Lyn Alden on Japan's Unwinding, US Recession & Social Unrest

Summary

In this comprehensive discussion, the hosts delve into the intricacies of global finance, exploring the impact of Japan's economic policies on the Yen, the potential for a US economic slowdown, and the broader implications for Bitcoin. They analyze the ripple effects of carry trade deleveraging and the role of liquidity in market crises, offering insights into investment strategies and the importance of understanding economic trends for long-term financial health.

Takeaways

• 📈 The conversation discusses the volatility of Bitcoin and its correlation with global economic events, highlighting its role as a liquid asset during crises.
• 🌐 The impact of Japan's economic decisions on the global market is examined, particularly the yen carry trade and its effects on asset valuations and investor behavior.
• 💹 The script addresses the broader implications of monetary policy, especially the role of interest rate differentials and their influence on currency strength and trade balances.
• 💔 It details the consequences of devaluing currencies through inflation, noting the 'hidden tax' on citizens and the socio-economic effects of such policies.
• 🌍 The potential for a global economic rotation is suggested, where capital may flow out of the US and into other markets, affecting various economies differently.
• 📊 The discussion touches on the indicators of a struggling US economy, including manufacturing weakness, job market changes, and credit spread increases.
• 🏛 The script reflects on the societal unrest in countries like the UK and the US, linking it to economic pressures and the decline of trust in institutions.
• 💬 The conversation emphasizes the importance of understanding complex economic issues, rather than focusing solely on social issues, which are often easier to discuss and politicize.
• 🚀 The long-term outlook on Bitcoin is optimistic, with the expectation that it will serve as an alternative to traditional money and benefit from a shift in global capital flows.
• 🤔 The script questions the role of Bitcoin as a 'lifeboat' during economic crises, noting its tendency to drop in value during liquidity crunches but also its potential for recovery.
• 🔑 The final takeaway is a reminder of the importance of holding Bitcoin with a long-term perspective, considering it as a structural solution to monetary issues rather than a short-term investment.

Q & A

What was the significance of the 37th conversation between Lynn and the speaker?

The 37th conversation marked a significant milestone in their discussions, highlighting the long-term engagement and the depth of their dialogues on various topics, including Bitcoin and economic issues.

Why did the speaker mention the drop in Bitcoin's value?

The speaker mentioned the drop in Bitcoin's value to illustrate the volatility of the market and the impact of global events, such as Japan's currency movements, on cryptocurrency.

What is the carry trade and how did it contribute to the market's reaction?

The carry trade involves borrowing a currency with a low-interest rate, like the Yen, to invest in higher-yielding assets. The deleveraging of this trade due to Japan's monetary policy changes and intervention in the currency market contributed to the market's reaction and global volatility.

How has Japan's monetary policy affected the Yen and global markets?

Japan's decision to tighten monetary policy by raising interest rates from 0.1% to 0.25%, along with intervening in the currency market, has led to a rapid appreciation of the Yen and a significant impact on global markets, causing a deleveraging event.

What is the concept of 'fiscal dominance' mentioned in the script?

'Fiscal dominance' refers to a situation where a country's fiscal policy, particularly its debt levels, influences its monetary policy to the extent that raising interest rates becomes difficult, as seen in Japan's case with its high public debt to GDP ratio.

Why has Japan been hesitant to strengthen its currency aggressively?

Japan has been hesitant to strengthen its currency aggressively because it benefits from a weaker Yen in terms of export competitiveness and has historically targeted mild inflation to manage its high public debt through debasement.

What impact has the gradual debasement of the Yen had on the Japanese citizens?

The gradual debasement of the Yen has imposed a hidden tax on citizens holding currency and bonds, reducing their purchasing power over time, especially affecting imports and energy prices.

What is the relationship between the US economy and the global financial markets?

The US economy, with its strong currency and deep capital markets, has a significant influence on global financial markets. Its monetary policy and economic performance can lead to capital inflows or outflows, affecting other economies and market conditions worldwide.

How might a rotation in global capital flows impact different economies?

A rotation in global capital flows could lead to a rebalancing of economic strengths, with some countries benefiting from capital inflows and others facing challenges due to outflows. This could result in shifts in growth, inflation, and investment patterns across regions.

What factors could trigger a change in the current economic imbalances?

Factors such as changes in US monetary policy, economic performance, geopolitical events, or shifts in global demand and supply dynamics could trigger a change in the current economic imbalances and affect capital flows.

How does the speaker view Bitcoin's role in the current economic landscape?

The speaker views Bitcoin as an alternative financial system that offers 24/7 liquidity and serves as a solution for those looking for an alternative to traditional, 'broken' money. However, it is not seen as a typical risk-off asset and can be volatile during liquidity crises.

What is the speaker's outlook on Bitcoin's future performance?

The speaker is bullish on Bitcoin's future performance over several years, expecting it to grow as part of a structural shift towards alternative financial systems, despite short-term volatility and its current association with risk-on assets.

Outlines

00:00

📈 Bitcoin Conversations and Japanese Market Turmoil

In this segment, the hosts discuss the frequency of their conversations about Bitcoin and reflect on past shows. They delve into a sudden drop in Bitcoin's value, attributing it to Japan's economic intervention. The hosts explain how Japan's low interest rates have fueled a carry trade, leading to a massive deleveraging event as the Yen appreciated rapidly. They also touch on Japan's fiscal dominance and its reluctance to strengthen the Yen due to public debt concerns, resulting in a slow debasement of the currency that impacts imports and energy prices.

05:01

🌐 Global Financial Dynamics and Japan's Economic Strategy

This paragraph explores Japan's desire for inflation to alleviate debt and the challenges of managing a weakening currency. The hosts discuss how Japan's fiscal policy and public debt have led to a gradual debasement of the Yen, affecting the middle class and those holding Japanese bonds. They also examine the potential for social unrest due to economic pressures and the global impact of Japan's financial decisions, including the effects on import prices and the potential for a shift in global financial focus.

10:01

📉 The Impact of Japanese Monetary Policy on Global Markets

The conversation turns to the recent actions by Japan to intervene in currency markets and the ripple effects on global trading. The hosts dissect the reasons behind Japan's decision to raise interest rates and the subsequent deleveraging of the carry trade, which led to a spike in market volatility. They also discuss the broader implications of these actions, including the potential for a shift in investment strategies and the impact on short volatility traders.

15:03

🔄 Market Rebound and Economic Cycles

The hosts analyze the quick market rebound following a significant drop and discuss the potential for shorter economic cycles and market fluctuations. They consider the possibility of an economic shift as the US faces potential headwinds and the Federal Reserve may cut interest rates. The paragraph also touches on the potential benefits and drawbacks of such economic rebalancing for different stakeholders.

20:04

🌍 Global Economic Imbalances and the Potential for Change

In this segment, the discussion centers on the imbalances in the global economy, particularly focusing on the US and its trade deficit. The hosts consider the potential for a change in economic dynamics, with capital flowing out of US markets and into other regions where opportunities may be more attractive. They also explore the potential winners and losers in such a scenario, including the impact on American consumers and foreign exporters.

25:04

🏛️ Socio-Economic Tensions and Their Manifestations

The conversation explores the socio-economic tensions within nations, exemplified by the UK's social unrest. The hosts discuss the role of economic pressures, such as inflation and cost of living, in fueling social unrest. They also consider the broader implications of these tensions, including the potential for political exploitation and the challenges of addressing complex economic issues through social debates.

30:05

📊 Economic Indicators and the Signs of a Struggling US Economy

This paragraph delves into the economic indicators suggesting a potential slowdown in the US economy. The hosts discuss the implications of manufacturing weakness, job market changes, and credit spread increases. They also consider the potential for interest rate cuts and the impact of these economic signs on global financial markets.

35:06

🌐 Global Threats and Economic Challenges

The hosts examine global threats and economic challenges, including high public debt and geopolitical conflicts. They discuss the potential for economic crises and the differences between private sector debt bubbles and public debt issues. The paragraph also touches on the role of energy policy and the impact of demographic changes on the global economy.

40:06

🕊️ The Role of Bitcoin as a Solution in a Fragmented Economy

In this final segment, the conversation focuses on the role of Bitcoin as an alternative financial system amidst economic fragmentation. The hosts discuss Bitcoin's performance during liquidity crises and its potential as a long-term investment. They also consider the future of Bitcoin in the context of a shifting global economy and the importance of viewing it as a structural growth story rather than a short-term risk asset.

Keywords

💡Carry trade

A carry trade involves borrowing money in a currency with a low interest rate and investing it in a currency with a higher interest rate or in an asset expected to yield a higher return. In the video, it's discussed how Japan's low-interest-rate policy has facilitated this trade, leading to significant market movements when adjustments occur, as seen with the yen's rapid appreciation causing a deleveraging event.

💡Deleveraging

Deleveraging refers to the process of reducing the amount of leverage or debt in a financial system or an investor's portfolio. In the context of the video, it is mentioned in relation to the carry trade, where a rapid increase in the yen's value led to a significant deleveraging event across global markets as investors had to sell assets to cover their debts.

💡Monetary policy

Monetary policy involves the actions of a central bank to control the supply of money and credit in an economy. The video discusses Japan's monetary policy, specifically how they have tightened it by raising interest rates from 0.1% to 0.25%, which is a significant move in the context of their historical policies and has had a substantial impact on the yen and global markets.

💡Fiscal dominance

Fiscal dominance is a situation where government debt levels are so high that the central bank is unable or unwilling to raise interest rates due to the potential impact on government borrowing costs. In the video, it's mentioned as a reason why Japan has been hesitant to raise rates, despite having one of the highest public debt to GDP ratios in the world.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. The video discusses Japan's ironic desire for some level of inflation as a means to reduce their substantial debt burden, a policy that has been historically effective in certain economic contexts.

💡Debasement

Debasement refers to the reduction in the value of a currency, often through the increase in the money supply without a corresponding increase in goods. The script mentions how Japan has been slowly devaluing their currency, effectively imposing a 'gradual tax' on those holding yen and Japanese government bonds.

💡Volatility

Volatility is a measure of the magnitude of price changes of a security or index over time. The video describes a significant spike in market volatility, which was triggered by the unwinding of the carry trade and the short volatility trades, leading to the third biggest volatility spike in US history.

💡Liquidity

Liquidity refers to the ability to buy or sell an asset quickly and easily without affecting its price. The script discusses how Bitcoin provides 24/7 liquidity, which is a key feature during times of crisis when other markets may be closed or illiquid.

💡Debt-to-GDP ratio

Debt-to-GDP ratio is a metric that compares a country's national debt to its gross domestic product, indicating the ability of the country to pay back its debt. The video mentions Japan's high debt-to-GDP ratio and how it affects their economic policies and the potential systemic risks involved.

💡Interest rate differential

The interest rate differential is the difference between the interest rates of two countries, which can influence the exchange rates and investment flows between them. The video discusses how most currencies trade against each other based on interest rate differentials and current account flows, impacting global financial markets.

💡Global financial crisis

A global financial crisis is a situation where a disruption to financial markets has the potential to cause damage to economies worldwide. The script alludes to the potential for another crisis similar to 2008, discussing the various economic indicators and global tensions that could contribute to such an event.

Highlights

The conversation marks their 37th interaction, which is a surprising and significant milestone for both parties.

A discussion on Bitcoin's volatility and its status as a percentage of all shows made, highlighting its importance in their dialogues.

An analysis of the Japanese yen's devaluation, its causes, and the impact on global markets, particularly for carry trade investors.

Explanation of Japan's fiscal dominance and its reluctance to raise interest rates due to high public debt.

The role of Japan's monetary policy in intentionally allowing inflation to devalue the yen and its effects on exports and imports.

A comparison of Japan's economic situation with other countries and the unique challenges it faces due to its fiscal policies.

The potential consequences of Japan's gradual currency devaluation on its citizens, particularly those holding yen and bonds.

Insights into the social and economic impacts of currency devaluation, drawing parallels with Egypt's experience.

A detailed account of the recent yen carry trade deleveraging event and its ripple effects across global markets.

The potential triggers for the yen's sudden strength and the implications for traders and investors.

An exploration of the broader issues affecting global finance, including interest rate differentials and currency strength.

Discussion on the possibility of a global economic rotation and its potential impact on various economies and markets.

The potential benefits and drawbacks of a rebalancing economy, particularly for American consumers and foreign exporters.

Analysis of the current economic challenges in the UK, including social unrest and the impact of inflation on everyday life.

A broader examination of societal tensions and unrest in various countries, attributing them to economic frustrations.

Reflections on the Bitcoin thesis amidst economic instability and its role as a liquid asset during crises.

Final thoughts on the future of Bitcoin, its potential growth, and the conditions under which it may thrive.

Transcripts

Lynn Hi how are you pretty good have to

happy to have another conversation yeah

do you know how many we've done in total

I actually don't know how many 30 this

will be 37 really 37 yeah 37 that's much

more than I would have guessed well we

did about 14 in one year once um that's

why yeah but I thought in Norway that

was our going to be our final what

Bitcoin did show together but yeah we

couldn't we couldn't let that one be the

last one we had to do we had to do one

more you're actually 4.4% of all the

shows we've

made and a high percentage probably a

download um but yes with the we we

needed an emergency ly Oren

broadcast lot lots of stuff going on

Lynn I went to bed the other night and

Bitcoin had dropped a bit and I was like

okay well this happens you know Calm

before the storm and I woke up and I I

have an app that gives me the price and

I just had a look and I was like 50k and

I was like when we at 60k or were we at

50 like it was such a drop I was like

have is this in pounds is my mental

model wrong and I called up Danny I like

oh no because he's obviously in

Australia he's like oh no Japan's

collapsed Japan's finished Japan's done

everything's over uh what the hell

happened uh so a lot happened uh the

biggest one is that the carry trade um

had a deleveraging which is a lot of

jargon but basically uh because Japan

has unusually low interest rates a lot

of investors both Japanese and foreign

borrow Yen uh for nearly zero interest

and then they use it to buy other assets

including things like us treasuries or

US Stocks or just Assets in general if

you can borrow from a low yielding

currency and you can invest in a higher

yielding currency especially one where

the currency itself also appreciates

compared to the Yen um then that's a

very attractive trade as long as the Yen

keeps devaluing and as long as that

interest trate differential remains

where it is the problem is that um so

the the Yen got so weak in the past

couple years and uh Japan occasionally

comes in and intervenes because unlike a

failing Emerging Market they actually

have a lot of Firepower to protect their

currency if they want to they have huge

foreign exchange reserves they have a

ton of foreign Capital that they can

pull back um and so they they kind of

most part letting the devaluation happen

but whenever it gets too quick or too

disorderly they can go in and break you

know various kind of speculators and

shorts um and in addition they they've

actually tightened their monetary policy

to it's funny it's only 0.25% interest

rates but it's it's the tightest they've

been in quite a while and the

combination of these actions uh put a

lot of appreciation on the yen in a very

short period of time which is a problem

for people that borrow the Yen if they

were overleveraged and so we got a

pretty pretty massive deleveraging event

across Global markets um as that

partially Unwound okay Lo loads to unack

there as well okay so why has the yen

currency been been in trouble and if

they've got a lot of Firepower why

haven't they used that to strengthen the

currency and turn their economy around

so a couple reasons one it's been

weakening because uh you don't get

indust rates that um are comparable to

what you get from other currencies or

compar to the money supply growth rate

or or inflation um and so basically

Japan and I I talked about the subject

of fiscal dominance which is say that

when a when a lot of debt gets piled

onto the public Ledger they uh countries

start running into an inability or they

get a lot of consequen from raising

rates um because in add you know the

normal reason why a country would raise

rates is to either make their currency

more attractive uh compared to other

currencies and therefore strengthen the

exchange rate or two to slow down the

rate of Bank lending um because that's

that's usually the dominant force of

money supply growth but there are

certain eras where fiscal spending

fiscal deficits are a much bigger Factor

than Bank lending so Japan does not have

excessive Bank lending so there's little

reason to raise rates in in response to

that it's mainly about making their

currency not terrible compared to other

currencies that that people can hold

globally and so they've they've because

they have more public debt the GDP than

any other country they're deeper into

fiscal dominance they have much more

problems raising rates and so while

almost every other country has raised

rates try to get a positive real rates

Japan has really pushed the limit on

saying we're just not going to do that

the United States did the same thing

back in the 1940s uh during World War II

as did a number of other countries it's

kind of you know repress interest rates

well below the inflation rate and just

kind of let bonds and currency inflate

away for a period of time and the reason

that Japan was willing to do it is

because ironically they want some

inflation uh from their policymaker

perspective they kind of want to burn

some of that debt away um they want to

let things run hot because they they've

historically had some of the lowest

inflation rates um they're comfortable

with that if anything it makes their

exports more competitive competitive now

and their main constraint um is it it

basically makes their energy Imports or

their other commodity Imports more

expensive uh that's kind of the the

biggest thing that they have to kind of

are worried about getting disordered

um and so until it reached a certain

point they weren't really concerned

about it they kind of just let it play

out they didn't want to use their

valuable reserves uh when they're kind

of already getting what policy makers

want um and they only would use those

reserves when it got to a fairly extreme

point and there actually is starting to

be some you know anger uh among people

about you know the rate of their

currency to basement their their

inability you know their their reduction

in in foreign purchasing power and all

that so it kind of finally got to a

level where they're not really alarmed

per se um but they they be they did

begin to increasingly take actions to

slow down or or pivot that that loss why

not try and clear some of the

debt because it's really hard to it's on

the public ledger so I mean they they

can't really I mean they don't really

want to default on it uh because that

destroys your your Global your you know

your ability to borrow in the future for

a long period of time and so instead

they destroy it through de basement um

basically anyone holding for a long

periods of time Japanese government

bonds your ability to buy almost

anything else gradually deteriorates so

they're they're they're faulting on

people in very slow motion which is

generally easier to do than defaulting

on people nominally because then you

actually have to admit mistakes you get

all the disruptions you get all the

problems so instead you can have a very

high credit rating and just keep slowly

rug pulling people uh as long as you can

so and who's getting harmed is it is it

the is it the middle

class so Japan actually has less wealth

concentration than most other developed

countries um so in in their case it's

basically anyone holding currency anyone

holding bonds uh many of them uh invest

in foreign assets for that reason um but

yeah basically anyone holding um

Japanese currency and bonds basically

has this gradual tax imposed on them uh

fairly invisible visibly uh kind of just

his very mild slow rug pulling right and

has there been any response because

Japanese are quite a civil Nation quite

calm people I I can't even think of

times where I've seen of any form of

kind of like protests in Japan yeah they

have one of the the lowest kind of

measures of of political

polarization um you know compared to

many other places um they I actually did

a post on social media a while back uh

kind of when the Yen was depreciating at

the fastest rate and I was like Hey

Japanese investors here Japanese people

here uh what's you know how many people

there are talking about it what's the

what's the chatter like some people said

hardly anybody's talking about it other

people said no a lot of people are

starting to notice so obviously depends

on people's Social Circles uh you know

how how in a finance they are for

example uh people certainly notice it uh

in terms of imports um and I I've seen

this on Egypt in a faster scale like

I'll go when when I'm there I'll ask

people like what so what do you think of

this the basement that's happening it's

and that that's happening much faster

than Japan and where people notice it is

the Imports so for example in Egypt um

people will be like literally car prices

tripled in like three years um and that

you know it's not like so like certain

things like like you know domestic food

didn't really go up or like the rate to

hire another Egyptian to do something

didn't really go up too much but when

you're buying a computer or a car or

even like wood like foreign made wood

for example these things would go up so

dramatically and that's where the pain

points are um so I my understanding is

it was similar in Japan just at a slower

rate because it's it's a wealthier

society inflation was still fairly low

ironically um despite all that

debasement and really the main parts

where it can show up are in Yen

denominated Energy prices commodity

prices which can then kind of trickle

into other things right okay and and I

guess even though they've got a fairly

solid domestic car market themselves the

raw materials could be imported so it

still impact it yeah I mean it is a

those Imports of raw materials are a

fairly small percentage of GDP um and so

and they're wealthy Society so they can

generally absorb that and it's less of a

crisis than when an Emerging Market gets

like you know higher energy prices in

local currency terms um but yeah if it

goes on long enough and get significant

enough that's when you do get more

people kind of saying this is this is a

problem and then you're more likely to

get the government saying okay now the

risk wward is more in our favor to to

try to slow this down make sure we don't

have energy cost get too high in Yen

terms that kind of thing and what

triggered this d

leveraging a combination one is that in

the past uh number of months Japan has

been more directly intervening uh like

FX like sell you know selling reserves

to buy back Yen so the there'll be these

big bursts of like money uh you know

tens of billions of dollars being used

equivalent to um support the Yen uh and

this one seems to be triggered by the

fact that they increased their interest

rates from 0.1% to 0.25% % which is

still very low but uh it's the highest

rate in a decade and a half um and when

a country has um a structural current

account Surplus and then they're raising

rates they can actually be pretty

impactful uh given how leverag that

carry trade was how big it was um so

that that seems to have been the

proximate Catalyst and then there's kind

of things that feed on themselves so for

example if various entities that have

borrowed too much yen had to suddenly

deleverage they're selling some assets

uh which is then hurting other players

that might have to then sell those

assets as well and it kind of feeds on

itself in addition there was a separate

kind of mini bubble which was that a lot

of Traders globally were short

volatility uh basically they were

structurally selling options kind of

like selling Market insurance against

volatility events uh and so a lot of

them got caught off sides by the carry

trade partially uh deleveraging and so

you get a carry trade d leverage which

then hurt a lot of these you know short

volatility entities and so we got the

third biggest volatility spike in US

history uh compared to a fairly mild

event I mean the other two volatility

spikes were 2008 and 2020 so we had a

volatility Spike that least briefly got

up to roughly that level uh because

there was these kind of imbalances

everybody on one side of the trade right

but a but a

0.1% to

0.25% doesn't seem like a particularly

big rise so let me see if I've learned

anything over the years with you is it

is it a case of even though it seems

such a small rise knowing the levels of

debt that Japan has that brings a huge

amount of systemic risk into the

Japanese Market because of the the

interest pay the difference in interest

payments that will be and how that is

funded so that that is part of it that

basically that that small numbers matter

when we're talking 250% Deb to GDP um in

addition there's psychological Trend

changes like you know the the straw that

broke the camels back kind of which is

to say that this move in a vacuum might

not matter but when you when you saw in

recent months that Japan is increasing

willing to intervene uh in its currency

Market uh and is now raising rates uh it

kind of shows that maybe they're not

just willing to yet let the Yen devalue

as it as it was when it was devaluing

for a while people were like aren't they

going to do anything and the answer

keping no not really no they're just

going to leave everything how it is um

but it kind of showed that at these

levels it has gotten you you know some

of a concern for them and so if if

you've been years you know borrowing yen

to buy other assets and you're quite

leverage and you start to see increasing

signs that they're going to defend these

levels to some extent uh a lot of people

at once can realize I want to get out of

this trade or I want to minimize my

exposure to this trade I I want to

deleverage myself relative this trade

and like then it feeds on itself it

sounds like an easy trade but the the

the risk is whether you do get caught

short with it

yeah it's kind of it short volatility

trades as well as carry trades it's kind

of one of those things they work until

they don't yeah which is to say it you

know it makes sense to borrow zero

yielding Yen and buy 5% yielding dollars

right uh and it's like why wouldn't the

Yen keep devaluing relative to the

dollar um but eventually it reaches such

an equilibrium point where Japanese

goods are absurdly cheap on the global

market um so it can really benefit their

their current account and then you also

get more you know willingness by

authorities to intervene and so you what

was once a very easy no-brainer trade

starts to get risky and if you're

leveraged you know a 5% currency move

can wipe out a year of profits for

example um so fairly small differences

can really um matter all at once and and

are we aware of anyone who got wiped out

was is there any like public disclosures

of uh people who are in a difficult

position with us I don't think we've

really seen the you know the proverbial

bodies float to the surface yet um Bank

Japanese Banks had some of the biggest

um stock price impacts on the day um but

it's it's really a pretty broadly

diffused trade there's just a number of

entities that had to deleverage that

that you know would have taken pretty

significant p&l hits on that day we've

you know we've already seen a pretty

sharp rebound yeah um uh but you know

because a lot of that is now deleveraged

um but there are kind of broader issues

associated with it

all right so let's do both so so it was

one it was like the I can't remember the

actual stat but it was the biggest drop

in um uh in the in the nick since what

Co or something I think 1987 was 87 okay

so it was worse than that so worse than

2008 okay uh but it's bounced back

pretty quickly so I've got a couple of

things on that firstly why did it B

bounce back so quickly but secondly

we've talked a lot about this in the

past where uh economy start to fail that

you would expect to see a more kind of

shorter cycles and this kind of uh yo

yooing between uh of of rates is this is

this what we're starting to see are we

seeing something breaking in real

time well I would phrase a little bit

different I think a lot of people I mean

when the Yen was weakening people were

saying oh it's the end of Japan all all

the stuff's kind of coming back to hit

them now and then ironically when we had

this period of Yen strengthening and the

Nik down people like oh it's the end of

Japan all this stff coming back to hit

them it's like well what is it is it

when it weakens is it bad for them or

when it strengthens is it bad for them

like what exactly are we calling you

know the crisis here um I I view this as

this individual instance as less big of

a deal than many Market participants

made it out to be which is to say that

um this was a fairly mechanical uh shift

um there was a deleveraging that

happened there's probably more

deleveraging ahead but but less abrupt

because now the now the pivot is in

place now the trend change is more

obvious uh kind of like the the fear of

God has been put back into anyone who

was running a leverage book like the

reminded yes there's risk uh yes you

know it kind of like changes psychology

um in the market um and I think the I I

I think Japan still has a big Runway

ahead and all the different levers they

can pull um their stocks are not

particularly expensive right so it's not

like uh you're you know in the late 80s

when they got their famous uh Japanese

bubble um the valuations were Silly back

then uh whereas now the stock market is

fairly reasonably valued compared to

their cash flows and things like that so

it's not surprising that you know when

there's a 12% drop there's a number of

people that said wait a second most that

was almost entirely mechanical um you

know so I'll I'll go and buy names that

are that are inexpensive and oversold um

you know uh there unlevered entities

could come in and take advantage of the

fact that levered entities basically had

to sell um kind of like if you see a

Bitcoin get a liquidation uh if you're

unlevered you have some cash sitting

around some people come in and buy it so

we've seen some of a rebound in Bitcoin

as well um and so I think that's normal

I think the the bigger story is that

aside from just the carry trade the way

that Global Finance works is that most

currencies trade against each other

based on interest rate differentials and

current account flows so if you're

running a structural trade balance and

your interest rate is not attractive

your currency is likely to weaken until

you kind of find more of an equilibrium

the dollar has this extra monetary

premium on top of it as the most liquid

most attractive Curren in the world the

deepest Capital markets um there's a lot

of entities around the world that hold

dollar denominate assets and so we get

like a structural premium to our

currency uh which makes us really good

at importing we have tons of importing

power but it makes our exports less

competitive and so to meet that kind of

global demand for dollars we're kind of

forced into running these structural

trade deficits uh and they accumulate

over time more and more dollars flows

out into the world they take those

dollars and they buy us assets and so

everybody's kind of crammed into our

stock market and our bond market and our

private Equity market and our real

estate market everyone's kind of crammed

in but especially equities um and so

it's like a a really kind of a an engine

that just keeps spinning um and uh

there's a decent chance that can start

to reverse in the years ahead that as we

as our economy slows down a little bit

as the the weak exports weigh in our GDP

as um there's Rises

political concerns around that trade

deficit and the broader concept of

restoring and kind of actions we might

take in terms of currency or in terms of

trade to uh try to reduce that you could

get a partial uh you know kind of flow

out of that Capital um which would be

benefit some countries uh but would

would would you know harm others um and

I think that that we're probably on a

setup like that the last time we

actually had a setup like that was after

the dot bubble when the US cut indry

rates uh you know in the late 90s and

early 2000s the dollar was very strong

uh and there was the Asian financial

crisis because they all had dollar

dominant debts uh you a lot of them blew

up but when our economy softened and we

cut indust rates uh it kind of gave the

especially the developing world uh more

Breathing Room on their liabilities and

so from say 2003 to 2007 there's an

Emerging Market boom that's where we

actually got the term bricks from every

was like that was kind of hot trade that

was like the mag seven or like that was

the that was the main trade of the of

the day was these booming Emerging

Markets um and maybe on a smaller scale

we could get something like that again

which is that the US finally runs into

some economic headwinds trims interest

rates this some of this Capital that is

just so on one side of the boat so

stuffed into US markets could start to

come out and go to certain pockets of

the globe where things are cheaper where

their dollar Diamond debts are now like

under control um and and you can start

like a a virtuous flywheel into those

types of of areas would that not be net

beneficial though yeah rebalancing

because at some point it's you know if

you go back to the market cycle I mean I

know only the basics from Ray Dary has

Market Cycles but you have to rebalance

at times yeah I think basically it's

it's it's more dangerous when you're in

a very imbalanced condition uh and so

then the question becomes timing you

know there have been a lot of people

calling for rotation and a mean

reversion of that trade um the last time

there was a good window for it was 2019

that was the mid 2019 the FED started

cutting rates so was before Co yeah uh

the US economy is already softening the

Federal Reserve cut interest rates by

late 2019 because the repo rate spiked

they actually went back to balance sheet

increases as well um and so and you

started to get this kind of mini you

know the dollar weakened a little bit

you started to get a little bit of a

mini rotation into some foreign markets

uh but then covid and lockdowns and

everything so that rotation never really

materialized um a lot of countries were

hit harder than that especially

developing ones um because of all the

the you know the effects of that whole

situation um and so this is probably the

first window since

2019 where a serious um possibility of

rotation is at hand and it's hard

because you don't want to be you know

early like in you know my base case in

2019 was okay look we're probably going

to get a rotation then of course you

know the pandemic happens you got to

change all your outlooks um so there are

certainly things that could derail that

view um I do think a rotation would be

healthy should it occur um generally

speaking when you get that kind of

rotation so in in the prior times where

we had that kind of rotation in addition

to being good for those you know select

foreign equities it also tends to be

good for Commodities gold and presumably

Bitcoin um Bitcoin was not around in

Prior rotations but presumably it'd be

good for them because you generally have

a a weakening dollar um and and kind of

just you know Capital more broadly

dispersed and a little bit of a boom

who's it bad for though it can well it

can be bad for American consumers right

the the the ones that have kind of been

on the winning side of a lot of things

um they you know you can kind of get

more inflation in the US you can get

more higher energy prices in the US um

it it's kind of like a a bandaid being

taken off because it does increase our

export competitiveness to some degree um

so there are kind of winners and losers

from that but basically if you're a

foreign exporter it might not be amazing

and if you're an American Consumer it

might not be amazing but that's it's

it's it's kind of so imbalance right now

in favor of foreign exporters uh and in

favor of American consumers and it kind

of reaches like a a Breaking Point

eventually and those groups generally

will not not love that type of period um

whereas anyone who's a consumer in um

all these places with Beaker currency uh

they generally do better uh and American

exporters could could you know maybe not

do amazing because we we've got

structural issues there um but they

could get breathing room for example all

us being equal it's it's some tail ones

in their favor an American uh consumers

already been hit pretty hard the last

couple of years with high inflation I've

seen it myself traveling to the US like

just I'm just amazed at the cost of

everything it's it's kind of mindblowing

even going for a Starbucks you just

cannot like me and Daniel were going we

get a couple of coffees and a couple of

sandwiches and it's like $40 you're like

what the what have I spent here

how's that happened um that's true but

it's on a relative basis American

consumers have generally done better

than other countries um especially when

looking at Global purchasing power so

for example our our ability to buy

energy has generally been better than

say a Japanese person's ability to buy

energy um or yeah or American's ability

to travel abroad you know it's easier

for us to go to Japan or go to Europe

than Europeans or Japanese come here let

alone Emerging Markets um and so

especially on the on the upper half or

upper third of American consumers that's

where a lot of the strength has been

focused and they could take you know a

fairly big hit that if you have a cycle

of capital outflows um and again I don't

think it's going to happen overnight but

if you do get one of these more

sustained flows like like we did in the

early 2000s um a lot of those kind of

upper middle class American consumers

that have been able to fly everywhere

buy whatever they want energy is cheapap

um some of them run into issues and

unfortunately it will also impact some

of the lower income consumers that have

already not been in great shape um and

so that's the type of of where there are

winners and losers now some of those

lower income consumers could be off

offset by the fact that you know there's

more exporting jobs for example maybe

more manufacturing things like that so

more opportunities for income but also

damaging to their consumption um but at

the end of the day a lot of this isn't

really intentional it's just kind of

like imbalances in the system some

potenti you're reverting back when they

can no longer be sustained like when the

rub rubber band stretch really far and

you're trying to hold it and your

muscles are getting tense eventually it

just kind of starts to kind of let go um

and that that that we could see

something like that ahead I'm kind of

monitoring for signs that as the US Cuts

interest rates in face of a at least

somewhat softening economy um I'm going

to pay attention to really how that

affects some of these dollar indebted

countries that have otherwise held up

pretty well but that kind of under the

boot of of a strong dollar so so what

are those uh signs of the struggling

economy because there has been talk of

recessionary pressures it feels like for

a for quite some time now and there have

been calls for uh the FED to cut

interest rates um people have expecting

a CH like I I think I saw this week the

calls for like 50 basis points

reductions in interest rates what what

are the signals that exist right now

well see the market is now pricing in

probably a 50 basis point cut in the

next fed meeting um and that would be a

significant cut right that would be yeah

I mean it wouldn't be that significant

considering that they're over 5% so it's

it's less than a 10% reduction in

interest rates um so it wouldn't be that

unusual but it it is it would be

interesting to go from zero to 50 basis

points that quickly um uh and so the

signs generally are you know the us

because we're running very strong like

very loose fiscal policy and really

really tight monetary policy we've had

kind of like two different types of

economies in the US if you're on the

right side of deficits you've been doing

pretty well meaning for example if

you're catering to upper middle class

Travelers the travel industry has been

doing great uh whereas the commercial

real estate markets obviously been

terrible and the manufacturing sector

has been in basically a mild recession

for like a year and a half um and the

labor markets have been fairly strong

the consumer uh especially the upper

half of consumers has been fairly strong

uh but we saw in in um the last week was

manufacturing weakened more than most

economists thought um and um payrolls

like jobs uh weakened more than than

most of them thought um and so you know

we started to get a that that probably

contributed to some extent to the Yen

care trade and winding as well because

in addition to Japan trying to tighten

their own currency we also got weakness

in US markets more rate Cuts priced in

and therefore that that contributed to a

weaker dollar there as well so you have

kind of a one-two punch um in addition

partially because of this you know Carri

trade unwind we got a uptick in credit

spreads which is basically saying that

the the the indust rate gap between uh

junk credit and like say treasuries

widened um it's still fairly low but it

it it's now moving in an upward

Direction uh which is generally signs of

of basically financing stress and some

of the more sensitive parts of the

economy um so there's number of things

that are kind of pointing to at least

gradual economic deterioration in the US

which generally leads to interest rate

cuts and just kind of more accommodated

policy um which you know it might not

might not even be that helpful uh for a

lot of us businesses but then ironically

could as I mentioned before boost some

of those emerging markets that have

dollar dominant debts so it feels like

it's almost like a it's like a relay and

you know that the Baton is just being

handed on to other markets in you know

in that the US has a weakening economy

you know reduce the interest rates uh

stimulate uh domestic businesses hand

the strength back over to uh other

economies and when to the US strengthens

like the reverse will happen is this

just like a global relay just pass the

Baton on that is how it works it's kind

of this control system and it kind of

floats around and so for example in the

you know the 80s it was really kind of

Japan was kind of you know pulling

everyone along with their massive like

industrial base and you know their asset

price is doing really well and and just

kind of you know kind of dominating all

the stuff they're they're doing um in

the 90s the Baton really passed to the

US um uh and uh then you know when we

kind of softened in the 2000s then you

got the the bricks were really kind of

running the the the Baton and then after

the global financial crisis uh kind of

the bricks you know they did less of it

it it was really kind of China focused

for a while China was kind of the

world's growth engine

uh them kind of pulling everyone along

um in this upcoming one uh China's

probably not going to play as big a role

as they did uh in the 2010s they they

might have um their consumer might might

pull things a little bit but they B you

know their demographics and their debts

are more of an issue now it could be the

indias of the world it could be Latin

America it could be parts of Africa kind

of a more dispersed um but basically

some of these economies that have decent

demographics that are reasonably

well-governed um that are just kind of

held down by the fact that they borrowed

in dollars and then those dollars got

stronger um this is a pretty consistent

pattern that happens every 10 15 years

or so you get a little bit of a rotation

is there any significant uh Global

threats because the reason I ask is it

feels like everyone's kind of a little

bit

jittery and uh like Japan said boo and

the rest of the world freaked out um are

there other big structural issues and

could we have an you know something

similar to 2008 but much worse

well I think a lot of countries are in a

similar position as Japan but just less

thorough right so I think us death of

GDP is a problem European de of GDP is a

problem and while we are stronger in

some areas than Japan we're weaker in

other areas so Japan like I mentioned

before they're a huge creditor Nation

they ran structural trade de trade

surpluses for years that's how they

build up this big war chest of all these

foreign assets that they own they

they're very high public debt but they

also have very tremendous amounts of

foreign assets um and uh the United

States is actually in the opposite

position which is that we ran structural

trade deficits so we're running twin

deficits um and so even though we have

better demographics than Japan we have

more energy security than Japan um we

have um you know like uh you know less

Public public uh debt of GDP than Japan

we also have this this trade deficit

issue with more po political

polarization than Japan um you know we

don't know what's going to happen with

the upcoming elections uh and then even

if however they go we don't know who's

going to accept it or not accept it we

have just kind of like a lot of mistrust

a lot of lost faith in institutions

across the board um and so I think it's

right for people to be jittery in

addition to of course this really

ongoing war in Eastern Europe and

ongoing conflict in the Middle East with

increasing instances of escalation

especially in the Middle East uh in

recent times um and of course anything

that that damages uh the flow of energy

globally uh can be a big problem uh for

a lot of energy importers um and so I

it's there are heightened risks I would

say um one of the you know basically as

we get to kind of late 2025 that the

Federal Reserve might have to go back to

balance sheet increases for treasuries

uh which could be a problem if you still

have above Target inflation um so I I

view it less like 2008 because that was

a private sector debt bubble um so

private sector debt bubbles tend to be

big deflationary events um whereas I

view now most of most of the problems

are on the public ledger so very high

public debts uh which which when they

have issues tend to be somewhat more

stagflationary um when they unfold uh

now obviously there's different things

that could happen to adjust that so I

try to I monitor things as we get it but

I do think that um it's not quite the

same as 2020 or or 2008 are you

following what's been happening in the

UK to to us a moderate degree yes I'm

sure not as close as as you have but yes

yes I was discussing it with my son this

week um and you know he was asking

asking why it's happened you know what's

going on and like on the face of it it

feels uh like

polarization uh certainly between

there's a a right-wing element to it but

there's also a youth element to it so

you're seeing clashes between uh groups

of what are considered farri protesters

and uh mus Muslim communities but also

when you see the footage you're actually

just seeing a lot of young people what

you would we would call yobs uh young

people with hoods up and their faces

covered lobbing bricks and looting

stores and and so I was trying to trying

to explain it to my son I said look

there's lots of things going on here and

there's lots of ways you can look look

at it there's a lot of nuance to it um

we have we had a sadly in Southport we

had a stabbing where uh a young man went

into a community group and stabed three

young girls like terrible event and it

was very quickly jumped on with

misinformation blaming it on a Muslim

person that's created this kind of

conflict and tension but when you layer

in there's lots of young people also

going out and know looting stores and

lobing bricks and fighting the police

and seem to be enjoying it I I said to

him part of this I think is an overall

tension uh that exists within the nation

it feels like it's more workingclass

communities but you know I know for

example with the businesses I have here

I've seen the inflationary pressures we

have less people spending money and when

you ask people why they say well I you

know my rent's gone up or my mortgage

has gone up and I can't afford it and so

I'm just I've got this kind of like

underlying feeling that that really

what's going on is that it's like a

there is a match which is like like

striking uh the Tinder and it's like

creating uh these these in these moments

where it's you know where people are are

protesting or fighting but I feel like

it's it's tension that's been built in

them

economically yeah that's I mean the one

of the quintessential examples I turned

to is some years ago in in Chile they

had massive protests they were uh the

trigger was basically like train prices

went up by like a nickel that but of

course yeah so you were okay you so it

wasn't the nickel you know it wasn't the

nickel that did it the nickel was this

Catalyst for accumulated um frustrations

that people had um and you know that's I

think what we're seeing now in some

developed countries we're seeing in

United States we're seeing it in the UK

we're seeing it in in parts of

Continental Europe um and basically you

know there was this there was this chart

I saw it was Michael Green that shared

it basically it's like uh it was America

but it was like real disposable income

uh after like you know shelter food

transportation and all this and it shows

that it ever since about you know the

past 10 years or so it's been going kind

of sideways to down which means that

most people's everyday experience of and

it's like the median person so most

people's everyday experience of of

affordability and quality of life has

not has went from structurally improving

to not really doing great uh in addition

in United States it's kind of the you

know the first period of time where life

expect is actually going down uh to some

extent which is a really bad sign um UK

is in a similar position in the US where

you have trade deficits um so you've had

a little bit of hollowing out of your

industrial base uh which you know you

you you've you've kind of observed that

as well is just kind of like industrial

towns on harder time working class um so

it's a similar position as as the United

States and so people increasingly sense

that something's wrong they're not

really sure what it is like you know

they're not really sure what mechanisms

are there um and then you get more

distrust in institutions uh so both the

US and the UK and elsewhere people that

say you know I think I think

government's doing a good job or I think

the media is doing Fair reporting or I

trust medical authorities or I trust you

know whatever the case may be across the

board that trust is generally declining

to to fairly very low levels more

polarization more frustration build up

economic frustration and then you have

like you know very real policies that

that do you know people do have say

rightly criticism of like how you know

immigration's good but how if you

immigrate a ton of people all at once

and there's a lack of

assimilation people can I think right

get concerned about that to some extent

and of course it can be taken out in in

harmful ways but then people start

debating what's going on socially while

all these other economic things are

happening and and then people can

unfortunately take it out in in violence

and hate when uh it's it's some of these

problems are very hard to solve and I

tie a lot of it back to Broken money not

everything yeah um but if you kind of

catalog over time over decades as a

species we consume more energy per

capita so that's good uh our technology

is way better than it was years ago uh

some of it's actually got harmful

effects but either way we at least have

better technology than we once did um

but our money's like worse than it was a

a while ago especially if you're outside

of these major countries but in general

money is bad it's like that one area

where Technology's not really made it

better um and and it causes all these

imbalances and all these all these you

know one one part of economy gets

hollowed out and this other thing has

like this unfair advantage and then it

kind of rotates and people the these big

forces happen around them and they don't

really know how to frame it how to

contextualize it it's it's much harder

to have debates over fiscal policy than

it is to have over social war stuff so

when the fiscal policy or just the

overall economic situation when that

gets Messier fewer people are able to

articulate it uh and so they articulated

in more visible ways more social ways

that's where a lot of that anger gets um

expressed a lot of the time

well look I mean we said at the start

we've done 37 interviews now on this and

I've essentially been fortunate to have

you almost like a onetoone mentor for

the last three four years where I get to

ask you every question but it's a lot to

take in it's a lot to understand it's

complicated I mean I'm trying to explain

it to my son thinking I wish ly was here

she' do a better job than me but it's a

complicated thing to try and understand

I was trying to explain it from a

personal perspective in that as I'm a

taxpayer but also a business owner and I

my my corporate taxes are going up my

personal taxes are going up it's getting

harder to get rid of Staff but I have to

pay my staff more yet we've got less

money coming in there's economic

pressures in every direction essentially

less money coming in more money going

out very hard to streamline your

business and and trying to navigate this

this path is getting kind of Tighter and

Tighter you know when you see like in a

film there's walls that close in and

someone's trying to run through it

that's what it's starting to feel like

and try trying to explain that or

articulate that to people is is very

difficult and I think like you say the

social issues are easier to argue yet

we're sat there with political parties

who are incentivized to tell us what the

problem is and what a solution is and it

seems to be almost that there's now an

opportunity for yeah well not

opportunity that PO certain politicians

are using this as a way of driving votes

and I just feel like this doesn't have a

good historical

precedent historically not historically

you tend to overshoot right so the

pendulum goes to one side people want to

go break it up and then it swings to the

other side and uh people can misdiagnose

the problem blame the wrong groups and

and it can get unfortunately pretty dark

um to say the least um yeah you know

it's it's when when the pie is growing

people are way more accommodative you

know they might be frustrated about this

or frustrated about that but the pie is

growing things are getting better

they're optimistic that their kids going

to have a better life than they had um

people are more tolerant when that pie

stops growing uh or it starts shrinking

and we get a more of a zero sum game

that's when people start finding someone

else to blame you know wanting to take

away from someone else and give to them

because it's kind of the only way that

that that they get a that they come out

better because the pie overall is not

growing and again there's a lot of you

know it's broken money I also think it's

broken energy policy right that um you

know a number of countries have not

managed their energy well uh they get

they get into this like mindset that

like the only thing matters is say

carbon emissions right they get they try

to quantify everything by one number uh

like you know most people if you ask do

you want to keep the uh environment

healthy around you you want to have

clean air and fresh water and of course

um but then so many politicians put into

one number and then they'll base all

this energy policy around one number at

the end of the day if people you know if

their energy costs are going up if if

they you know their real standard of

living is is running into frictions

that's when they're willing to take it

out not not just on you maybe they are

protesting around energy price in some

cases but they're also then looking

around and saying well who's who's

eating my lunch you know and they might

blame someone who's not eating their

lunch but someone's got to eating the

lunch and so you start to get more like

you know issues and of course then but

then you can tie it also back to to see

real you know questions around how

should we structure immigration policy

or what you know there there's you know

legitimate concerns there I think but it

it can get taken out in very destructive

ways when a lot of things happen at once

I saw a really good meme today on

Twitter I don't know if you've seen it

it's a it's a table there's a politician

in the middle there's a there's a white

guy on the right and a Muslim on the

left and the muslim's got a plate with a

cookie and the white guys got a plate

with no cookies and the politician's got

a plate full of cookies and he's saying

he's taking your

cookie yeah there's a there's actually I

saw a video was like a dog was eating

from like a food and another another dog

came over and attacked it and they're

like then barking and yapping at each

other and fighting and this third dog

just kind of came over and ate all the

food there you go uh and and it's

literally like you know there's always

it's misdirection that's how a lot of

politics Works um is very kind of

misdirection oriented um like it's their

fault you know go go go after them and

you know it's it's it's you know

politicians rarely will ever take

responsibility for things they did um

and some of these things things

politicians might not even understand

like some of these Financial Plumbing

stuff you know it's like most people

don't want to be a Chief Financial

Officer on their side in addition

whatever other their main you know area

of focus is and so that's that's kind of

why it's easier to blame the social

issues than some of these more economic

issues yeah but that comes I mean when I

was out in Argentina I don't know if

I've told you this I went out for dinner

on the first night I was with my friend

Yan and his friends and they all said

everybody in Argentina has two jobs they

have their job and 30% of their time

they're a financial director they're

having to manage their money and by the

way sorry just go back so is that the

second book bro broken

energy you know actually Eric Townson of

the macro voices podcast Su just I write

that book I mean probably not but we'll

see um it would be an interesting book I

think so is broken money it's broken

energy policy but it's broken media but

it's broken media just Downstream of

broken money it's broken politics it's

like it's all it's all been

broken yeah I mean a lot I think so

there there's that book fourth herting

which you're familiar with um the the

reason I think that there's an element

of truth to it is that um institutions

can develop entropy which is to say that

they're built in a certain era it kind

of makes sense in that era and then over

time they are Antiquated the world has

moved on Technology's moved on things

have moved on uh their own internal

things just get kind of like corrupted

um companies or organizations or

governments rarely disrupt themselves

right so if you're like a paper maker uh

you're probably not going to invent

email right um you know you're going to

you're going to want to people to use

all your paper all the time right so

companies rarely they it's usually

startups that disrupt incumbent players

it's very rare for that not to be the

case um and that same is true for

governments the same is true for for

supernational uh organizations the same

is true for um old school media there's

rarely enough like self-reflection

intentional self disruption and staying

vibrant and and changing so normally

what happens is you kind of replace you

get to a point where it's so out of

touch that those other institutions

either get taken down or just become

irrelevant and new institutions get

built or new and an institution can be

multiple things it could be a way of

thinking you know it could be it could

be an actual institution but it also

could be a way of thinking it could be a

protocol uh there's all these things

that you can kind of Orient around to

say these are kind of pillars of society

that are now consed considered more

structurally relevant than things that

were you know put into place a century

ago president

AI well I hope not there's that there's

that actually there's that old um IBM

quote never let a machine make a

decision because a machine cannot be

held

responsible that's yeah we're struggling

to hold some of these politicians

responsible okay um so what does this do

to your Bitcoin thesis because um at a

time where things are breaking uh and by

the way I've had two emails today alone

they basically asking you this question

is likew what about the Bitcoin thesis

because when things break uh Bitcoin

dumps the most um Danny told me he had

he read a very good I can't remember who

tweeted it he said he had very good read

a very good thesis on this in that

Bitcoin being the most Global liquid

Market um will always respond best to

what's going on uh in the global economy

but either way it's the the people

who've written to me have said well

every time something breaks in the

economy it's Bitcoin that dumps I

thought Bitcoin was meant to be the uh

the

Lifeboat yeah so one is yeah Bitcoin

provides 247 liquidity so on a Sunday

night in America time while you know

Japanese uh Monday morning while they're

blowing up um you know the the safety

option is that if you hold Bitcoin you

have 247 liquidity if you need it or

want it which you don't have with almost

any other asset uh the downside is in

terms of price it's not great for those

that are still holding it is good for

those that like to buy dips um I I

generally don't view Bitcoin as being a

riskof asset in the way that we that

that portfolio people would think about

it meaning that price normally goes up

during crisis um because it's still not

well understood uh it's still um you

know it's just there's sometimes there's

leverage in the space um one thing I

point out is that there's there's like

pr- liquidity crises and then there's um

anti- liquidity crises most crises are

anti- liquidity which is to say that you

know bitcoin's biggest correlation from

what I found is liquidity um and when a

crisis breaks out normally it's not good

for liquidity and so Bitcoin is G be one

of the first things sold especially

because it's like that phrase you sell

what you have to not what you want to

especially if we're talking about a 247

Market on a weekend um and just a

volatile asset as long you know as long

as Bitcoin has upward volatility which

you want it to have because we want it

to get much larger uh that's going to

come with of downside volatility and

then as long as it has both upside and

downside volatility in in large amounts

um people are going to often treat it

like a risk asset until it kind of

reaches some much larger more

distributed steady state or at least you

know like kind of gold gold like in size

um an example of a of a PR liquidity

crisis was ironically the 2023 American

Regional Bank crisis so Bitcoin

performed poorly in say late February

and early March because that's where

actually liquidity was worsening uh

under the surface um but when the crisis

actually hit Bitcoin did well uh and

that's because the market immediately

realized uh okay the fed and treasury

going to provide liquidity uh things

broke uh and they kind of knew that

that's something they had to respond to

and they did and so Bitcoin did quite

well after you know some some hours it

actually did quite well pretty quickly

because that was a pro- liquidity crisis

um things like the covid crash or things

like um you know this dislocation we

just saw these are generally anti-

liquidity events um so we should not

expect Bitcoin to do particularly well

during them it still serves its function

of giving people 247 liquidity should

they need it or want it um but I think

it's more like I think Parker Lewis has

said this it's not a hedge it's a

solution in the sense that this is an

alternative system that's being built

and so I I wouldn't think of Bitcoin

anything less than like fouryear

increments um because it's a structural

as long as a thesis is correct it's a

structural growth story um but one that

is likely to be sold during most um you

know negative liquidity crises so you're

you're buying for problems four years

down the line yeah yeah and you're

buying you're buying a solution for like

if money's broken you buy the least

broken money buy the good money um you

and you try to build you know systems

like when people ask me what do you

think about this recent bitcoin price

drop and like my answer is like I hold

key and geographically separated areas I

invest in Venture you know with EOD

death capital for you know like decade

long like intended

timelines um it's that that's that's the

the kind of the time frame I'm thinking

of when it comes to bitcoin and I I

generally warn that in any sort of

intermediate term sense Bitcoin is

highly coed with liquidity does not do

well usually during bad liquidity

environments um if we do get this more

gradual rotation like if for example

if the US trims interest rates in

response to weakening us activity and we

start to get some life out of Emerging

Markets because their dollar Domin debts

are you know eased a little bit and you

start to get that kind of flywheel of oh

look you know investors say they're

doing decent I can take some money out

of overvalued US stocks and put it into

country XYZ then that ironically

strengthens their currency even more and

weakens the dollar even more which is

good for their dollar diin debts and so

you get this kind of self reinforcing

flywheel that would be probably quite

good environment for Bitcoin you know

that that'd be an environment where

foreign equities are doing decent Gold's

probably doing decent bitcoin's probably

doing great um that's where that would

would probably be paying off pretty well

you know in this current period you know

is is the last few years as good as

Bitcoin was in dollar terms it was even

better in Yen terms you know if you're a

Japanese person holding Bitcoin you're

like a a king or a queen relative to you

know what most people around you are

experiencing if we get that other type

of rotation you could have a similar

thing um so I'm I'm I'm quite bullish on

bitcoin with I guess the shortest the

shortest time frame I give is maybe two

years I'm saying okay I'm bullish on

bitcoin with a two-year view um but more

realistically I look out several years

and say well I think Global Equity is

goingon to be higher years from now I

think Bitcoin is going to be higher um

and but I don't expect it to be a riskof

play in the price sense uh unless a

particular crisis happens to be one of

the Fairly uncommon Pro liquidity crises

h all righty well listen look that's it

37 shows we've done it feels like a good

time I want to end on bitcoin I did have

other questions but on end Bitcoin 37

shows Lyn it's quite the catalog that's

quite a lot I would have guessed 20 I

think so I undershot that quite a bit I

just checked the website um there's a

there's a there's a rumor we're

launching a new show so we may get you

on that at some point but I've heard the

I've heard the rumor we we'll have to

get you over to the UK for that because

I'm not traveling anymore uh Lynn it's

been an absolute pleasure over these

last few years making new shows with you

but we will friend the fact that I

didn't know how many it was shows how

much I liked it because it shows it

never got old there you go well look a

lot of people got a lot of value from it

I you know what I'll do I'll go and get

the total downloads for you at some

point it would

be I would guess millions and millions

so we will get those numbers for you but

um we will stay friends I will see you

in various places like Norway and but

I'm going to be traveling less but when

you're next in the UK we will try and

find a way

of going through and turning all 37

shows into one at some point of course

right you're the best Lynn I adore you

thank you congratulations on the book uh

I love everything you've done and uh

your career trajectory has been

incredible and long may it continue

thank you and congrats on your your your

kind of show changes and and all that

you've done all right peace out