:43) How DO We Survive Financial Repression
(37:55) The Power of the USD
(40:54) The Power of Stable Coins
(43:10) Real Estate?
(47:40) Where is Safest in the US?
(49:15) Is the Blockchain Enough?
(52:00) Underappreciating RAI
(55:37) Closing Thoughts

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Transcript

Welcome Ladies and gentlemen, Degen's and degenerates to another episode of the Alfalfa podcast. We are for radically moderate entrepreneurs and

investors swimming

in the messy gray

ocean serving

up alpha in money, politics and life. We are nick rabbani eric,

Johanson steven,

Cesaro and I am Arman Asadi. All links at alfalfa pod dot com, Make sure to hit subscribe wherever you are listening or watching on Youtube and follow us on the socials and most importantly, hop in our discord to join the community for the after party and more alfalfa.

Yeah, I don't know. You'll you'll have to decide where you think it's best to start off Stephen who was that babe in the background there? Who was, who was your babe there

babe?

She single or what I think she

is because her husband

died, jesus christ. I can't believe my immediate reaction is to laugh at that you have a nervous

get rid of that post.

I don't like myself sometimes. What better way to Stephen to show off his wealth rather than have the cleaner exit as a podcast in front of his baby, his baby grand piano, my rugs.

Alright guys,

sorry,

someday when you own a house you're gonna be like,

you know, cleaning

this thing sucks, I

rent a condo and I have a house cleaner sometimes when the deep cleaning is not good enough. Um Alright, what are we gonna get into here? We

we live this on,

we're doing it. All

Right, cool. I love these, love these broken intros. Uh yeah, so we decided that we were going to talk about the new Arthur Hayes piece. Um our thoughts on it repercussions of it, you know, thoughts in the world. So so Arthur dropped a new uh not at all brief piece which medium told me was going to be 31 minutes to read the other day. So that was great. What

Grade Reading Speed? You only took 26? I've

read enough Arthur where I can skillfully be like this is just him being cute for nine minutes of reading here.

I admittedly skipped nine paragraphs because I was like this is obviously preamble.

Yeah there's a lot of like kind of dramatic writing and sir jerome and it's it's it's very cutie but I had no time for it last night. Um Anyway, Arthur is basically telling us as the T. L. D. R. That the world is going to enter into a state of war and as a result of this war our governments are going to financially repress us all and that Bitcoin is going to be our ticket out of this financial repression. Uh The only thing that will save us um Our

digital savior?

Yes. Yes. Nick. Did you did you read this in depth enough to would you like to give some further further bullet points of just how he says this is going to play out for the audience.

Doesn't have

31 minutes to burn.

Sure sure. I mean he he draws some comparisons to to history um where in world War two. uh you know the U. S. Enters the war and it needs a financial war issues war bonds and several countries have done this uh you know in their own right and uh war bonds are away essentially to financially repressed citizens. And the way they financially repressed citizens is that they have negative real rates. So the rate of return on the on the war bond is way less than inflation. So you can imagine during war supply supply chains dry up um Costco maybe there's some hoarding of goods. Um Maybe the government needs those goods and needs to take them from you. Um That could be gold, it could be steel, it could be all kinds of things. So commodities go up um And inflation maybe increases and persist during wartime. And what better way than Uh to to afford that and pay for that war is then to offer war bonds at a at a lower rate.

So uh they might offer 2% interest rate or very low interest rates, inflation could be really high. And essentially we inflate away the debt that the government's go on. So that's kind of like a core of what he's saying is that if we do and then he looks forward to U. S. And china and says if we do get in a war um to make your move to prevent being uh financially repressed. It will be too late if we're already happens. And so he's basically saying, you know, you need to plan now. You need to think of this scenario now and he proves that or it makes the point that Bitcoin is not as easily confiscate able uh as as other things. Um for example, uh money in your bank account, stocks, bonds that you own. Maybe physical items. Um and that because it's potentially it's decentralized and the game theory plays out if they shut down mining in the U. S.

And that it'll be financially advantageous for other countries to start mining Bitcoin. That it's actually a lot harder for the government to take that away from you. And it may be your only source of hope in the time when a government's at war and they need to uh take what they need for the state to persist. And you know, throughout his article, he basically says when the state is at war, the state will will always win. And he used Covid as an example. Um, if you think that you're going to get out of, you know what the state wants. Um you know, we had a war against an invisible virus and there is plenty of evidence to show that, you know, we we shut down businesses. Um, we did several actions to take vaccines had all kinds of mandates and regulations that most of the population almost happily followed. Um and so he says that the state will persist in any type of war specifically kinetic war. So I'll let you fill in the blanks from there if I missed anything important.

So

my first question to you guys is like, are we in this war right now? Like does like I know that Russia Ukraine exists and that we're contributing dollars to that conflict and that china is playing a role on the other side. But like are we in this war today? Can I maybe take a different angle at that first? Um, I want to know are we in financial repression right now? Because wait,

I want to answer your first question

first. Okay, let's

answer that question because I have a I have a few

issues with

this Arthur article. I don't think it's quite as incisive as some of his other pieces has a lot of glaring holes in it in my opinion. Um, the first problem I have is that he sort of like solely centers this idea of financial repression around like requiring some sort of war to break out, be it like a kinetic war, some sort of cold war. Right? Um, but but I would argue that that's not at all a prerequisite. And we are all ready to answer Nick's question and like sort of early stages of this like um,

war is almost the lowest probability scenario for financial repression to occur.

Well, why does war create a government incentive for financial repression? It's because war is expensive and ultimately governments incur like a crap ton of debt during wars and it is in the sort of servicing of that debt um that they have this wild incentive to do financially repressive things.

But

if debt is like sort of the actual root cause of the repression, like we already have a debt problem like in in europe and the United States and Japan, like we have massive levels of debt to GDP already like regardless of what

had in any point in time in history when there were kinetic wars, like more debt today than ever.

Yes. So, so to answer your question, like it almost doesn't even matter. But also I would argue that we we are obviously fighting wars were obviously fighting a kinetic war right now sort of by proxy uh in Ukraine, but we've got some kind of Cold War type stuff going on with china. There's obviously like a sort of uh you know, ax hanging over our heads right now with the chips and Taiwan and will there won't they invade, what is that going to have like in terms of and impact on us. Right? So there's definitely a lot of further catalysts down the road, but we are already in a bad state and and and our european counterparts I would argue are are in the worst state. I actually don't

think

that people in America are in that much danger of this. But I think people in the eU are definitely absolutely screwed and this is sort of an inevitability for them. It's already happening right

now. Just when you say something like that, I just want to know what you mean in terms of ramifications like you come out hot, like what does that mean for a citizen of the U. Well, so um I think it's good to kind of like roughly define financial repression and give a few examples because it'll start to come clear. I think what we're talking about and what could

happen should we like define it a little more specifically?

I mean I guess I define it as like basically a systematic tran of wealth from citizens to the government, particularly when the government overspends and you know, one easy way to do that is turn um Savers citizens um into negative real rates. The other ways to do that like china does it right now they have capital restrictions. You can't move your capital outside the country. That's a form of financial repression. You could move short term interest rates down to zero when inflation is running high. That's a form of financial repression. You could allow inflation to run above target. So the Fed in the US could uh let inflation run at 3-4%.

But that in isolation doesn't work unless you also get bond yields to systematically run below inflation. Financial

influx of capital at the same time as that

correct? So like how do you get the ability to borrow money persistently at a rate that's lower than the prevailing interest rate, which you're borrowing practices have largely caused. How do you do that? That is sort of the essence of repression. As Nick said, you are, you are taking money from the private sector and sort of systematically channeling it into investment vehicles which would otherwise not want to go into because it's clearly a bad deal. And in the past, as you said with the World War Two bonds, right. Those are a bad deal. I think people lost like half of their purchasing power over the course of a decade on those bonds, which is nuts,

the wealth was transferred from citizens.

That was, yeah, that was a transfer of wealth from like patriotic, goodhearted, unknowing citizens to the government. Now. I think the populace is more sophisticated these days. Right? I think we obviously are in spite of what you may see on Tiktok investors, people aren't going to take that by and large. Right? So the, the ways the government does this has to be like a little more subtle, little more nefarious. I think one thing that you didn't mention Nick is that, um,

there

are already like massive pools of capital for the government to access, for example, via the most obvious low hanging fruit. I think it's like pension funds, pension retirement accounts, like a lot of money in those,

this is after quantities after just printing more money, right? You're talking about the next biggest pool. Yeah,

like I'm talking about like capital that exists like out there already that we could repurpose if you want to call it that one is like pension funds, right? But um, so you could, for example, as the government just pass a law that just says all pension funds must hold a minimum of X percentage of their assets and like Treasuries, you

Can also do that for 41K. Plans.

Yes, 401K is another good example. You could do that. The other place you could get stung is like index funds, mutual funds like wherever you have like a large pool of capital that sort of centrally managed by like one entity that is really like answerable to the government. If your money is in any of those pools, you're going to be like, really suspected you are the low hanging fruit to be sort of like tax in a way, there's

so much money in this bit like

pie

chart of seeing where like America's wealth exists. Like I haven't, but like, I think if you, if you just aggregate uh pension funds, 401 Ks. And uh, I can remember everything you said like, oh my God, I would be so much money. Yeah. And I think it's uh, this, this, this question is important because we have a very highly leveraged world economy. Like not only is our country highly leveraged, but the whole world wide economy operates off debt and you know, pretty high leveraged debt? And so the question is like, how do you unravel that at some point? And financial repression is the tool at hand if you're a state, if you're governing from the state's point of view, that's only way you have to unravel this so as investors, and also it's just people, you know, looking at like what's politically feasible in the future. You know, this either ends in like complete deflationary economic destruction or a systematic way for governments to unwind their debt.

I

think it's such a it's such a semantic problem, like the the argument is semantic because I think even when uh like Arthur in his article, he describes when FDR was going through um the FDR administration is going through like how a dollar was backed by gold and and then they said like, okay, well, we're not gonna we're not gonna transfer uh your dollars to gold anymore. Like that is still semantic because it's like, they're not tell. And even like with war bonds, you know, they're not telling you that you have to buy them. They're just saying that they exist and for those who choose to participate, they can and that's like it's repressive in um in dollar terms, right? It can be repressive in dollar terms, but without being repressive in like authoritarian autocratic sense, like where it's like, you must buy these war bonds, right? And like, and that's a different level of repression because I think like some people are going to be duped by, you know like a bad like a negative E. V. Proposition. Um And that's not repression to me.

I mean it's repression under the I I guess if you wanna get technical its repression under the definition of the stanford guys who like coined this term in the seventies, we can argue about like whether it is actually repressive, I

I

think it becomes like a tina thing, right? Like you can corral all of the capital into a barrel. You know, you want to shoot fish in a barrel. Well you corral all the fish in the barrel first, the capital of your fish. And then it can't go anywhere else. So you can you can you can pick it off. Like if you successfully implement like a good example of this is UK right? In World War Two times, they you couldn't sell a security without the government approval. Like never mind transfer any money out of the country, right?

So once you've

corralled all the capital and it can't go anywhere else, then it becomes very easy to have like this sort of kinder gentler sort of like financial repression. You know, like the protection that would be a shame if anything happened to your capital just sitting there. You know, just be a shame if you didn't get 2% a year, we're gonna nuke it like five. You know, it'd be a shame if you can't go anywhere else, Right? It's a it's kind of that Type of thing or, but most people I think are gonna be aware of it because they are putting money into a 401K. They're investing into an index fund there in a pension plan. They won't even know. That's like the kind of pernicious thing about that.

I mean, I agree that it's mostly optional right now. And I think what we're really talking about here is like what happens in the next step forward. But I would also argue that the push for financial repression does not come from uh, once, once there is a debt to pay, pushing people in some of these lower return negative real return assets, it really comes from the original sin, which is um, you know, printing more money, taking too much debt and and too much spending. Like I think covid is, is an example like uh the Covid response uh caused us to basically shut down the and force people inside, which then we needed to stimulate the economy and print more money. And right now we're paying for that in negative real rates. And so I think the financial repression comes from the original sin of of having to do that. And um, there are other scenarios where this comes up, but if there is a war, uh, potentially in the future with most likely china, then there could be things that are done. You know, the the government could take the next step. And the question is, do we really have to prepare ourselves in is Bitcoin the right answer.

Well, okay

so I guess my question is like if we're gonna use history as a proxy to today, you know, I'm looking at the article and in I just googled it, like here's the quote in the article, it says only Secretary of the treasury Morgenthau who was the Secretary of Treasury at the time during F. D. R. He said that only he was the in opposition to the plan. His point was that the voluntary way was the democratic process. So like only people that would opt into the war bond would pay for this like negative eveything that was like a negative real returns. So uh just so we're clear like are you suggesting that you know, a we're in uh a wartime today and that be they will take the next step beyond what FDR took which is to force citizens to pay the government with their savings because um in this in this example they did not they they opt they allowed people to opt in. I don't think we're in that wartime footing now by no means uh

yeah

we we in the US europe whole different story. But uh no but I think you know, Arthur's making a case that if we did get in a kinetic war uh these measures would be implemented over time and it'll be half of a persuasion tactic to get people to be patriotic and invest in these. And then, and you saw like examples of that persuasion over time through like advertisement. So it's like we love America, we support the war, buy war bonds etcetera. But that's also not financial oppression to me. That's uh you know, that's uh

that we don't have to do that anymore right? Like in World War Two like times like Social Security didn't even really exist, right? Like like all these government programs didn't exist. People weren't investing in for people had like a lot of cash. They had like their own investments. Right? So it was, it was a more difficult process to part people with their money today. Nobody has any of their own money. Like how many people manage their own portfolio portfolio and do so by opening a brokerage account in their name and just buying stocks under their name at a minimum. Most people buy like an index fund And most people have like 401KS or they invest, they have like a pension. Like so the it's not, it's almost like not a fair analogy to compare the modern world to World War II. We don't have to convince people to do anything.

We just have

to yeah

centralized,

sequester those funds much more easily than than in FDR's administration. For sure. Are you thinking that that that's a path that they would take during wartime as

okay look so I want to even just get off the war I guess for europe the war time thing is kind of relevant. Like I would argue that europe is at war right now. Even if you don't want to consider it like a full blown panic war, the EU is in some sort of energy war right with Russia. Um Clearly but but to me that's not even relevant like the problem is already there without the war. The problem was already there. And then like Covid sort of was like the match that really let the flat like we had all of this like excessive Q. E. And money printing. But it didn't matter because the money wasn't getting into the system so there was no inflation. So the governments could keep kind of see the central banks to keep issuing this um issuing uh keep promoting this like growth of debt and doing Q. E. What the money never made it into the banking system into the into the general populace because the banks

had

no incentive. They didn't want to take on any sort of they just hoarded the cash basically. They didn't they didn't get out there. There was no velocity. Right. What changed during Covid was the government said banks lend this money, we will

basically

guarantee no losses for you. So the banks were

like

okay and suddenly all of this cash goes

and you're describing P. P. P. Yes yes

so that's sort of like is the you know the match that really lit like so now there's like a roaring fire burning everywhere right? And to me that is the main thing. I don't I don't want to like I think Arthur's pieces too focused on war and I don't I just don't think the war is that relevant. The other thing about Arthur's piece that like drives me sort of crazy. It's like he has this thesis that like you have to buy a Bitcoin now because they're just gonna turn it off, it's gonna be too late. Like

how

much money does the government have access to via Bitcoin and how difficult is it to confiscate Bitcoin versus how much access does the government have to gigantic pools of capital via pensions via mutual funds? Like it's like trillions of dollars in capital with the stroke of a pen. They can just just absolutely corral versus like they're gonna go after like billions hundreds of billions. Yeah it just makes no logical sense to me.

Well let's talk about the first one first and I think like you bring up a fair point like war doesn't necessarily it's not necessitated that we mentioned war in this conversation. But he does bring up the point that like during peacetime like the government doesn't need to enact these policies. So it's only when when it's required and during war is when it's required. So like to your point like I don't think that they would come in during peacetime. But when war time comes, what you find is that um the laws are superseded by the state's needs totally in in one scenario you could see is if we do go to war maybe they don't provide that backstop, maybe they don't provide that extra liquidity. And naturally people risk off and kind of go into these safe havens even though they have a negative real return. Do you see that possibility? And again we're talking about the war

scenario, we are in the risk off thing right now right? And I think a danger for people as they sort of get condition to this idea of dollar equals safe which it is right now it's been

the highest return asset you know in this last it

has but we're like creatures have have it and like much like we all got acclimated to stocks only go up right? We're all I see it around us right now we're all getting acclimated to dollar only go up but that's just not going to be the case right? So there's there's a few ways that this can play out. Um

Yeah

there's the

X. Y. Z. 20

I'll fade that but

it

there's only a few ways you can play this, this can play out right? There's too much debt and there's not enough GDP is unsustainable, we can't keep growing like this. So you have you have austerity, you have default, you have hyperinflation, you have massive growth that just grows us out of the problem

or

you have financial repression, austerity is not going to happen, it's massively politically unpopular, default isn't going to happen for similar reasons. You will crush people and you will just get you know in many countries dragged out into the street and bad things will happen to you. Hyperinflation, same exact thing. Again social unrest, high growth would be ideal but it's just sort of unlikely.

And I also think that's only on the table for the United States. I think that's the only way out that the United States actually has enough innovation, The human capital, the right materials to put together a fast growth economy. You can make the same argument for China but like their their GDP growth is is you know really fueled by by debt. And if you stop putting in the debt, I don't know if GDP grows at 56. Would

you would you would you agree with the idea though that the U. S. Actually kind of has like a different way out and that we can kind of like we have like the dollar as a release valve and like other people are sort of forced to buy it

using that. Yeah

europe is the one who's like doesn't have this kind of europe is mostly

just remove europe and us from it. Like I think um if if a nation state is faced with the choice of austerity versus repression, repression.

Yeah, like repression of those five options is the only one that's palatable in a world where high growth doesn't happen, which is most world, let's be honest.

The other, the other nations might not. So I think depression is more and more real for them. Yeah.

So if you just sort of like logically go down

that like

kind of analysis, you're like, okay, well they're going to do these things to basically like force capital into this. They're gonna corral capital and they're gonna inflate away the debt and they're gonna, we're basically going to pay for it via suboptimal returns and inflation. Right? Um So I guess that leads us to, okay, so so Arthur has some holes in his theories. Um I mean, do either of you think that Arthur's theory is sound before? I just move on there.

I mean, so when you say Arthur's theories, are you talking about his Bitcoin theory? Are you saying that financial repression is the I think, I

think he's right on financial repression. I think he's focused too much on war and then I think he is both wrong on the sort of path dependent way in which like Bitcoin kind of gets into this and like how much urgency you have and then also I would argue on the effectiveness of Bitcoin so we can kind of touch on either of those points,

let's hit each one independently. I think he's underplaying and the tinfoil guy from episodes ago thought that we were already in war and I think he's underplaying the fact that we're in war today. I think so. I think we're in war now. I think um that risk, you're completely underplaying so how that manifests itself. So

I'm not playing risk. I just, I just think it doesn't matter because you're already, it's already there without war.

I agree. I think I think it does matter, but he just missed the the like five other scenarios in which financial repression can happen. Like

he was, he was

spot on on on presenting that this is a risk. But he, I think the causes of it. Um, he focused too much on kinetic war. So to your point eric we're not a kinetic war with say china, but I like this phrase hot war in cold places and that specifically mean like cyber financial war uh, like war over commodities shoring up supply chains like that is hot war in cold places and we are most definitely in that phase and that's the way that war is going to probably persist going forward in, in a world in which everybody has nukes. Like we don't want to play a kinetic war game where we have to eventually kill each other in all of us. I will say to his point, I mean you use like archduke franz Ferdinand in World War One as an example. Like all it takes is is one potential event to kick off a world war. So you know I think he he does kind of slightly mention this in the article that like we are not a kinetic war now but like it could be one slip up that then you know starts a very fast um falling dominoes to to get you to that place and at that point it's too late. But

well let's let's assume that this is all happening, it is going to happen right now. Let's assume we just move to the phase where we're like we gotta we gotta protect ourselves

like that. So like

eric what are you, what are you doing? I mean do you agree with that? Like in the mid mid point of the article like there's just big caps like get out and that's kind of the thesis exit the system going to the only thing that lets you exit the system. Like do do you agree with that, is there a better way to sort of protect yourself? What do you

think? I'll tell you that? Um when when I was reading through that section of the article, I felt solace and and this is not like me telling you what's right or what's wrong? I did feel solace that like I have a bunch of money on the Blockchain like regardless of which chain we're talking about, it's like the ethereum chain the Bitcoin chain whatever. Like I have money that is um outside of the government's purview today and that felt nice to me. Um I I still see uh weaknesses within that but but even like at that level I'm already feeling more secure than like having all my money and fucking fidelity where it's like jesus christ like do you think

there are any non Blockchain ways to guard against this?

I mean there are there are a lot of people who exist in my trad vice fear who like still hold like gold physical like buried in their backyard and like silver coins and like

this

is like a real thing that I deal with that like you know these people don't think of the Blockchain but this is a real thing. Yeah I mean so real quick the problem I have with like gold and silver and Bitcoin, it has this very big assumption overlaying it. Which says that you can actually buy goods with these things like you can I don't know sliver off a piece of your gold bullion and go pay for food with it or transact in Bitcoin in a global economy and like I think that's a pretty uh big tough assumption to swallow um I do know that like the city Citibank's private bank did put out a note on how to survive financial repression and then they make the case that uh you know debt is at, you know wartime levels already. And so how are you going to do it? And they're there and I don't necessarily agree with this totally. But um you know, their recommendation was dividend yielding equities and they looked at previous points of financial repression and how they described it and they showed that like if you reinvest the dividends, uh those equities outperform uh inflation during those repressive times. But in the scenario where steven is talking about uh where you have money in a pension plan or in a 41 K. Plan and we do implement those things were essentially you're forcing people out of risk assets by kind of uh placing placing a floor on how much they have to uh buy, you know. Treasuries, then that is not necessarily good. I think that's a that's a stretch. Um for me, I do think, you know, even though I just kind of shut it down, I do think um you know, having a little gold and a little bit coin on the side that maybe no one knows about is is good. I don't know how to play out, like I don't know how I'm going to use it, but if really, if everything really goes to ship maybe you could use it.

But I mean, I think we're um I think holding us dollars is is the best. I

don't know.

I don't think so like, so how about this like uh they're telling

you that you're gonna lose half your purchasing power in a decade. You wanna hold

dollars. Isn't

Arthur Arthur

Hayes has Arthur Hayes bank less episode come out yet because when David was on ours, he said that he interviewed Arthur Hayes and and he he made a point that stood out to me, he said that Arthur denominator this whole portfolio in energy energy like like in kilowatt hours and he he makes like go ahead and he makes a point at the end of article. He's like eventually, you know if if this thesis plays out, you will know the amount of Bitcoin for a pair of oil not the amount of us dollars. Okay so with that being said like if that if that's his take then like you know I mean we've seen how Bitcoin can be regulated in Canada, we've seen how crypto can be regulated in the United States tornado cash like at the like the end user state crypto can be regulated pretty easily. So I mean what is what's the best like I mean I'm not condoning just like sequestering barrels of oil in your backyard. Like what what's like the what's the way to do this?

I think so one of the problems I have with his thing and he sort of glosses over it with the o the price of dollars doesn't matter anymore, it just won't matter just oil and that that might be true but like his thesis that like if you buy a Bitcoin now because the government is going to ban it and then you have Bitcoin and you're good in between that like the price of Bitcoin nukes like 90% isn't it? Like so that part is written to be like somebody who like doesn't use ethereum because I feel like if you use like any sort of just basic like thinking ahead you're like okay well I get the idea that I want to keep value outside of the system totally agree with that great thing to do. You don't want to immediately put that value in Bitcoin. You wanna immediately you want to hold the value in like non confiscate able stable coins and then when the new happens then you want to use the stable coins to buy Bitcoin. I don't know maybe you buy like ren Btc and then ported over to like actual Btc or something but surely there are like a million ways to play this that are better than buying Bitcoin now and then getting nuked 90% and just being like it doesn't matter. I just denominated oil anyway.

Sure I mean that's a that's a good point and I would just only push back to say like most people who even use block chains are gonna be like okay well U. S. D. C. U. S. D. C. Just bent over backwards for trinity cash like well don't use

us D. C. Or do use us dc because I don't think they're just gonna wake up one day and just freeze all you. I think there'll be some warning or like you'll see like the world's getting kind of messed up. Maybe I shouldn't have all my money in U. S. D. C. But like at that point is good like you should be cognizant of how centralized your your stable coins are diversified.

I still don't understand why like uh U. S. Dollars in the best place to go. So like let's say you have a bag of U. S. Dollars and kinetic war breaks out, all the other fucking asset classes are going to go down. So maybe you save some bags their best way to start off this kinetic war is holding us dollars and then play it out because we're seeing this play out now where inflation happens supply chain shut down. Uh There's like systemic inflation, there's hoarding of commodities and then you know every country is gonna need to buy those same commodities which is priced in dollars and which which side of the equation? Do you want to be on? Do you want to be in U. S. Dollars or do you want to be playing other in some other currency at least relative to those other currencies, your currency increases in value.

And you know maybe if you're talking about You know 10% inflation for a decade. Yeah that's that's pretty rough and you might have to take more risk. But I still think you know we were talking about preparing for this scenario holding dollars even just dollar denominated assets I guess like even us equities um is a good place to start it off.

But the whole point of this argument, if you believe it and that's a caveat that people should think about. Like if you believe it, the line of thinking goes once you hold dollar denominated assets in a particular me, a vehicle in which they're under us jurisdiction and just subject to laws, confiscation, whatever You've already lost the battle once the once the regime of repression starts because you are going to enter into an inflationary era right? Like maybe the best case is the baseline of 4-5% a year, right? Maybe that's the basic best case. That's not good. You know? But if you're holding dollars because you're like a dollar is going to be at a certain point. If all the capital gets corralled, you can't exchange the dollars for anything else. And that's why you capitulate.

So I think if you're if you are lucky enough to hold us dollars, your biggest risk in this scenario is heavy d basement, right? That the U. S. Government is going to print a lot of money. I I don't think, right that's the one I'm most worried about which I had in my notes to touch on. But in the case I think the most likely cases heavy d basement lots of printing of money. And the U. S. Can do that because well they they own the money printer. And I do think there's this um there's this balance that they will play for that will be more politically advantageous for them. Uh in the in geopolitics terms to not put on the hooks to the U. S.

Dollar to not put these vices in play because I think it benefits them that people want dollars

because it

allows them to kind of move chess pieces around and say country A. B. And C. You want on our team. Okay here's the terms we offer you you politically kinetically award with aligned with us so that you have access to dollars and X. Y. Z. You don't uh you know kinetically and politically aligned with us. So you have no access to.

I sort of agree with you by

the way this is like dollar milkshake Brent johnson is kind of like line

of thinking. Yeah the the caveat is what you're saying is true at the beginning of the war. But at that point you do want to purchase assets at a discount but you can't because you're trapped in the system and the assets you purchase even if they go up those gains will be repurposed if you believe in the repression thing. The other thing I would say is like I kind of agree with a broad sentiment that like if you're in the US this is not actually a big risk for you. But like 95% of the world population is not in the 95%. Probably about 95% of the world population is not in the US and they are subject especially Europe. So what about those people, what do they do

coins sounds good to me like us

d stable coin does doesn't that sound better than Bitcoin? Like usd stable coin that it's like a diverse

basket of usd stable

coin confiscated.

It goes down I get debased by 10% versus a decrease of 80%.

Yeah. Why why would you why would you buy Bitcoin if you know it's gonna

specify any reason why Bitcoin over that.

Bitcoin is

just off the government sort of. Yeah.

Well the line of thinking is get out step one. How do you get out? Well everything else is sort of and I think his argument on physical gold is a little he's like you can see it so I can tell you own it but like how easy it is to see it but like his point is well taken for like I can know what your bank account is. I can check the name on the deed to know who owns the house. Everything else we own is very easily verifiable. Right? So I get that sort of aside from the physical gold I get going to Blockchain then the thesis is that like Bitcoin is the only Blockchain that is like the most censorship proof, the actual most resistant to nation state attack. Which I think is honestly arguable but like even if we give that to him right then the conclusion is ergo by Bitcoin to sort of protect your value or to have value outside of the system. But like I I think where we all disagree with this is that like I just feel like if you think this is going to be the case like you should just keep stable denominated assets out of the system and then wait for the Bitcoin nuke the Bitcoin ban. Like if you think Bitcoin is going to survive a ban You still want to own it. Well when the band happens you know it's gonna go down like a minimum of like 50%. What

about buying die? So like the biggest problem with dies it doesn't scale right? Like the value

There is like $1.50. Exacting it goes up.

I mean you see this in Argentina like I think um Tether at one point traded for a premium because they're trying to buy as much dollars as they can and crypto is only one of the ways that they can buy more dollars so at some points tether trades at a premium so I kind of like holding die because it doesn't scale as well for that purpose. Um But also I'll throw another one out there as someone who has their their largest asset classes, real estate. I can't

believe I didn't, I

didn't think about that. So um if I had to make an off the cuff case for real estate in the financial repression, uh you know, scenario, it's that property rights um specifically your home is like one of the most fundamental things in a capitalistic society. Um You know, I'd even put it in in in under europe's terms like, ouch right. Uh well in any case, like I do think that might be the last place they would touch like, and I'm trying to think of other ways they could take the value out of your home other than actually confiscating your deed and I just don't really see that happening because that has the same equivalent effect as austerity as hyperinflation. Like, I mean those scenarios create revolt, but starting to, you know, take over people's primary holding in their, in their net worth, their family's net worth their home. So real estate could be the best place to do as long as it's not. Can I ask, what, what do you guys know what they did to roman Abramovich? You know, like he had to get a lot of assets in England. Do you guys know exactly what they just confiscated or what, So he doesn't own the property that he previously owned. I have to fact

check, I don't want to speak to authoritatively on this, but I'm pretty sure they took some stuff from him that

Okay, well that, I

mean that

is so draconian. Like the fact that that is not more on our radar is alarming in itself. So I mean that's one of the cases that Arthur makes in, in his article, is that roman Abramovich, you know, was one of the wealthiest people who, you know, is was is was Russian oligarch, but had made his roots in in London. I mean, he bought a football team. He, you know, owned property amongst other Royals and other politicians. He probably like, yeah, I try to play to the our european listeners and cohorts. Um, yeah, a football team, um, the football team and he bought property and you know, one would think that out of anyone he might be excluded from from the raft. But he he was not. So that that's, you know, to his point. But like if you're not, if you're not potentially on the sanctions list, uh, then you're probably okay investing in real estate. And one maybe one way to get on that sanctions list, by the way, is to somehow, I don't know, take a Bitcoin and traded for oil from like, uh, axis of evil country or you know, violate those rules. However they so get delineated.

So, you know, I think there's

you, if she hits the fan, you have an easy exit, you can go to a quote unquote neutral country and like access your wealth.

Switzerland

Yeah. Switzerland, Whoever whoever it is, I want to dig back into the real estate thing though because I think for most non crypto people who are like, how do I feel like real estate to me does look like the obvious place because when you are buying real estate, you're sort of doing what the government is doing. You're like financing this like purchase with an artificially low debt number. Right? So you're sort of like enriching yourself because you are, you are paying and financing way less than you should for this asset, which by the way, you have leverage on that is now also guaranteed to go up because inflation, right? So on paper it looks really, really good. The problem with real estate, I think you could argue it is, it is the absolute like least mobile form of like any asset you can have like, it's just, it's land,

you can go anywhere. You can refinance it to cash and interest rates are so low.

But like if they decide like, hey, and you can see this happening like populist government is, hey, we've decided to land. The landowners Have quadrupled the value of their land in the last five years off the backs of the people who have made nothing, we're implementing this one time wealth tax of 40%

deal

with it. You know, just

also, Yeah. And the non landowners of the majority vote for

your vote to take your stuff eventually. Right? And you can't you can't go anywhere. You can't do anything.

I think in this case kinetic war the property Nebraska just skyrockets like you've you've made the point in previous episodes that like a coastal real estate in the U. S. Is like one of one N. F. T. Like it it holds value more than more than anything. But in san Diego we have the western fleet here we have the navy seals, we have the marines, we have Miramar Air Force Base, a. K. A. Top gun. And we have all these military assets. Like it's not a really great strategic place.

If you're in a kinetic war you really want to go. We're like, where's the safest place on earth? I think it's like Nebraska and look at this meadow behind me. Boys look at all this land right in that little window. I'm surrounded by just freedom. What's that? That family guy. I mean like Stewie he's like sitting on the front porch in a rocking

chair and it's

good to have land. Yeah, that's eric right

now.

So I mean I think real estate is a is a is a certain possibility. I'll be honest. I thought this um this conversation was the idea of this conversation was very tinfoil. E but as we're talking I did a few Google searches and the fact that I found Citibank's private bank issued issued a note to their private bank clients being like yeah and this is in 2021 so it's not it's not that far out. So um yeah it's a it's it's like 100 looks like 100 slides on how to like avoid financial,

it's like an inevitability to me like if if it's not,

I mean if we can't if the global economy can't grow itself. So I have a question to you guys and it's like is the Blockchain enough to avoid financial oppression or is that just like are you lowest hanging fruit? Like because they'll they'll just like ban Blockchain activity,

crypto

they'll ban it on the ramp area like because they can't they can't stop the chain but they can't stop, they can't stop me from but you can still send an address to address. But I think I think the best case for crypto right now is the fact that it's a trillion dollar asset class which is like man, I think like in in big terms when the government is trying to find, you know finance trillions and trillions of dollars of debt, you know, there are easier places for them to go. But I could totally see Elizabeth warren being like I just think I think hilarious that people think of this stuff is being like uncensored herbal censorship resistant. It's like

I think they're

easily happen

in the long run. I think there's a delusion amongst you know, some crypto people that this stuff can never be, it can absolutely be severely kneecapped over pretty long durations of time. I do think over the course of like multi decades, I sort of agree with Arthur's sort of take and that like in this like kind of war um scarce resource environment, the game theory does play out where like neutral countries or opposing countries have tremendous incentive to open their doors to crypto to the people who own crypto to the wealth of crypto. It creates this sort of like massive like wealth influx if you can do that and it's gonna be very hard for people to kind of like stop that. And eventually you could see a situation where everyone's like suck it, you know, we're not gonna even try to control this I guess. But but that is like to to to your point, my main issue with the Arthur thing is that like you're obviously going to get absolutely wrecked. Like in the short term if what Arthur saying is going to happen, you're probably gonna

Lose 90% of your

portfolio. Like

also also there's other things in your life that are probably not going so well they also instituted a draft jokes on, you know, I think other things, even dollar milkshake theory, it's like if this ship plays out the way that he thinks it does like we're all fucked.

Yeah, I

mean he's been asked multiple times. So what happens? Like I'll tell you it's just not pretty like it's just not good. You know he he does talk about owning gold but I think I landed the conclusion like die as a U. S. Denominated asset.

I I love this take of stable going

20.

You know That's pretty good. I I also think like uh I feel like we're still under appreciating uh Rye in a way um

Was it just died just I. Yeah

so rai is like we don't want to peg to a dollar. Like why are we pegging $2? Like it's a worthwhile question. I think it's a question that makers asked a lot in the past. Like should we peg to this thing that we're trying to get rid of. Um. Yeah so right has sort of like a floating peg. I think it's probably about three bucks. But in my mind like I think of it as like de vaal a ties. Is that a word uh theory? Like if you can sort of like own crypto but like take the volatility out of it in a way. And and to me that's kind of the core proposition of Bitcoin, if you think about it.

Like if Bitcoin is are really obvious about like the whole thing was supposed to be like you You can have and transmit value outside of government and nobody can censor you but the reality is they don't want ride because number don't go up. They want, they have the thing that goes up like 20 x on top.

They want it to be money, but money doesn't just go up forever. So my middle curve version because I haven't like looked into the like token ah mix of rye or how it works. Like does it feel a little luna esque at all when, once you actually dig into it? So it doesn't have that, you know,

it's, it's, it's a fork of die. Okay. I think

I haven't looked into it. So it just,

yeah, it smelled

of it as you described it.

No, it's it's it's not at all. It is fully, fully over.

What do we know what the market cap is like roughly like is it, is it, is it tested

by market

cap size or lindy

cap? It's well

Fractures you guys, I mentioned this uh mentioned fractures about six months ago. Uh, that's down about 90% since I mentioned it. Yeah,

well you have to get that air drop and get the, get the heck out. That was that was a nice little airdrop.

Right? What am I in the right 1? Okay, it's a fucking $14 million dollar market cap. That can't be right. Our ai

I feel like the governance token is more orders of magnitude that I find hard to believe rise 14 million if it is, that's criminally undervalued. Um, but yeah, I like the general, I like the general idea of that project, which is like people don't necessarily want some crazy high volatility Ponzi coin. They want money that they can have. It's like self ownership of in a permission in this way and they mostly just want

stability

and predictability, you know at like the base level for most of their net worth. Like somebody in Nicaragua is not trying to like YOLO like their entire net worth on Bitcoin and have it like evaporate half of it like in in three months, it doesn't make any sense. They'd rather have dollars. We should give them the closest thing to permission list dollars they can have. That's also noninflationary long term

and you think that's right and I think you're right and the reason why I'm asking, I think you're right. You think rise the closest iteration to that today.

It's as far as I can tell. Yes. And you could argue that stuff like L usd liquidity is

like a

Close 2nd. But it's it's it's obviously denominated in it's pegged to a dollar

but the

dollar peg is what the whole world wants for the most part. So it's not really, I mean that's kind of

sort of money looks like, yeah

we have to be a little more open minded about this stuff. Any any parting thoughts guys.

No, I mean I was curious where this conversation was going to go because like we had just like one little prompt for it. But it's a really interesting discussion. I think it's like a an interesting mental exercise but at the same time I'm really hoping it doesn't become one. But then at the same time like how doesn't it become a real exercise that you have to at least think about, you know what's scary you guys is that three of us have like more questions than answers? Uh I think And where does that leave everybody else? Like we're fucked here us three. Where does that leave everybody else? Because like I don't have the answer like it's

hard to get all the answers but I I think one good takeaway that Arthur and all of us can sort of converge on is that I think it is good to get some sort of value outside of the system while you still can. I do think that you know four years down the line like it may be impossible to get value onto the Blockchain from any sort of bank. And like like it's already very hard now that tornado cash is gone right, you may years down the road be very grateful that you have this value somewhere off the grid like on on chain. I think that'll be a good thing where I disagree is that you should just YOLO it all in the Bitcoin right now before it's too late. I think that's silly. I think keeping a lot of it in cash for this scenario is good because you want the cash to buy the nukes when the bad things happen right, You want to be able to hold the dollar as well. They're useful. But then get out of the dollars into something else. If this it actually takes place. But mostly this is like a thing for like our euro and other.

I mean 11 interesting thing is that like that could be the instigator for what biology calls the network ST. So you have this cohort of world population that has stable coins on on the Blockchain and you're not allowed to move them back into fiat. So then you have all this thing and the only people who are able to commerce with our other people who have assets on for like for my service, my financial advisory service. I'll, I will accept digital assets as payment for your bath bombs. You'll accept digital assets payments like maybe we become part of the network state that uh everything alright guys.

Well that's a good,

that's a good final thought. Um This is a good discussion to continue the discord. So if if you have questions, if at some point you want to yell at us, yell us

in the discord.

Um You know, do all the things follow us on youtube Like it surely helps us out. Uh Monsieur Arman, hopefully see you next week. Love you guys talk to you

soon, bye

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