Inflation Is Here To Stay. The World Needs Bitcoin Now.

[0:02] Yo, welcome back to another episode of
[0:04] the Jack Morer Show. I am your host,
[0:07] Jack, and you are listening to yet
[0:09] another edition of Mailbag Monday,
[0:13] episode
[0:14] 132. Ladies and gentlemen, today's
[0:17] episode is titled Inflation is Here to
[0:20] Stay. The world needs Bitcoin. Now,
[0:24] here's the deal. Based on your guys
[0:26] feedback, I'm going to try and do both
[0:28] today. both macro and a 101 educational
[0:32] segment. We will start with macro. We'll
[0:35] talk about Kevin Worsh, the Fed chair in
[0:38] Jackson Hole, Wyoming, the upcoming
[0:40] September rate decision meeting, what
[0:43] Scott Bessant had to say this morning,
[0:45] and we'll check in on bond yields. We'll
[0:47] break all of that down. Thank you guys
[0:49] for the feedback. You really enjoyed
[0:50] last week, which I appreciate and I'm
[0:53] happy about. You also like the
[0:55] educational bits. So we will take what
[0:57] Bessant and Wars have been talking
[0:59] about. They've been citing inflation and
[1:01] we will use this inflation concept and
[1:04] we will parlay that into a inflation 101
[1:08] from first principles. What is it? Where
[1:10] did it come from? Why does it exist? And
[1:13] then what does a Bitcoiner think of
[1:15] inflation and where do I think the world
[1:17] is going? And what would the world look
[1:18] like on a Bitcoin standard when it comes
[1:21] to inflation? So we are going to do
[1:24] both. Now, before we get started and
[1:27] before I time stamp this episode, uh,
[1:30] three things for you guys because I'm
[1:32] continuing to, as I told you guys, I
[1:35] want to do more content. I think
[1:36] education is incredibly important. I
[1:39] enjoy it. I really love talking to you
[1:42] guys and embarking on this journey
[1:44] together of orange pilling the world.
[1:46] So, I'm going to keep iterating on my
[1:49] content and trying to make it better.
[1:50] So, here's the three updates I got
[1:52] before we get started. one, uh, my team
[1:55] is telling me that a lot of the people
[1:57] that listen to this have not subscribed
[1:59] or rated the show. Now, listen, I I
[2:02] don't do ads on this show. That's not I
[2:05] don't pay my bills by doing this podcast
[2:07] or this show. I don't monetize it. I
[2:09] don't make money on it, but I still want
[2:12] it to reach more people. I mean, I do do
[2:14] it because I want people to understand
[2:16] these things. I want people to
[2:18] understand Bitcoin. Obviously, if I
[2:20] didn't want those things, I wouldn't do
[2:21] the show. So, if you wouldn't mind
[2:24] subscribing to the show or if you're a
[2:26] podcast listener, rating the podcast.
[2:28] Listen, I don't know how this stuff
[2:30] works. I'm actually learning on the fly.
[2:32] So, I will one day learn how it works,
[2:34] but supposedly the more people that
[2:37] subscribe and rate it means that the
[2:39] algorithms push the show out further.
[2:41] Obviously, I have an interest in wanting
[2:43] the show to reach more people,
[2:45] especially people that don't already
[2:46] understand this stuff. So, that's one.
[2:48] If you guys are a frequent listener and
[2:50] you want to support me and you enjoy the
[2:52] work, if you wouldn't mind subscribing
[2:54] and rating the podcast. Number two, tell
[2:57] me who you guys want on the show. So,
[2:59] one of the things I have come to a very
[3:01] conclusive decision on is having guests.
[3:04] It's not going to mean I will not
[3:05] continue to do Monday live streams. It's
[3:07] not going to mean that you won't
[3:08] continue to get content strictly from
[3:10] me. That's why I stopped doing guests in
[3:12] the past is because you guys wanted to
[3:13] hear more from me and not me
[3:15] interviewing others. Totally fair. I
[3:18] don't see why I can't do both. I do
[3:20] think that there's a lot of interesting
[3:21] conversations that I can uniquely have
[3:23] that don't already exist. And I want to
[3:26] have these convos. I might as well
[3:28] record them. I do have these
[3:29] conversations in my private personal
[3:31] life. I might as well record them. I'd
[3:33] be curious who you guys would want to
[3:35] see me talk to. I'm going to talk to
[3:37] people that I'm interested in. Um, but I
[3:39] also want you guys to like the
[3:41] conversations. I want you guys to enjoy
[3:43] the show. I'm curious who you guys want
[3:44] me to talk to. So, let me know. The
[3:46] third one, I'm going to take Q&A out of
[3:49] the live streams. Now, bear with me for
[3:51] a second. Okay, I think the Q&A suffers
[3:55] and is shorter than it should be because
[3:58] it's part of this massive live stream
[4:00] show. You know, I end up talking for two
[4:02] hours and by the end of it, I maybe have
[4:04] 10 minutes max and I'm blitzing through
[4:06] answers and the way they're submitted
[4:07] through Dylan in the live stream. How
[4:09] can you submit a question if you're not
[4:11] part of the live stream? I think we
[4:13] could do way better. So, what we're
[4:14] going to do, if you follow us on
[4:16] Twitter, the Jack Maller show, we're
[4:18] going to tweet out a link where you
[4:20] could submit an anonymous clip, audio
[4:23] clip. If you guys have watched Theo Von,
[4:26] there's there's a lot of uh guys and
[4:28] girls that do this where they play
[4:30] listeners clips where they say, "Hey,
[4:33] Theo, here's my life situation. Can you
[4:35] opine on this?" Or, "Hey, X, Y, and Zed.
[4:39] Um, I have a question." And then it'll
[4:41] allow me to record a separate show of
[4:43] weekly Q&A where I can spend like an
[4:46] hour replying to your guys' questions
[4:48] and really get into detail. I can maybe
[4:50] even prepare materials. I think it'll be
[4:52] a lot more fun, more interactive if I
[4:53] can play your audio clips, you know,
[4:56] will giving your will given that you're
[4:58] willing to submit audio. Maybe the
[5:00] feedback is you guys don't want to
[5:01] submit audio. But either way, I would
[5:03] like for Q&A to be a separate show, a
[5:06] weekly segment. So I'll record it and
[5:08] publish it not on Mondays. It'll give me
[5:10] more time to answer questions. It'll
[5:12] give a dedicated space to have more fun
[5:15] and more valuable Q&A. I think there's
[5:17] tools we can use to make it more
[5:19] interactive. I would love voice clips. I
[5:21] think they make for better questions. It
[5:23] allows me to understand what you guys
[5:25] are trying to ask better as opposed to
[5:27] interpreting text. So, be on the lookout
[5:29] for that. For that reason, today I
[5:32] probably won't do too much Q&A, if any
[5:34] at all. We'll see how the show goes. And
[5:36] by this time next week, you guys will be
[5:38] able to submit me audio clips of
[5:41] questions and those videos will be
[5:43] uploaded separately to the channel,
[5:45] which is another reason you guys should
[5:47] subscribe to the show. I'm doing a lot
[5:49] more content. Okay, now let's time stamp
[5:52] this bad boy and get into why you guys
[5:54] are all here in the first place. Sorry
[5:56] about that, but needed to get those in.
[5:59] Okay, ladies and gentlemen, I am talking
[6:00] to you all at a Bitcoin price of $79,000
[6:04] flat even on the money. That puts
[6:07] Bitcoin's market cap at $1.59
[6:10] trillion US. Our all-time high remains
[6:13] at $126,160.
[6:16] We are 37.4%
[6:18] off that high made on October 6, 2025.
[6:22] Now, 329 days ago, almost a full
[6:26] calendar year since Bitcoin's last
[6:28] all-time high. The last Bitcoin block
[6:31] mined since I hit stream was block
[6:33] height 964,944.
[6:39] Okay, the first section of today's show
[6:43] is the macro section. Let's talk about
[6:45] Kevin Wars, the Federal Reserve Chair,
[6:47] Scott Bessant, the US Secretary of
[6:50] Treasury, the long end of the yield
[6:52] curve, of these Treasury securities
[6:54] we've been talking about, and all of the
[6:56] arithmetic underneath it. Let's continue
[6:58] to break this down. This is a show by
[7:00] the common man for the common man. So,
[7:03] for those of you curious, why am I
[7:05] talking about Kevin Warch? Why is he
[7:07] relevant this week? Well, every single
[7:09] year the Federal Reserve goes to Jackson
[7:12] Hole and basically hosts a press
[7:15] conference. Um, they don't actually
[7:17] decide on anything material like
[7:19] interest rates, but he goes and he talks
[7:23] and it's really hard to explain and not
[7:26] really worth our time on this show if
[7:28] I'm being honest. But there's been a
[7:30] cadence built up over decades where the
[7:33] Federal Reserve kind of speaks in tongue
[7:35] and cheek almost in their own language
[7:37] which effectively gives guidance and
[7:39] gives the market clues as to how they're
[7:42] thinking and then the market takes their
[7:44] information and takes their rhetoric and
[7:46] takes the quotes that they're giving the
[7:47] media and starts to price things in.
[7:50] Now, historically, the reason that they
[7:52] do this giant game of theater, which it
[7:54] really is, guys, it really is like a
[7:57] fifth grade theater show. The reason for
[8:00] this is because the last thing that
[8:02] central planners want is for financial
[8:04] markets to be surprised. Because if
[8:07] you're trying to build a financial
[8:08] system where your paper notes are
[8:10] collateral, the last thing you want is
[8:13] for collateral to be extremely volatile
[8:15] because that's when people get margin
[8:17] called. That's when people close their
[8:18] positions. That's when things go haywire
[8:20] and you get financial crisis. So what
[8:24] financial authorities have historically
[8:25] tried to do in this fiat era is
[8:28] constantly give people clues, constantly
[8:30] leak things to the media, constantly
[8:32] give things what they call forward
[8:34] guidance, just so at the very least
[8:36] financial markets can slowly but surely
[8:39] price things in on a forward-looking
[8:41] basis so that the market is never caught
[8:45] off guard. It's never surprised. you
[8:47] don't get these whoosh downs or these
[8:48] whoosh ups. Now, Bitcoin is there's no
[8:52] uh Bitcoin's not foreign to volatility
[8:54] whatsoever, but that's because Bitcoin
[8:56] can sustain volatility. I it it's not
[8:58] centrally planned. Um there's not a
[9:01] bunch of both elected and unelected
[9:03] officials that are trying to turn paper
[9:05] claims into the collateral in which the
[9:07] world operates on top of monetarily.
[9:10] Bitcoin is a hard bear instrument and it
[9:13] can sustain volatility because it's
[9:14] strong. financial paper claims cannot
[9:17] sustain volatility because it's weak. So
[9:19] anyways, that's the background. And so
[9:22] Chair Worsh did go to Jackson Hole and
[9:25] he made some remarks. Now his remarks
[9:27] are what we call hawkish. Hawkish
[9:30] meaning they were implying monetary
[9:34] tightening. So this CNBC headline I'm
[9:36] showing on the screen, Jackson Hole
[9:38] analyst roundup wars speech sends hike
[9:40] chances higher. May put the Fed at odds
[9:43] with the Treasury. This would be putting
[9:46] Kevin Worsh, the chair of the Federal
[9:47] Reserve, at odds with Scott Bessant, the
[9:50] secretary of the US Treasury. We've been
[9:52] calling him the CFO of the United
[9:55] States. The key points of the article
[9:57] read, "Deutsa Bank continues to expect
[9:59] the Fed to hike 50 basis points this
[10:02] year with increases at the September and
[10:05] December meetings. Traders of Fed fund
[10:07] futures now see nearly a 56% chance of a
[10:11] quarter point hike in September
[10:13] according to the CME's Fed watch tool.
[10:16] Now this is really interesting guys
[10:18] because this gets at to the crux of
[10:21] what's going on from a macro landscape
[10:24] the US all of this debt inflation.
[10:27] We're really starting to reach the dead
[10:30] end that's been inevitable this whole
[10:32] time. Wars remarks were hawkish, meaning
[10:36] he's worried about inflation. He wants
[10:38] to tighten monetary policy. He wants to
[10:40] raise rates. Now, traditionally, that's
[10:42] really bad for assets because the the if
[10:46] if interest rates are low, money is
[10:49] cheap to create. When money is cheap to
[10:51] create, people create a bunch more via
[10:53] credit. And then you get more monetary
[10:55] units competing for about the same
[10:58] amount of goods which results in
[10:59] inflation which we'll get into later on
[11:01] in the episode. But that's the increase
[11:03] in prices everywhere. Not only in food,
[11:07] not only in gas, but also in the price
[11:09] of Bitcoin, also in the price of the S&P
[11:11] 500, also in the price of real estate.
[11:13] So you get more monetary units, meaning
[11:16] dollars in this case, competing for more
[11:18] or less the same amount of goods and
[11:21] services. Now, if Kevin Walsh and the
[11:24] Federal Reserve wanted to fight
[11:25] inflation, they could increase the
[11:28] interest rate, which would make it
[11:30] harder to create more units of credit,
[11:32] which would make monetary conditions
[11:34] tighter, which would have the reverse
[11:36] effect. It should, in theory, well,
[11:39] we'll get into this later because money
[11:41] doesn't work this way where someone can
[11:43] snap their fingers and just affect
[11:45] change. But anyways, I digress. In
[11:48] theory, it would make the price of
[11:50] things like Bitcoin and stocks and real
[11:52] estate go down along with the price of
[11:54] your eggs along with the price of gas at
[11:57] the tank. And so what Kevin Worsh
[11:59] effectively said in this kind of fifth
[12:01] grade theater more or less, they're
[12:03] playing a little game of chicken here.
[12:05] He said, "Hey, inflation is still above
[12:08] our target of 2%." Inflation still seems
[12:12] to be a problem, and my job as the chair
[12:14] of the Fed is to solve that problem.
[12:17] Now, this is at direct odds with the US
[12:20] Treasury, which we'll get into a sec,
[12:22] which makes it interesting. But the
[12:24] point is, and I read it in the CNBC
[12:25] article, I'll restate it here with this
[12:27] slide, the Fed decision to hike rates in
[12:31] September is now at 58%
[12:34] on prediction markets. And if you read
[12:36] the futures market, so there is a more
[12:39] than not chance the market is expecting
[12:42] the Fed to raise rates in September.
[12:45] This is a huge deal. Why is this a huge
[12:48] deal? Well, if we take a step back to
[12:50] last week's episode, we know that the US
[12:53] government cannot afford higher
[12:55] borrowing costs. Okay? When I've talked
[13:00] often on the show about a term called
[13:02] fiscal dominance, fiscal dominance means
[13:05] that the US government's need to borrow
[13:08] and finance debt is now far more
[13:11] important than anything else. Sure, yes,
[13:14] there's inflation. There's been lots of
[13:15] inflation since we divorced from the
[13:17] gold standard and there's been increased
[13:19] heightened inflationary pressure since
[13:22] co since we bazooka printed all of that
[13:25] money. I mean the United States broke
[13:26] all sorts of inflation records for the
[13:28] country and there's been efforts to tame
[13:32] that inflation but it's very hard to get
[13:33] inflation back in the box. you already
[13:35] printed and created all of that credit.
[13:38] And so, yes, inflation's a problem, but
[13:41] the bigger problem is the fiscal
[13:42] situation that the United States is in.
[13:45] Our interest obligations and fixed
[13:47] obligations are already exceeding
[13:49] receipts, which I'll get into in a
[13:51] second. So, the question is, can the
[13:53] Federal Reserve raise rates and fight
[13:55] inflation where the biggest group
[13:59] they'll be burdening is the government
[14:01] itself? The government is sitting on $40
[14:03] trillion worth of debt. The government
[14:05] is r trying to run $2 trillion deficits
[14:07] annually. The government is trying to
[14:10] fight the long end and keep yields from
[14:12] rising, which is increasing their
[14:14] expense to borrow more money. So the
[14:17] question is this is the Federal Reserve
[14:19] truly independent and can fight
[14:21] inflation by increasing the cost to
[14:23] create credit and and print money or do
[14:26] they have to bow down to the knee of the
[14:28] government because the government is the
[14:30] biggest lender of everyone in the world
[14:33] and they're too in debt debt to GDP is
[14:35] over 120%. And so now fast forward guys
[14:39] to this morning I wake up and this is
[14:41] what's on the slide for the podcast
[14:43] listeners. A source familiar with the
[14:44] trip tells me that Secretary Scott
[14:46] Bessant took Fed Chairman Kevin Worsh
[14:49] from Joint Base Andrews to Asheville on
[14:52] his government plane. Fed Chairman Wars
[14:54] is representing the Federal Reserve Bank
[14:56] at the G20 finance ministers meeting.
[14:59] Fox has the photos and there's photos of
[15:01] Kevin Worsh and Scott Bessant hanging
[15:03] out. Then later this morning, what hits
[15:05] the headlines is that Scott Bessant
[15:07] says, direct quote, "Kevin Wars and I
[15:10] are on the same page regarding bonds."
[15:12] Another quote, "Not going to speculate
[15:15] on what the Fed may or may not do, but
[15:18] traditionally you do not raise rates
[15:20] into a supply shock." So the US Treasury
[15:24] Secretary Scott Bessant is telling you
[15:27] that he's hanging out with the Federal
[15:29] Reserve Chair. He's making sure that
[15:31] there's photo opportunities and then
[15:33] he's going to the media and saying he
[15:35] will not hike rates. Don't you dare.
[15:38] Because this is at odds with what Scott
[15:40] Bessant has been trying to do. At the
[15:42] end of the day, Scott Besson's job, his
[15:44] boss is Donald Trump, and his job is to
[15:46] make sure that the US government can
[15:48] afford to finance what they want to do.
[15:51] Period.
[15:53] Now, what's the job of the Federal
[15:55] Reserve? Let's not get into that. It's
[15:57] tremendously unclear. Technically,
[15:59] there's supposed to be an independent
[16:01] private bank that has a few mandates.
[16:03] Practically, their job historically has
[16:06] also been to help finance the US
[16:08] government. And so in Jackson Hole,
[16:11] Kevin Worsh was doing what I like to
[16:13] call a lot of jawbon, a lot of yapping,
[16:15] a lot of chatting. Here's the problem.
[16:17] Since the guy's become the Federal
[16:18] Reserve chair, all he's talked about is
[16:20] what again they're calling hawkish,
[16:22] which is monetary tightening. I'm going
[16:24] to fight inflation. I'm going to
[16:26] restrict liquidity. It all sounds good,
[16:29] but if you really thought you should do
[16:31] that, you would have already done it.
[16:32] You've had multiple opportunities to do
[16:34] it. What's taking you so long? It seems
[16:37] to be a whole lot of talk and not a lot
[16:40] of action.
[16:41] Now, the market seems convinced that
[16:43] there's a more than 50% chance that he's
[16:45] going to hike, but the Treasury is
[16:48] telling you that he's not. Somebody's
[16:50] bluffing. Somebody's lying. And this
[16:53] gets into what I call the dead end. You
[16:56] cannot just print money forever. At some
[16:58] point, rubber meets the road. Rubber
[17:01] meets the road. Okay, let's keep going.
[17:03] So, I created this slide here. What I
[17:08] This is a little confusing, especially
[17:09] if you're listening on podcast. So, just
[17:11] let me give me a second. So, what you
[17:13] guys are looking at or what you're
[17:14] hearing me describe is the blue line is
[17:17] the US 30-year yield. The white line is
[17:22] the US 10-year yield and the green line
[17:26] is the US 2year yield. Okay, now here's
[17:32] the deal.
[17:36] Well, let me hold on one step back. I I
[17:39] I always debate with myself whether I
[17:41] need to repeat some of this.
[17:43] Repetition's good. The higher the yield,
[17:45] the worse for the US government because
[17:47] this is the amount of money they have to
[17:49] pay to borrow. Okay, we've talked about
[17:52] what bond math is. As bond prices fall,
[17:54] yields rise. Why is that? Well, if
[17:57] nobody's willing to effectively lend to
[17:59] the US government at 1%. Well, how about
[18:02] 2%. How about 3%. You try and find a
[18:06] yield where the market finds sufficient
[18:09] demand. Okay, fine. If you're willing to
[18:11] pay me 10%, I will lend you money, but
[18:14] I'm not lending you money any before
[18:16] that. So by seeing yields rise, not only
[18:20] does it increase the cost that the
[18:22] government is borrowing money, but it is
[18:25] al effectively also a message that
[18:27] nobody is willing to lend to these guys
[18:29] because they're so indebted with no
[18:31] plausible way of paying you back. Paying
[18:34] you back at least in real terms, which
[18:36] we'll get into in a second, not in
[18:38] printed inflated currency, but in real
[18:40] purchasing power. So what I have here is
[18:43] the 10-year, the 30-year, and the
[18:45] 2-year. What I've also marked on these
[18:47] lines is the red line is the last
[18:50] calendar day before Bessant started
[18:53] doing things like doubling the Treasury
[18:55] buyback which I have on the slide before
[18:57] remember Bessant doubled the buyback
[18:59] from 2 billion to4 billion now $4
[19:01] billion relative to 40 trillion is
[19:04] nothing but it's the mere notion that
[19:07] he's trying to tell the market I will
[19:09] print the money I will intervene in
[19:11] yields I will intervene in the bond
[19:14] market I will basically central plan our
[19:18] way out of this via inflation. Now,
[19:21] after that, you can see these especially
[19:24] the 10-year and the 30-year go down.
[19:26] Yields went down, which means bonds
[19:28] strengthened on the back half of his
[19:30] announcement. So, theoretically, that
[19:32] worked. The line after that was when
[19:35] Bessant then followed up immediately
[19:36] after he doubled the buyback program and
[19:38] said, "Oh, I heard that 4 billion is a
[19:40] small number relative to my $2 trillion
[19:42] annual deficit." Well, just a reminder,
[19:45] I have $1 trillion fresh in the bank
[19:47] that I can spend on this. That's when he
[19:50] said, "I have a trillion dollars in the
[19:52] TGA." And that TGA stands for Treasury
[19:54] General account, and I'm not afraid to
[19:57] spend the trillion dollars in my
[19:59] Treasury General account, which is
[20:00] effectively the US Treasury's checking
[20:02] account. It's their bank account. I'm
[20:04] not afraid to spend that to protect
[20:06] yields, which is effectively yield curve
[20:08] control. Yield curve control is when the
[20:11] government or the Fed steps in and
[20:13] starts buying bonds, lending money to
[20:16] themselves to prevent the yields from
[20:18] going any higher. So yields yields
[20:20] yields fell and you guys can look this
[20:22] this is the line starts August 18th.
[20:24] August 19th is when Bessant made his his
[20:26] first announcement. And then the second
[20:29] dotted line there is when Wars came out
[20:31] and and implied he was hawkish and
[20:33] implied he's thinking about raising
[20:35] rates and all of this jaw boning, guys.
[20:37] all of this jawbon. Well, guess what?
[20:40] Guess what? This morning when I woke up,
[20:44] the 10-year was at a 19-month high 12
[20:47] days after all this jawbon intervention.
[20:50] So, here's the problem. These guys are
[20:53] have to print the money. There is no,
[20:56] you cannot make these empty promises.
[20:57] You cannot jawbone your way out. You
[20:59] cannot use media tactics. This is it's
[21:02] just math. They've lost control of the
[21:06] long end. People do not want to lend
[21:09] money over 10 year or 30-year. They do
[21:12] not want to lend over duration to the US
[21:14] government. They do not want that
[21:16] counterparty risk because the
[21:18] mathematical only way for them to get
[21:20] paid back is quite literally via printed
[21:25] money. Real rates negative. They're not
[21:28] going to get paid back in purchasing
[21:29] power. Yes, they're going to get dollars
[21:31] back because the Fed can always print
[21:33] money. The government can always print
[21:34] money. However, the money that they get
[21:36] paid back in will be getting them less
[21:38] stuff, less groceries, less housing,
[21:40] less vacations, less everything that
[21:42] you'd want in your life. It's another
[21:44] way of saying inflation. So, this tweet,
[21:48] there it is. 12 days since the US
[21:50] Treasury intervention in the bond market
[21:52] was announced, and yields are already
[21:54] back to a new 19-month high. The 10-year
[21:57] note yield is now just two basis points
[21:59] away from its highest level since 2007.
[22:02] You guys understand the relevance of
[22:03] 2007? at just before the global
[22:06] financial crisis. The bond market
[22:08] appears to be completely ignoring the US
[22:11] Treasury. So the bond market seems to be
[22:13] completely ignoring Bessant. We don't
[22:15] care about what you have to say. We
[22:17] don't care about any of these tactics.
[22:19] Inflation is a persistent problem. The
[22:21] math, and I'll walk through the math in
[22:23] a second. That's what this show is going
[22:24] to be about. But the math just tells us
[22:27] that if we lend you guys money, we're
[22:30] getting screwed. So, there's no way
[22:31] you're going to have to pay me way more
[22:33] than 4.7%.
[22:36] And the last part of this tweet, which I
[22:38] want to highlight, is we simply cannot
[22:40] afford to have the 10-year yield, so the
[22:43] rate to lend the government at over a
[22:45] 10-year duration at 5% plus. And the
[22:48] reason I just want to remind you guys,
[22:50] the 10-year yield is the most valuable
[22:53] data point in all of this because the
[22:54] 10-year yield underpins things like your
[22:57] mortgage rate. Okay? So housing is going
[23:01] to get tremendously more expensive the
[23:03] higher these yields go. And to take it
[23:06] all the way back to last episode, we
[23:07] talked about AI, all of these
[23:09] hyperscalers, all the infrastructure and
[23:11] AI, these people are willing to pay way
[23:13] more than 4.7%.
[23:16] So a lot of the marginal capital that
[23:18] would historically lend to the US
[23:20] government, these are, you know, fixed
[23:23] uh uh fixed income investors.
[23:26] Well, now they're lending to a group of
[23:29] people. the people building AI
[23:30] infrastructure that are a lot more
[23:32] productive that are willing to pay more.
[23:34] Now, the US government can't afford more
[23:36] than 4.7 or so percent, they they seem
[23:38] to always intervene when the 10year gets
[23:41] close to 5%. And the American people
[23:44] certainly cannot afford the 10year at
[23:46] over 5% because it impacts all of the
[23:49] consumer rates that they use to finance
[23:51] their lives, their credit cards, their
[23:53] mortgage, their car notes, their their
[23:55] uh student loans, everything.
[23:57] Everything. everything. Okay. So to make
[24:03] it simple, the Fed
[24:06] if they raise rates, so their job is the
[24:08] price level. It's the higher rates are
[24:11] the tool that they've historically used
[24:13] to do their job. Now the Treasury's job,
[24:16] so that's Kevin Worsh. Kevin Worsh at
[24:18] the Fed. He's claiming or hinting at the
[24:22] ability to raise rates because that's
[24:24] his job. His job is at the price level
[24:27] and higher rates are the tool that he
[24:30] uniquely has to do what is supposedly
[24:33] his job. Okay. The Treasury, Scott
[24:36] Bessant, remember his job is to finance
[24:39] trillions of dollars a year of deficit
[24:43] spending. So the Treasury's job is to
[24:46] keep the government funded at whatever
[24:48] rate the market demands. So the Fed can
[24:50] fight inflation if they want, but the
[24:52] government still has to finance that
[24:54] debt. And this is where this dead end of
[24:57] fiscal dominance is. Listen guys, if the
[25:00] US government had zero debt or its debt
[25:03] to GDP was 40%. This wouldn't be a
[25:06] problem. They would have raised rates a
[25:08] long time ago.
[25:11] What we've been talking about on the
[25:12] show and the core issue, it's very
[25:14] simple. The US government is $40
[25:16] trillion in debt. The debt to GDP is
[25:19] over 120%.
[25:22] You cannot fight inflation and raise
[25:25] rates in the face of what is becoming a
[25:28] sovereign debt crisis where the leader
[25:30] of democracy in the western world is
[25:33] behaving and performing like an emerging
[25:35] market.
[25:38] So the the problem is it doesn't really
[25:40] matter if there's inflation. It doesn't
[25:42] really matter what the data is telling
[25:43] you. It doesn't really matter what the
[25:45] historical rules have been. What matters
[25:48] is
[25:49] this. I mean the United States is
[25:52] insolvent.
[25:57] So this is what would happen if they
[25:59] raise rates very simply. Higher rates as
[26:03] I'm implying but let me make it explicit
[26:05] make the debt for the country more
[26:08] expensive. So if rates go up then the
[26:10] old debt that you have to continue to
[26:12] refinance because keep in mind remember
[26:15] why I keep telling you they keep issuing
[26:17] debt over shorter and shorter duration.
[26:20] So nobody wants to lend to the US
[26:21] government over 10 years. Nobody wants
[26:23] to lend to the US government over 30
[26:25] years. So the US government's issuing
[26:28] debt over three months over 90 days
[26:30] because that's where they can find
[26:32] lenders, buyers of these instruments,
[26:35] right? And then if if the debt expires
[26:38] every 90 days, you have to continue to
[26:39] refinance and roll that debt over.
[26:43] So rates go up, old debt has to
[26:46] refinance at the new rate. That means
[26:48] your interest expense on that debt goes
[26:50] up. That means the deficit that the
[26:52] country is running grows wider, which
[26:54] means that they have to keep borrowing
[26:56] more money. And this is what we call a
[26:58] debt spiral. is that rates going up
[27:02] increases the deficit which makes you
[27:04] borrow more which makes the rates go up
[27:06] which makes the the deficit wider which
[27:09] makes you borrow more and you just
[27:11] repeat this loop until you blow the
[27:13] whole thing up and you're totally
[27:14] insolvent and you default. So that's I
[27:17] mean this is the danger of like the Fed
[27:20] can do all the jaw bon they want and
[27:22] maybe they do hike in September. doesn't
[27:24] really matter because at the end of the
[27:26] day there is no notion of fighting
[27:28] inflation. Raising rates causes the
[27:31] United States to enter a debt spiral. We
[27:34] go into this sovereign debt crisis and
[27:37] the United States entirely defaults. So
[27:39] just a little bit more simple math on
[27:42] the fiscal situation the United States
[27:43] is in that's just so scary. So federal
[27:46] receipts, so the amount of you can think
[27:48] of it like revenue, the amount of income
[27:50] that the United States is bringing in.
[27:53] Okay, it's $4.151
[27:56] trillion dollar. Okay, now the fixed
[28:00] obligations is what I'm calling it.
[28:03] Interest expense, health and human
[28:05] services, social security, uh veterans
[28:08] benefits. So these are the things that I
[28:11] call them fixed obligations. They are
[28:14] you cannot get rid of these. You cannot
[28:16] necessarily like hey let's reduce those
[28:18] unless you're unless you're willing to
[28:21] remove healthare remove social security
[28:23] which you know is again anything is
[28:26] possible but I'm not you know this isn't
[28:30] a political show but let's assume that
[28:32] the government's still going to provide
[28:34] health and human services social
[28:36] security it's going to pay the interest
[28:38] on its debt it's going to make whole on
[28:40] those promises and it's going to pay for
[28:42] veteran benefits well that came in at
[28:45] 4.375 trillion. So you have fixed
[28:48] obligations that you cannot bring down
[28:50] in cost unless you're willing to cut
[28:52] interest rates at 4.3 trillion and you
[28:55] have your income at 4.1 trillion. So
[28:58] guys, the share of receipts, so our
[29:00] fixed obligations as a percentage of the
[29:03] revenue we're bringing in is over 100%.
[29:05] It's 105%. So before we spend on
[29:08] defense, this is before defense, before
[29:11] any other expenditures from the
[29:13] government, we already have to print
[29:16] money to make the difference. Do you
[29:18] understand what I'm trying to
[29:19] communicate to you? Our revenue is 4.1
[29:22] trillion and our fixed obligations
[29:24] before expenses like defense and
[29:26] military before those just the four
[29:29] obligations, health and human services,
[29:31] social security, interest, and veterans.
[29:33] Those four are already more than our
[29:36] revenue. So this is the definition of a
[29:39] Ponzi scheme. They are printing money.
[29:42] They they have to print money to afford
[29:44] themselves. They're not bringing in
[29:46] enough revenue to afford the amount of
[29:49] money that they're spending.
[29:52] So again, inflation is baked into the
[29:55] cake. It is an absolute necessity. You
[29:57] cannot if you raise interest rates, I'll
[29:59] go back a slide. You raise rates. You
[30:02] refinance the old debt onto the new
[30:04] rate. Your interest expense goes up.
[30:05] That interest expense is already
[30:08] contributing to a bill that's greater
[30:10] than revenue. The cost is greater than
[30:11] revenue. So then this expense gap
[30:14] widens. The deficit gets wider. The only
[30:16] way to then kick the can is to borrow
[30:19] more. But by borrowing more would cause
[30:21] more inflation which would cause the Fed
[30:23] to raise rates again which would then
[30:25] once you refinance at that rate then
[30:27] your interest exponent gets up even
[30:28] further and then the deficit gets even
[30:30] wider. The only way to kick the can is
[30:32] to borrow more but then the Fed is going
[30:34] to have to deal with even more
[30:35] inflation. My point is inflation's baked
[30:38] into the cake. It's too late. The math
[30:40] is the math.
[30:43] Do you understand what I'm saying here,
[30:44] guys? They're spending more than they're
[30:46] earning only on four fixed obligations.
[30:49] Don't even get me started on defense and
[30:52] that Trump wants to grow. And it's not
[30:54] even this isn't Trump's fault. This
[30:55] isn't Besson's fault. This is decades
[30:57] and decades and decades of money
[30:59] printing, of weak leadership, of
[31:01] borrowing from your future, of spending
[31:04] more than you earn, of hyper
[31:06] financializing, of globalization, lack
[31:08] of proof of work.
[31:11] You see? So, back to these four core
[31:15] expenses.
[31:16] Let's take a look at these obligations.
[31:18] So, one, you have your interest expense,
[31:20] which we know what that is. It's the
[31:22] cost for them to borrow, right? And so,
[31:24] obviously, if Kevin Worsh raises rates,
[31:27] that expense grows tremendously. If the
[31:30] 10-year and the 30-year yields continue
[31:32] to go higher, then that if if the market
[31:35] is saying, "Guys, Bessant, I cannot lend
[31:38] you money at 4.7%." Are you crazy? Have
[31:41] you done the math? I need at least 7% 8%
[31:44] 9% 10% on the 10-year. Then their their
[31:48] interest expenses will go up, right?
[31:51] Okay. Let's remove the interest expense
[31:53] for a second. Let's look at Social
[31:55] Security, healthcare, and veterans. The
[31:58] problem is, yes, you can devalue fixed
[32:00] nominal debt. So you can devalue debt
[32:03] that's fixed in dollar terms like just
[32:06] $100 on a balance sheet and and I owe
[32:09] that debt. I can devalue that line item.
[32:13] What I cannot devalue is the things on
[32:15] here that are not fixed in nominal
[32:19] dollar terms like social security. What
[32:23] about the cost of living adjustments
[32:24] with prices? Social Security grows with
[32:27] inflation because it has to account for
[32:29] and adjust to cost of living. What about
[32:31] health care? I cannot print doctors. I
[32:34] cannot print drugs. I cannot print
[32:36] procedures. I cannot print health care
[32:38] services. What about veterans? That
[32:41] politically it the point is inflation
[32:45] acts against these expenses. These
[32:47] expenses grow with inflation.
[32:51] they they do not like the US government
[32:54] is in debt hard assets here with these
[32:58] expenses. So sure they can inflate and
[33:02] try and devalue the dollar but they also
[33:05] have to and I'll get into this in a
[33:07] second. This is going to sound
[33:08] confusing. They have to both inflate
[33:11] away the value of the dollar and enforce
[33:16] some form of yield curve control.
[33:18] meaning they have to get in the way of
[33:22] how much they're paying interest on
[33:24] their debt. They cannot let the market
[33:27] set the price of interest they're
[33:29] paying. If the market's saying, "Guys,
[33:31] we refuse to lend to you at 4.7%. And
[33:34] not even 5.7 and not even 6.7. If you
[33:37] want to compete for my dollars, because
[33:39] I can just lend to hyperscalers that are
[33:41] building AI infrastructure. if you want
[33:44] my dollars lent over 10 years, you got
[33:47] to pay me at least 10%. They can't allow
[33:50] that to happen. So, they have to do both
[33:53] yield curve control or some form of
[33:56] manipulating the interest that they're
[33:58] paying and they have to run inflation.
[34:01] That's the only they it's it's a
[34:03] debasement of debt to GDP. So, let me
[34:06] explain. Okay, here are the four ways
[34:09] out that they can do. Hopefully all this
[34:11] makes sense in that they have fixed
[34:13] obligations that they already can't pay
[34:15] for with their receipts and that's
[34:17] ignoring all the other stuff they spend
[34:18] money on like defense. I can't imagine a
[34:20] politician saying we're going to spend
[34:22] zero dollars on defense. Like this is
[34:25] this all of the math here is ludicrous.
[34:28] I mean once you do the math and you
[34:30] understand this stuff at a fundamental
[34:31] level, this is where you just buy a
[34:32] bunch of Bitcoin because like this is
[34:34] crazy. So there's four options that
[34:36] these people have. Okay. One is some
[34:40] form of real growth productivity miracle
[34:43] where like there's an im like this would
[34:45] and when I say miracle I'm not
[34:46] exaggerating literal miracle. The
[34:49] problem with such a miracle like let's
[34:50] say AI like some politicians are saying
[34:52] AI is going to magically grow us out of
[34:54] all this debt. But we've talked about
[34:56] this. You'd have to have such a miracle
[34:58] where it's enough productivity that is
[35:01] provided to everybody
[35:04] but doesn't unemploy anyone and disrupt
[35:07] the economy. There's no such miracle
[35:09] because if AI works as fast as all of
[35:12] this debt requires it to to bail
[35:15] everybody out, well then no one's going
[35:16] to have a job because the only way for
[35:19] AI to grow that much AI that level of
[35:22] productivity, let me let me put it in
[35:24] simpler terms. That level of
[35:26] productivity does not work in a system
[35:28] built on debt and credit. It's it's
[35:31] doesn't compute. It It's like it's like
[35:34] a a triangle trying to fit into a square
[35:36] peg. Just doesn't work. Doesn't work.
[35:40] So, real growth is not an option. Okay.
[35:43] The second option is austerity or taxes.
[35:47] Meaning the government, Congress can
[35:49] either spend less or the government can
[35:52] tax us all more. Now, that also is
[35:56] that's how you lose elections. I've
[35:58] talked about this on the show. If I ran
[36:00] for president and I said, "Here's the
[36:02] deal, guys. One, as a country, we're
[36:04] going to spend less. So, your quality of
[36:06] life is going to go down because we
[36:08] shouldn't be spending all of this money.
[36:10] We can't afford it. We're already
[36:11] exceeding our means with four fixed
[36:14] obligations before we get into defense,
[36:16] which would give us the ability to
[36:18] defend ourselves if anyone tried to
[36:20] attack us or do anything malicious. But
[36:22] even before that, I we I can't even pay
[36:26] for the amount of money that we're
[36:28] spending in the lifestyle provided with
[36:30] the existing revenues. So, one, we're
[36:32] going to spend less. And then two, the
[36:34] next promise of my presidential campaign
[36:36] is I'm going to double everyone's taxes.
[36:39] Do you guys think I would win that
[36:40] election or the person running next to
[36:44] me that says I'm going to spend more and
[36:46] I'm going to give you zero taxes? Who do
[36:48] you think is going to win that election?
[36:50] And so part of the blame is with the
[36:51] people because we keep electing people
[36:53] that are promising to do ludicrous
[36:56] stupid stuff that is impossible
[36:58] mathematically.
[37:00] So another option, sure, austerity or
[37:03] raising taxes, sure. What's the
[37:04] likelihood of that? I price that at
[37:07] about zero, but technically a
[37:09] possibility. The third is default. We as
[37:12] a country can just not honor the
[37:14] promises we've made. Oh yeah, you lent
[37:16] us money and we told you we'd pay you
[37:18] back. Well, turns out we're just not
[37:19] going to pay you back. We could do that.
[37:22] That would crash the global economy.
[37:24] Effectively set the world on fire
[37:26] considering the dollar is the world
[37:27] reserve currency and so much of the
[37:29] world is priced in dollars. The dollar
[37:31] is used for currency exchange. It's used
[37:33] for trade. It's used for debt. I mean,
[37:35] that would also all of these options
[37:37] would light the world on fire. Now the
[37:40] fourth option is what I'm describing and
[37:42] what Bessant is effectively the reason
[37:44] Bitcoin went from 60K to 80K overnight
[37:47] is because these guys are starting to
[37:49] tell us what we all knew they inevitably
[37:52] have to do. And I write here inflation
[37:54] and financial repression. But this is
[37:56] where on this show, this is why I assume
[37:58] you guys listen to this show because
[37:59] it's a show by a normal guy for normal
[38:03] guys and girls. It's just we got to
[38:05] break this stuff down and make sure that
[38:06] everyone can actually understand it. So
[38:08] just bear with me because some of this
[38:10] stuff they they they all make it so
[38:12] confusing and it's actually not that
[38:13] confusing. So hold on, bear with me. I
[38:16] call it inflation and financial
[38:17] repression and I write here in the
[38:19] slide. You make nominal GDP grow faster
[38:22] than the debt. But that's just so
[38:24] confusing to people. What it actually
[38:26] means is you allow for inflation and you
[38:29] manipulate the cost of the debt. So you
[38:32] it means yield curve control. So you
[38:34] say, "Hey, I'm not letting the tenure go
[38:36] above 4.7%." So if no one else is
[38:39] willing to lend to the US government at
[38:41] 4.7%, we we will print the money and
[38:43] lend it to ourselves. That is
[38:46] manipulating the cost of your debt.
[38:48] You're basically so yield curve control
[38:50] is putting a cap to how much you're
[38:52] willing to pay for debt, which is that's
[38:54] printing money. That's ridiculous. This
[38:56] is Ponziomics. This is a Ponzi scheme,
[38:58] which is what do you mean you're
[38:59] printing money out of thin air to lend
[39:01] it to yourself? That's a joke. It's a
[39:03] joke. And then the other is allowing for
[39:06] runaway inflation. Because here's the
[39:09] thing, people say like Scott Besson will
[39:11] say, we're growing our way out of the
[39:12] debt. Growing. But that's just
[39:14] inflation. Inflation is not real growth.
[39:19] So I give you guys this example. Right
[39:22] now, the US debt to GDP is 124%.
[39:26] Now, to try and break this down as
[39:28] simply as I possibly can, let's say the
[39:30] debt is at $124 and the GDP is at $100,
[39:34] which again, our debt is higher than the
[39:37] amount of production that we are
[39:39] producing as an economy. That is like
[39:42] we're exceeding our means. We're not
[39:43] earning enough to cover our basic bills.
[39:45] Again, once you break down this math,
[39:47] you're like, "Oh my gosh, I'm living in
[39:49] a Ponzi scheme. This is crazy." Which
[39:51] you are, by the way. It's why we're
[39:52] building Bitcoin. We're trying to build
[39:54] a system where those sane people out
[39:56] there that want to just live honorably
[39:58] and have a good life can use a system
[40:01] that isn't a ridiculous joke and a scam.
[40:04] But I digress. We start by saying debt
[40:07] is at $124. GDP is at 100. That gives us
[40:10] a debt to GDP ratio of of 124%. Now
[40:14] later you could say the debt is now at
[40:17] $150. The GDP is at $150. I've reduced
[40:21] the debt to GDP ratio to 100% and I can
[40:24] continue to bring it down. Now, how can
[40:26] I do that? Well, one way for me to grow
[40:28] GDP, so I grew GDP from 100 to 150. I
[40:31] grew GDP by 50%. Well, I can grow GDP
[40:34] just by allowing for inflation. Because
[40:37] these numbers don't measure whether the
[40:39] growth was real growth in real terms or
[40:42] whether it was just inflation.
[40:44] I mean, no, nowhere on this screen is it
[40:47] measuring what $150 can actually get me.
[40:50] It's not measuring this in eggs I can
[40:52] buy or housing I can buy or vacations I
[40:54] can get. It's measuring it in dollars.
[40:58] Okay. Well, I can allow for 50%
[41:00] inflation to get my GDP to go from 100
[41:04] to 150. Boom. Done. So, one step is
[41:07] allow for inflation and allow inflation
[41:09] to persist and continue. That will allow
[41:12] GDP to grow. Now, the second is if
[41:16] inflation goes up, I cannot let the debt
[41:19] go up as much as inflation, which it
[41:21] should. If I'm lending someone money and
[41:23] the life around me is getting 10% more
[41:25] expensive every single year, I have to
[41:27] get paid at least 10% to lend you money.
[41:31] Or else I sure you're paying me 8% for a
[41:34] loan, but the world around me is getting
[41:36] 10% more expensive. So, I'm losing 2% of
[41:39] eggs, of housing, of cars, of education,
[41:42] of vacation. I'm losing 2% of the things
[41:44] that I want in my life because they're
[41:46] getting more expensive than you're
[41:48] paying me. So, the rate to borrow should
[41:51] at least be the rate of inflation. And
[41:53] of course, that's what the market is
[41:55] trying to do with these yields. That's
[41:57] why the 30-year yield is going up.
[41:59] That's why the 10-year yield is going
[42:00] up. Inflation is real. The growth in the
[42:04] economy, you're hearing the US economy
[42:06] is redot right now. Yeah, it is redot
[42:08] because inflation is redot
[42:11] and that but but what the US government
[42:13] can do is put a cap to yields and say
[42:17] we're not letting them go up to the to
[42:19] the rate of inflation. We're going to
[42:20] cap them. They're not going higher than
[42:22] 4 and a.5%. We got 4 and a.5% for you
[42:25] max. Yeah, sure inflation on this screen
[42:29] inflation's 50%. We're letting inflation
[42:32] go to 50%, so the GDP goes to 150. But
[42:35] the debt, it's not going any higher than
[42:38] 150. And if you guys want higher than
[42:40] 150, then we will print the money and
[42:41] lend it to ourselves. Now, what have
[42:43] they done? They've devalued debt to GDP.
[42:46] They've gotten the debt to GDP lower,
[42:48] but they've done it by cheating, but
[42:50] it's a combination of cheating. And this
[42:52] is where like if you listen to people,
[42:54] sometimes they use all this gibberish
[42:56] that's confusing. What have they done to
[42:58] cheat? They've one allowed for inflation
[43:01] and two they've capped yields. They've
[43:03] capped how much they're willing to pay
[43:04] for debt. And by doing the combination
[43:06] of those two, you're drastically
[43:08] reducing the debt to GDP ratio which all
[43:11] of a sudden takes you out of a financial
[43:14] position that's untenable because the
[43:17] debt to GDP is the most valuable thing
[43:19] because it's telling me how much debt I
[43:22] owe versus the growth I'm producing to
[43:24] pay that back. If I can get that below
[43:27] 100%.
[43:29] Then I'm good. Yeah, I have debt, but
[43:32] I'm producing enough growth to pay it
[43:33] back.
[43:35] So, how can they manipulate the market
[43:37] and get away with this scam? Well, they
[43:40] allow inflation, which which is the
[43:43] growth. It's not real growth, guys. It's
[43:45] fake growth. It's inflation.
[43:48] And then they cap how much they're
[43:50] willing to pay for the debt. And that's
[43:52] how they take a number that right now is
[43:54] 124%. And they have to get it below
[43:57] 100%. They have to drive it down. So
[44:00] yes, but you have to you have to
[44:01] remember guys, it's not only inflation.
[44:04] People will say, "Oh, they're going to
[44:05] inflate away the debt." Yes, I know
[44:06] they're going to inflate away the debt,
[44:08] but don't don't forget about the step
[44:11] where they're going to they have to cap
[44:14] these yields because they can only pay
[44:17] so much. You you understand what I'm
[44:19] saying?
[44:21] Because if they only did inflation and
[44:23] they didn't cap yields, well then if I
[44:26] go back all of these what I call fixed
[44:28] obligations, these social security,
[44:30] health care,
[44:32] the the cost of health care is going to
[44:34] go up with inflation. The cost the of
[44:37] living adjustment for social security is
[44:39] going to go up with inflation. So their
[44:41] expenses will go up with inflation as
[44:43] well. They have to find a way to cap
[44:46] their expenses and allow inflation to
[44:48] just like go through the roof. Like if
[44:51] if the US government ran inflation at 20
[44:53] to 25% and then implemented yield curve
[44:56] control, they would fix this problem in
[44:59] like five years, but Bitcoin would be $2
[45:02] million a coin. Gold would be $20,000 an
[45:04] ounce. I mean, everything would be
[45:06] inflated to the bazooks and and the and
[45:09] the dollar would be devalued
[45:11] tremendously. I mean, I've said it a
[45:12] million times. There's a very easy way
[45:14] out of this. They just need a much
[45:16] weaker dollar. A much weaker dollar. But
[45:19] the way they do it, they have to do
[45:21] both. They have to do both. They have to
[45:23] allow for inflation to be hot. And they
[45:27] have to now whether they're going to
[45:28] call it explicitly yield curve control
[45:31] or they're going to technically not be
[45:33] doing yield curve control, but
[45:34] practically what they have to do is
[45:36] manipulate the the cost they pay on
[45:39] their debt. Make sense? Now, if we go to
[45:43] the next slide, which is inflation only
[45:47] helps them if the rates don't keep up
[45:49] with inflation, which I kind of just
[45:51] explained. So, on the left, I have if
[45:52] nominal GDP growth is 7% and their
[45:55] borrowing costs are only 4%, that's good
[45:58] for them. They're growing faster than
[46:00] their costs. If the GDP growth is 7% and
[46:03] the market's like, well, considering
[46:05] everything else around me is getting 7%
[46:07] more expensive, I need at least 9% to
[46:10] lend you money. Well, now debt to GDP is
[46:12] working in the reverse where their
[46:14] borrowing costs are exceeding the
[46:17] productivity that they're producing on
[46:19] the other side. Now, this is really
[46:21] important. I know I'm repeating myself,
[46:23] but this is what I've I've I've
[46:24] referenced it a lot. This is what we
[46:26] call real rates negative. So, if a bond
[46:29] yield, what I have on the screen here,
[46:30] if a bond yield is 4%. And inflation is
[46:33] 6%, your real return is -2%. And so many
[46:38] people don't get this very simple
[46:39] concept because they'll say, "Dude, I'm
[46:41] rich. I'm getting 4% interest on my bank
[46:44] account. Can you believe it?" It's like,
[46:46] "Brother,
[46:48] you don't understand that the world you
[46:50] around you is getting 6% more
[46:51] expensive." So, you're drunk and you're
[46:54] like, "Oh my gosh, 4% I'm rich." No,
[46:58] your real return on capital is negative
[47:00] -2%. You're getting -2% more stuff in
[47:03] your life. Gas, eggs, housing.
[47:07] So, nobody in this scenario is
[47:09] technically defaulting. However, who's
[47:12] losing? There is a loser. It's the
[47:14] lender. And in in financial gibberish,
[47:18] the lender is the owner of bonds.
[47:21] They're getting a real return that's
[47:22] negative.
[47:24] That's how. So you have to ask yourself
[47:26] the US government or and I won't make
[47:29] this specifically about the US
[47:30] government or about who's in office
[47:32] right now because like I said it's not
[47:33] the people in office today didn't create
[47:36] this problem. This is a problem that's
[47:38] been created over decades of printing
[47:40] money of exceeding your means.
[47:44] I digress.
[47:46] So any indebted sovereign, they have to
[47:49] be screwing somebody over. Who gets
[47:53] screwed over here? The owner of bonds
[47:56] and the owner of the currency. Why? The
[47:59] owner of the currency gets screwed over
[48:00] because they're going to inflate away
[48:02] its purchasing power. The owner of bonds
[48:04] gets screwed over because they're going
[48:06] to keep the yield below the inflation
[48:09] rate. You must understand this. You must
[48:13] understand this. This is the extreme
[48:16] bullcase for Bitcoin and for gold or
[48:19] anything hard because they cannot be
[48:22] manipulated. So when you look at the
[48:24] bond market, how big the bond market is,
[48:26] people are going to be running out of
[48:27] bonds and into something else because
[48:30] they're going to get a negative real
[48:31] return by sitting in these things.
[48:33] People are going to be running out of
[48:35] the currency because their purchasing
[48:37] power is going to be inflated away. This
[48:40] is why bit the the bull case for Bitcoin
[48:42] when I say this Bitcoin we didn't have a
[48:44] real bull run in 2025
[48:48] the real bull run I don't think we've
[48:50] had a real bull run since co the real
[48:52] run will be when these guys hit this
[48:54] dead end which is what we're watching in
[48:56] real time guys we're watching this in
[48:58] real time we're watching Bessant
[49:00] effectively say when he comes out and
[49:02] says I'm doubling the buybacks by the
[49:03] way I have a trillion dollars in the
[49:05] bank account by the way if you guys
[49:06] think yields are going higher than 4.7%
[49:09] You're crazy. I would never allow that.
[49:11] What is that, guys? That's yield curve
[49:13] control. That's capping the bond yields.
[49:14] That's capping the expense that they're
[49:16] willing to pay. It's exactly what I'm
[49:18] presenting. And then on the other side,
[49:20] you're hearing Worsh admit to inflation.
[49:22] He's saying there's inflation. There's
[49:24] inflation. There's inflation. No [ __ ]
[49:25] There's inflation. Mathematically, there
[49:28] has to be inflation. I'm doing the math
[49:30] in front of the world on YouTube.com.
[49:32] There must be inflation. There must be
[49:35] inflation. They're doing both of these.
[49:38] This is their only way to write the
[49:40] ship. This is the only way out. I go
[49:43] back to this slide. Unless they're
[49:45] willing to do one of these, austerity,
[49:47] raise our taxes, or outright default.
[49:50] Unless they're willing to do one of
[49:51] those, the only way out is a combination
[49:54] of inflation and financial repression,
[49:57] which is capping the amount they're
[49:59] willing to pay for debt despite
[50:01] inflationary growth. That's it. That's
[50:04] it. And this is why you must own
[50:06] Bitcoin. Even if you think I'm crazy and
[50:09] you're like, "Man, I don't get what he's
[50:11] saying. This guy sounds nuts." You
[50:14] cannot own zero. Please, please. I don't
[50:18] A lot of you, I don't even know, but I
[50:20] care about you. Do not do that to
[50:22] yourself.
[50:24] Do not own something that nobody can
[50:28] manipulate. Please, because we're
[50:30] reaching a dead end where the
[50:31] manipulation must come. It must come.
[50:34] Mathematically has to come.
[50:38] And and sure, a stock portfolio is
[50:40] better than bonds, but not by a lot.
[50:43] It's very manipulatable.
[50:47] Okay,
[50:51] so that ends the macro update. We will
[50:54] see what Kevin Worsh does in September.
[50:57] We will keep tabs every single week on
[51:00] what these guys are saying, and I will
[51:01] continue to break it down and explain to
[51:03] you why they're saying what they're
[51:04] saying. And what the math is ultimately
[51:08] it's math guys. It's just math. Like
[51:12] this isn't People can argue about our
[51:15] semantics and the way we dress and the
[51:17] way we talk and the way we present. You
[51:20] can't argue with math. Hate me all you
[51:22] want. You cannot argue with math.
[51:26] So I keep referencing this inflation
[51:28] term and that's what today's 101 is
[51:31] going to be. Bitcoin 101 inflation and
[51:33] inflation from first principles, not
[51:36] jargon, not nonsense, not garbage.
[51:39] Really, what is this thing? How does it
[51:41] work? Why is it here? And if we all
[51:43] adopt Bitcoin, will it still be here?
[51:46] Can we solve for inflation? Okay, it's
[51:48] felt necessary for me. Firstly, let's
[51:51] start with the experience of inflation
[51:53] because people get lost in definitions
[51:56] which really pisses me off. is like,
[51:58] "Well, technically, according to
[51:59] Harvard, inflation." No. How about [ __ ]
[52:02] you, how about let's just talk about the
[52:05] experience of inflation. I've
[52:07] experienced inflation. Everyone
[52:09] listening to this has experienced
[52:10] inflation. Don't mansplain me. Don't
[52:13] treat me like a [ __ ] like an idiot,
[52:15] like a peasant. I know what it is
[52:17] because I've lived it. This is what
[52:19] inflation is. $100 of groceries used to
[52:22] get you a full cart of groceries. A $100
[52:25] of groceries today only gets you some of
[52:27] a cart of groceries. The same monetary
[52:30] units, the same $100 gets you less
[52:32] stuff. That's what inflation is. That's
[52:35] the experience of it. And it doesn't
[52:37] matter how educated someone is, what
[52:39] their religious beliefs are, what their
[52:40] political beliefs are, what their
[52:42] demographic is. It does not matter.
[52:44] We've all experienced it. And I don't
[52:46] need to go to Harvard or actually
[52:48] understand what the technical definition
[52:50] is. [ __ ] you. That's what inflation is.
[52:53] We all know it because we've all lived
[52:55] it. Now, on this screen for the podcast
[52:57] listeners, this is the cost of living in
[53:00] 1970. What's the relevance of 1970?
[53:03] Well, it was the last full calendar year
[53:06] before the dollar divorced itself from
[53:08] the gold standard, which allowed
[53:09] politicians in the central bank to print
[53:12] unlimited amounts of it. In theory, you
[53:14] weren't allowed to print dollars when $1
[53:17] represented a specific amount of gold.
[53:20] You can only have outstanding dollars
[53:22] that backed the gold you had in the
[53:24] vault. But when you sever the
[53:26] relationship between the dollar notes
[53:28] floating around in our pockets and the
[53:30] gold that's actually in the vault, then
[53:32] you can create as many dollars as you
[53:33] want, which results in inflation. So,
[53:37] let me read to you guys what the cost of
[53:38] living was in 1970.
[53:41] A new house was $23,000.
[53:45] 23,450.
[53:47] The average income was $9,400
[53:51] in 1970. A new car was $3,450.
[53:57] A movie ticket was $155.
[54:01] Gasoline
[54:02] was 36 a gallon. A postage stamp was 6.
[54:09] Bread was a quarter, 25 cents. Now, fast
[54:15] forward to today.
[54:17] Same dollars, same country, same
[54:20] everything, same everything. We didn't
[54:24] move.
[54:25] We didn't change nations. We didn't
[54:28] change currencies. We didn't We the
[54:31] people didn't do anything wrong. We
[54:33] didn't do [ __ ]
[54:36] And the Now, the problem is, well,
[54:38] what's everything cost today? And I'll
[54:40] get more into this in a second. Well,
[54:42] what's a new house today, Jack? It was
[54:44] $23,000 in 1970. What is it today? Well,
[54:46] it depends. What type of house do you
[54:48] want? Do you want to live on Miami Beach
[54:51] or do you want to live in rural Kansas?
[54:56] Well, Jack, what's a new car cost? It
[54:58] used to be $3,400.
[55:01] Well, it depends. Do you want to drive a
[55:03] used Toyota Camry or do you want a
[55:05] Rolls-Royce?
[55:09] You see? So, let's first start back to
[55:13] inflation. Man, this topic gets me wound
[55:15] up. I apologize, but holy moly, it just
[55:19] once you understand basics, which I
[55:22] really hope this show gives you guys, it
[55:25] should infuriate you what these people
[55:27] have done. Infuriate you.
[55:31] So, there is a group of people that
[55:34] think inflation is good. I This is not
[55:37] This is not satire. I swear to God.
[55:40] Okay. Mainstream economists say
[55:42] inflation is good. And this is what's
[55:44] called Keynesian economics.
[55:47] Now, this is their legitimate claim. And
[55:49] by the way, this is what they teach in
[55:51] school. They teach this in school. This
[55:54] is like if you pay $40,000 of tuition a
[55:58] year to learn economics, this is what
[56:00] you learn. They claim that if money were
[56:04] to hold its value, you would wait to buy
[56:07] things. And they think that's a bad
[56:10] thing. They think delayed gratification
[56:12] and low time preference is bad.
[56:16] So prices must rise a little bit which
[56:20] is another way of saying erosion of your
[56:23] purchasing power and erosion of the
[56:25] value of your money must happen a little
[56:28] bit to keep you spending all the time.
[56:32] Therefore,
[56:35] the economy, this whole thing called the
[56:37] economy can be acting and behaving to
[56:40] our standards.
[56:43] That I guys, I'm not, this is not a
[56:45] joke. I swear to you, this is Keynesian
[56:49] economics on inflation. They say if your
[56:53] currency was hard and held value, well,
[56:56] then you wouldn't wake up and spend all
[56:58] of it every single day. And in order to
[57:01] keep the economy humming and keep keep
[57:04] all the economic data churning through,
[57:08] we have to inflate things just a little
[57:10] bit so that you're incentivized to spend
[57:12] it today rather than save it for
[57:14] tomorrow. And so
[57:17] as a result of all of this, someone has
[57:19] to sit at the dial and set the cost of
[57:21] money. That's why Kevin Worsh is there.
[57:24] How dare I disrespect Kevin Worsh? Kevin
[57:27] Worish is sitting there looking at all
[57:29] this data and analyzing to the perfect
[57:31] tune what the cost of money is and how
[57:34] much my life should be inflated away
[57:37] just so that if I wanted to save money,
[57:39] I shouldn't and I should go out and
[57:41] spend it on on dumb [ __ ] Guys, I I'm
[57:45] not joking. This is quite literally the
[57:48] economic reasoning for inflation because
[57:51] you everyone have heard this 2% is the
[57:54] inflation target. the target. How about
[57:56] the target is zero? No, no, no. Zero
[57:59] would be too low. Then you would have a
[58:01] low time preference. Then you'd have
[58:03] delayed gratification. Then you would
[58:05] save a lot of money for your future. We
[58:08] can't have that.
[58:11] This is the claim. Now, what is the hard
[58:14] money theory? What is my opinion? What
[58:17] is the opinion of a Bitcoiner? Okay. The
[58:20] opinion is that nobody asks me how badly
[58:25] I want to spend. I want to spend because
[58:27] I'm human. As a human, I naturally want
[58:30] to consume. Kevin Worsh does. If Kevin
[58:33] Worsh raises or lowers rates in
[58:35] September, I'm still going to be hungry.
[58:38] I'm still going to want a car rather
[58:39] than walk. I'm still going to want to
[58:41] fly United rather than kayak to Europe.
[58:44] I'm still going to want a penthouse
[58:46] rather than a shitty condo. I'm still
[58:48] gonna want to live on Miami beachfront
[58:50] real estate rather than a shitty [ __ ]
[58:53] apartment in in Midwestern America.
[58:57] I want to consume
[59:00] the what I've earned no matter what
[59:03] Kevin Walsh decides in September. It is
[59:05] so offensive for these people to make
[59:08] the claim that my desire to consume what
[59:12] I've earned is based on their economic
[59:15] phenomena of data analysis that they do
[59:18] in private unuditable.
[59:20] What an what an offensive
[59:23] thing to claim
[59:27] that they understand the quality of life
[59:30] that I want. No, things need to be
[59:33] inflating in your life, Jack, because
[59:36] trust me, you wouldn't want to be saving
[59:38] for your future. How the [ __ ] do you
[59:40] know what I want?
[59:42] You have no idea if I want to get
[59:45] married next year, how many kids I want,
[59:48] if my family is sick, if I want to move
[59:50] to the suburbs, or if I want to live in
[59:52] an urban city. Who are you to determine
[59:55] my life, my consumption?
[59:58] It's it is it is outrageous. [music] But
[60:03] this is the problem. This is the problem
[60:05] that we have
[60:07] from government getting too big and
[60:09] money being a centrally planned entry in
[60:12] a database.
[60:14] Sorry, this topic it gets me so wound
[60:16] up. It really bothers me.
[60:20] So anyways,
[60:23] I that my my claim, the hard money claim
[60:27] is the opposite of my money should hold
[60:31] value. Things around me should get
[60:33] cheaper over time and it is a good thing
[60:36] for me to be saving. It is a good thing
[60:39] for me to have delayed gratification. It
[60:41] is a good thing for me to place a
[60:42] premium on tomorrow. It is a it is of a
[60:46] high functioning society for me to have
[60:49] the belief that tomorrow could be and
[60:51] should be and will be better than today.
[60:53] That is necessary. Or else I've made
[60:56] this point a million times. I would just
[60:58] eat donuts and get fat tonight because
[61:01] who cares about tomorrow? I would get
[61:03] blackout drunk tonight because who cares
[61:05] about tomorrow? I would spend all my
[61:07] savings tonight because who cares about
[61:09] tomorrow? And that's a lot of what goes
[61:10] on in society is a discount to tomorrow,
[61:14] an inability to lower their time
[61:15] preference, an inability to delay
[61:17] gratification, high time preference
[61:19] spending, and a just devastation of
[61:23] value today of health,
[61:26] of wealth, of capital, of family, of
[61:29] everything. It's it's utterly
[61:32] preposterous, honestly.
[61:34] So to the mechanics of inflation,
[61:38] we must understand this. More money does
[61:41] not create what I call wealth. And by
[61:44] wealth, I mean what's the difference
[61:46] between monetary units and the things
[61:48] that they actually are purchasing. So
[61:50] what I describe wealth in this slide is
[61:52] food, housing, energy, machinery, labor,
[61:56] software, medicine, transportation.
[61:58] These are the things you can't actually
[62:00] print. Now monetary units like dollars
[62:03] you can print. So what I'm calling is
[62:05] money or claims used to command these
[62:08] resources. So I have dollars as a as a
[62:11] means to command more food or more
[62:14] housing or more energy. The more dollars
[62:16] that I have, the more I can command
[62:18] these resources. But by printing more
[62:20] dollars, it does not automatically
[62:23] create more stuff. Meaning this if I
[62:26] have let's let's take a very simple
[62:29] economy for the sake of the math. If I
[62:31] have 10 real resources in the economy
[62:34] and I have 10 monetary claims on those
[62:36] resources. Now let's say I increase the
[62:39] monetary claims by 50%. Meaning I go
[62:43] from 10 monetary claims in the economy
[62:45] to 15 monetary claims. I still only have
[62:49] 10 real resources. I cannot print
[62:52] doctors, buildings, cars. I can't print
[62:54] these things. Yes, I can print monetary
[62:58] claims on these things, but I can't
[63:00] print the things. Therefore,
[63:03] here's the the the the main point of
[63:06] this is that inflation creates the
[63:09] illusion of productivity and the
[63:12] illusion of growth and the illusion of
[63:15] innovation. But it is no, it is not
[63:18] real. It is not real which causes these
[63:21] boom and bust cycles.
[63:24] because you can't print all of the
[63:25] things that the money has a claim to,
[63:28] which is what causes the prices to rise.
[63:31] So, I give you this example. Let's say
[63:33] you have 10 bushels of corn. Okay? Let's
[63:37] say you plan to eat six and plant four
[63:40] so that you can produce more corn.
[63:42] That's your total of 10.
[63:45] Now, if I could inflate real things, I
[63:50] would say, you know what? I'm a little
[63:52] more hungry than eating six, but I still
[63:54] want to plant four. So, I've decided to
[63:57] eat seven bushels of corn and plant
[63:59] four. Yeah, but jackass, you can't
[64:03] because that would mean you have 11
[64:05] bushels of corn. But you don't have 11
[64:07] bushels of corn. You have 10. So, that's
[64:10] not an option. You have to, and we've
[64:12] talked about this in one of the earlier
[64:14] 101 episodes, you have to make these
[64:16] decisions at the margins. You have to
[64:18] decide how hungry are you versus how
[64:20] much do you want to optimize for your
[64:22] future. You can either eat seven and
[64:24] plant three or eat six and plant four.
[64:27] But you have 10 bushels of corn. Period.
[64:31] Sorry. And you we must understand the
[64:33] difference between real resources and
[64:36] their inability to be inflated and
[64:38] printed out of thin air versus paper
[64:40] claims that we use as a means to command
[64:44] these real resources. A piece of paper
[64:47] cannot create the 11th bushel of corn.
[64:50] I've talked about this before. One of
[64:52] the things that's happening right now is
[64:53] there is a serious demand for
[64:55] commodities because AI infrastructure is
[64:57] being built all over the world. And
[64:59] guess what? You cannot build an AI data
[65:01] center with. You can't build it with
[65:03] silver futures contracts. Turns out you
[65:05] need real silver.
[65:08] And so we've created the illusion
[65:12] that there's an abundance of silver. But
[65:14] when people actually need the real
[65:16] silver, well, there goes the price.
[65:19] There goes the price of gold. There goes
[65:20] the price of Bitcoin.
[65:23] Do you understand?
[65:25] So, credit can change who gets the
[65:27] resources. But it cannot create
[65:29] resources themselves. So, more credit in
[65:32] the system cannot create another worker
[65:35] in the workforce. It cannot create
[65:36] another acre of land. It cannot create
[65:38] another power plant. It can't create
[65:40] another GPU for AI. It cannot create
[65:42] another barrel of oil.
[65:44] It can create another claim to command
[65:47] these resources but on a relative basis
[65:50] this these resources remain relatively
[65:52] fixed. So this is what happens when they
[65:56] create more money and more credit that
[65:59] creates more bidding for the same
[66:01] things.
[66:03] So if I have 10 resources in the economy
[66:06] and 10 paper claims against those
[66:07] resources there's one paper claim per
[66:10] resource. Now, if I create 15
[66:14] re uh paper claims to only 10 resources,
[66:18] well, now I have more than one paper
[66:20] claim per resource. So, a resource will
[66:24] now be worth more than one paper claim.
[66:26] The price of the resource went up when
[66:28] denominated in paper claims. That is
[66:31] inflation. That's how prices rise. You
[66:34] create more money and more credit.
[66:35] There's more bidding for the same
[66:37] things. That means real supply grows
[66:39] slowly, if at all.
[66:41] Sometimes more paper claims will grow
[66:43] the supply of the real stuff because
[66:45] there's more money to produce more. But
[66:47] take Bitcoin for example. You can't make
[66:49] any more Bitcoin. So more paper paper
[66:51] claims just make Bitcoin's price go
[66:53] higher. So then at the very end you get
[66:56] adjustment in pricing,
[66:58] which is guys, this is why inflation
[67:02] reduces your purchasing power. one
[67:04] monetary paper claim gets you less of
[67:07] the goods it's competing for the more
[67:09] units that they create.
[67:12] Now, we must understand that inflation
[67:14] is uneven. Okay, this is critically
[67:17] important. Inflation is not spread
[67:20] evenly. Like, okay, we're going to
[67:22] devalue the dollars, but at least
[67:23] everyone feels it evenly and benefits
[67:26] from it evenly. That I wish that was the
[67:28] case. That is not the case. So first
[67:31] they create new money and new credit in
[67:33] the system. Then asset prices rise,
[67:37] government spending increases, lending
[67:40] increases at the fundamental level like
[67:42] banks are giving out more loans. Only
[67:45] later after that do wages get impacted,
[67:49] rents get impacted, services get
[67:51] impacted and then only after that way
[67:54] after that do consumer prices get
[67:56] impacted like the cost of your food.
[68:01] But let me put it to you guys this way.
[68:04] Let's say the US government is going to
[68:06] print all sorts of money, which they
[68:08] kind of have already started to do. Now,
[68:10] if I was a hedge fund that got access to
[68:13] some of these So, let me hold on. Let me
[68:16] slow down. Slow down for a second.
[68:20] One way the US government can print
[68:22] money is making it easier to create
[68:25] credit, create loans. So they can go to
[68:27] the banks and say, "Hey, you can take
[68:30] certain collateral from hedge funds and
[68:32] from Wall Street folks and treat that
[68:35] collateral as in the money good no
[68:37] matter what." So treat all of their
[68:40] treasuries, all of their bonds as in the
[68:42] money good, unlimited leverage against
[68:44] it.
[68:45] Okay? Now, banks are going to issue a
[68:47] lot more credit and that's going to be
[68:48] highly inflationary and they're creating
[68:50] a lot more monetary claims on the stuff
[68:52] in the economy, right? Like we just went
[68:53] over. But who gets access to those
[68:56] loans?
[68:58] Does your neighbor? Does your old high
[69:00] school classmate?
[69:02] No, the normal person doesn't get access
[69:05] to that. Who gets access to that? Hedge
[69:07] funds, Wall Street.
[69:09] So, who gets to buy Bitcoin with
[69:11] unlimited leverage, with freshly printed
[69:14] currency because of government to buy
[69:17] Bitcoin at 60K? Who gets access to that?
[69:20] Now, by the time all of this spreads
[69:23] through the economy so that your
[69:25] neighbors got the got the uh inflation
[69:28] adjusted promotion, like, hey, we gave
[69:31] you a bonus or we gave you a raise or we
[69:33] gave you a promotion because inflation,
[69:35] but they got that promotion one year
[69:36] later, two years later, Bitcoin is at
[69:39] 250K.
[69:41] So, the hedge funds on Wall Street got
[69:42] to buy Bitcoin at 60K the day that
[69:45] Bessant made that announcement. and your
[69:48] neighbor gets to buy Bitcoin with their
[69:49] new promotion bonus, but Bitcoin's at
[69:52] 250K.
[69:55] Well, who got to benefit from inflation?
[69:57] The guy with unlimited leverage at 60K
[70:00] or your neighbor who's buying the top?
[70:03] [ __ ]
[70:05] You see? So, that's what I I put on this
[70:08] slide. Everyone's money and prices don't
[70:11] reset at the same time. So, your salary
[70:15] once a year, your rent once a year. But
[70:18] how often do your food prices change?
[70:21] More frequently. How often do home
[70:23] prices change? Every single day. How
[70:26] often do stock prices change between
[70:29] market and close? How often does the
[70:31] Bitcoin price change? 247 365.
[70:36] You see, inflation is not even. This is
[70:39] why it's not fair. And this is why
[70:41] everyone must own Bitcoin. Bitcoin is
[70:43] the most sensitive instrument we have
[70:45] access to to monetary liquidity. As soon
[70:49] as money starts getting printed, Bitcoin
[70:51] reacts immediately. So, we all get
[70:54] access to own the thing that performs
[70:56] the best in the face of all of this.
[70:59] Like our neighbor can own Bitcoin, can
[71:01] be DCA even if it's a dollar a week.
[71:06] So, I made this point earlier and I have
[71:08] to reiterate it. Now we get on to, well,
[71:11] what's the rate of inflation? When Kevin
[71:13] Worse says, "Our target is 2%." What is
[71:16] he talking about?
[71:18] Don't even I've already displayed enough
[71:20] emotion on this show. Don't even get me
[71:22] started. Listen, there is no such thing
[71:24] as the inflation rate because again,
[71:28] these [ __ ] are implying that they
[71:31] know what you want. I'll tell you the
[71:34] inflation rate, but you have to tell me
[71:36] what you want. Do you want to live on
[71:39] the beach in Miami or do you want to
[71:42] live in an apartment in rural Kansas?
[71:46] Totally different inflation rates. Do
[71:48] you want to be eating grass-fed ribe
[71:50] eyes or do you want to be eating
[71:52] porridge slop? Totally different
[71:54] inflation rates.
[71:57] Do you want to be driving a Rolls-Royce
[71:59] or are you okay walking? Totally
[72:03] different inflation rates.
[72:07] So the notion that there's an inflation
[72:09] rate that they can measure implies they
[72:12] know how I want to live. You guys don't
[72:15] know me. You didn't consult with me. You
[72:17] have no right to tell me how I should be
[72:20] saving and how I should be living.
[72:22] [ __ ] garbage.
[72:25] Manipulative tactical garbage. Sorry.
[72:29] And and you guys don't know. There's a
[72:31] lot of people out there that will ping
[72:32] me and say, "Hey, you got to be careful
[72:34] about how you talk about government on
[72:37] your show or who you're calling out."
[72:40] That ship has sailed, brother.
[72:44] I'm a man of the people
[72:46] through and through. At this point, I've
[72:48] made that decision. That ship is gone.
[72:51] I'm going to call it how I see it. It's
[72:53] garbage. And I'm not saying it's the
[72:55] Trump administration's fault. It's not
[72:57] Besson's fault. It's not War's fault.
[72:59] This is decades in the making, but I
[73:01] call it how I see it. Garbage.
[73:05] So, what I have here on the slide, how
[73:08] how about learning math? What's the
[73:09] inflation rate for learning math? Well,
[73:12] learning math has gotten incredibly
[73:14] cheap. You could talk to your AI agent
[73:17] in your phone and you got that app for
[73:19] free. You could look it up on YouTube.
[73:22] So much [snorts] productivity. There's
[73:23] an abundance of accessible information
[73:26] that can teach you base level math.
[73:28] That's incredible. Amazing. What about a
[73:31] Caesar salad? Well, a Caesar salad is
[73:34] there's not really inflation. I don't
[73:37] expect there ever to be inflation for a
[73:38] Caesar salad because that's pleb slop
[73:41] food. That's not real nutrition. If if
[73:43] what you want to do for the rest of your
[73:45] life is cut leaves off a tree and put
[73:47] dressing on it and call that dinner,
[73:49] then yeah, no inflation. So, if what you
[73:52] want out of your life is to learn math
[73:53] and eat leaves off a tree, no inflation.
[73:56] You're good. What about things like
[73:58] college tuition? College tuition could
[74:01] be considered learning math. No, no, no,
[74:03] no. But I mean, I wanted to join a
[74:05] fraternity and I wanted to go to
[74:06] football games and I wanted to learn
[74:08] more than just mathematics and I wanted
[74:10] to build towards a career and I wanted
[74:12] to have a relationship with professors
[74:13] and I wanted to meet who my future wife
[74:15] and the future mother of my children is
[74:17] going to be. That's what I meant by
[74:18] learning math. Oh, that learning math.
[74:21] Oh, well, this is why you must be
[74:22] specific. If you want to learn math, go
[74:25] on YouTube. Oh, you want to go to
[74:27] college? Oh, yeah. No, no, no. The
[74:29] inflation rate of that is tens of
[74:31] percents a year. Okay. What about health
[74:34] care? Well, if you just eat salad every
[74:37] single meal and you don't give yourself
[74:38] proper nutrition and you get disease.
[74:40] Oh, okay. So, you are willing to eat
[74:43] salad, but you're not willing to just be
[74:44] malnourished and die. Oh, yeah. Well,
[74:46] health care that that's that's really
[74:48] really expensive. So, you tell me what
[74:50] you want and I'll tell you the inflation
[74:52] rate. So, anytime anyone says, "Oh, I
[74:54] know the inflation rate." Liars, liar,
[74:56] liar, liar. They don't know what you
[74:58] want. They don't know what you want to
[75:00] consume. I'll tell you the inflation
[75:01] rate. The inflation rate is very easy to
[75:03] measure. Think about Bitcoin. I want
[75:05] Bitcoin. What's the inflation rate of
[75:07] Bitcoin? Well, it's its kagger. Bitcoin
[75:09] goes up 40% a year on average. So,
[75:12] unless I'm getting a 41% raise every
[75:15] single year in Bitcoin terms, I'm not
[75:18] going to be able to acquire the same
[75:19] amount of Bitcoin every single year.
[75:21] When I got into Bitcoin over a decade
[75:23] ago, I was able to buy a lot more
[75:25] Bitcoin than I can today. Of course, I'm
[75:29] not making as much money in Bitcoin
[75:32] terms than I was years ago. Hundreds of
[75:34] thousands of bitcoins was the average of
[75:36] was the was one average home when I got
[75:39] into Bitcoin. Now, an average home's
[75:41] like three bitcoins.
[75:44] So, right, I'll tell you the inflation
[75:47] rate. Tell me what you want. Oh, you
[75:49] don't want to save in Bitcoin. You want
[75:50] to save in pleb slot bonds? Oh,
[75:53] inflation rate's not bad. You're good.
[75:56] You're good.
[75:59] So, who gets the money? This is the
[76:01] Canilian effect. Who gets the money
[76:03] first matters obviously because if
[76:06] they're going to create new currency,
[76:07] whoever gets it first wins because they
[76:09] get to spend it before the prices have
[76:11] adjusted. They get to buy Bitcoin at
[76:13] 60K. They get to buy all the eggs before
[76:15] the price goes up. They get to hoard all
[76:16] the beef before the price of beef goes
[76:18] up. Whoever gets the money late has to
[76:21] consume the adjusted prices. This is why
[76:24] it's so unfair and it's so uneven.
[76:28] So if you owe a fixed amount of dollars,
[76:31] weaker currency can help. This ties it
[76:33] back to the macro section. If my debt is
[76:37] fixed in dollar terms and the dollar is
[76:39] getting weaker, well then it's easier to
[76:41] earn that amount of dollars to pay the
[76:43] debt back. You understand? Let me go all
[76:47] the way back to the 1970 slide. In 1970,
[76:51] the cost or the average income was
[76:54] $9,400,
[76:55] guys.
[76:57] Crazy.
[77:00] So, meaning
[77:03] and today, what's the average income? I
[77:05] don't know the answer, but how easy is
[77:07] it to make $9,400 today? It's not that
[77:11] hard, right?
[77:14] relative. It in 1970 it took you a whole
[77:17] year to make $9,400.
[77:19] Today it takes you less than a year to
[77:22] make $9,400. So by making the dollar
[77:25] cheaper and devaluing it and debasing
[77:27] it, it's easier to pay back debt. Let's
[77:30] say I owed someone $9,400 and that's
[77:32] been fixed since 1970. Well, it used to
[77:35] take me a year to earn that and pay them
[77:37] back. Now it does not take me nearly a
[77:39] year. You understand? So that is why
[77:42] governments try and have their expenses
[77:45] fixed in dollars and then devalue the
[77:48] dollar. It's easier for them to pay it
[77:50] back. That's that whole debt to GDP
[77:51] concept. We've already went over that.
[77:53] Um so in this situation where the dollar
[77:58] is getting inflated and inflation is
[78:01] happening in our lives and especially
[78:03] when they're fixing the cost they're
[78:05] willing to pay on their debt. Who loses?
[78:08] the lender and the currency holders,
[78:11] your claim, you lend them money and they
[78:13] owe you money back. What that the claim
[78:15] that they owe you back is going to get
[78:17] you less stuff by the time they pay you
[78:19] back because they're going to have
[78:21] inflated it away and the inflation is
[78:23] going to be rising faster than the yield
[78:25] that they're paying you. So in this era,
[78:28] I cannot stress enough
[78:31] and I know and I know people are saying
[78:32] you can't say that the government's
[78:33] going to be pissed if they hear you. I
[78:35] don't care. I just I'm telling the
[78:38] truth. This is either freedom of speech
[78:40] or we're not living in the America I
[78:41] thought.
[78:43] Do not own bonds. Do not own the dollar.
[78:48] This is why we own Bitcoin. They cannot
[78:51] think of Bitcoin like a bond that has
[78:54] zero yield but infinite price that no
[78:57] one can control. That's what I want to
[78:59] own. [ __ ] your yield. I don't give a
[79:00] [ __ ] about your yield. You're not going
[79:02] to pay me the yield of the inflation
[79:03] rate anyway. I'm not expecting you to
[79:05] make me whole on yield. I want something
[79:07] that floats truly in a free market in
[79:10] the dollar price so that when you print
[79:12] money and it goes up 25% in three days
[79:15] just like that. That's what I want to
[79:17] own. So I will not own dollars and I
[79:19] will not lend you guys money. 0% chance.
[79:22] And the people that that continue to
[79:24] hold dollars and continue to lend the
[79:25] government money, those are the losers.
[79:27] Now, quickly to end this whole episode,
[79:30] let's talk about what would the world
[79:31] look like on a Bitcoin standard. Can
[79:34] living on a Bitcoin standard fix this?
[79:36] The answer is yes. So, back to basics.
[79:40] What happens when demand for money
[79:41] rises? Well, in a soft money system,
[79:44] when demand for money rises, they can
[79:46] just print more money. So, right now,
[79:48] Scott Bessant really needs more money.
[79:50] People aren't willing to lend him money.
[79:52] What can he do? He can just print his
[79:54] own money. And what does that do? that
[79:56] results in inflation, which we just went
[79:58] over very straightforward from a first
[80:01] principles basis. And these guys are
[80:02] inventing metrics like the inflation
[80:04] rate, and they're telling you you need
[80:06] inflation or or else you'd save. How
[80:08] offensive is that? God, I can't get over
[80:10] that. We design inflation in the system
[80:13] or else you'd save for your future. [ __ ]
[80:15] you guys. So, they force you to spend.
[80:19] They they supposedly o understand what
[80:23] quality of life you want and what goods
[80:24] and services you want to consume.
[80:28] Ut utterly and completely ridiculous all
[80:30] of that. That's what a soft money
[80:32] standard is. Now on a Bitcoin standard,
[80:34] I'm not even going to call Bitcoin a
[80:35] hard money standard because it's a fixed
[80:37] money standard. A hard money standard
[80:39] would be gold, but you could still
[80:40] create more gold. A fixed money
[80:42] standard, demand goes up and you cannot
[80:44] print the money. If what Scott Bessant
[80:46] needed was Bitcoin and not dollars, he'd
[80:49] have to go buy it from guys like me. He
[80:52] can't print [ __ ] Oh, you want Bitcoin,
[80:55] Scott? Offer me a good price and maybe,
[80:59] just maybe, I'll go into cold storage
[81:01] and sell you a little bit of mine.
[81:04] That's that's the money that I want. You
[81:07] can't just print it out of thin air. You
[81:09] got to go get it from the market.
[81:12] So, again, gold is hard.
[81:15] because
[81:17] it's harder to produce gold than it is
[81:19] dollars. But it's not fixed. So the gold
[81:21] price goes up, you have more incentive
[81:23] to mine gold. But mining takes time, it
[81:26] takes capital, it takes energy, it takes
[81:27] geology, it takes it takes humans
[81:30] collaborating and unifying. So the
[81:33] supply of gold does respond and gold
[81:36] typically inflates at about 2% a year.
[81:39] So the reason gold has been a great
[81:40] money is because 2% is reasonable and if
[81:43] the things around you are inflating 2%
[81:45] then gold should be relatively fixed
[81:47] price. You know it it was like a flat
[81:49] rock for a very long time. But Bitcoin
[81:52] is even different than that because if
[81:54] its price goes up and its demand goes up
[81:55] and mining competition goes up the
[81:57] issuance doesn't change. The issuance is
[82:00] determined by the protocol because of
[82:02] the difficulty adjustment when Satoshi
[82:04] started the network. It doesn't matter.
[82:05] None of that matters. So life on
[82:08] Bitcoin, I want to talk about this. Life
[82:09] on the Bitcoin standard in the age of
[82:11] AI.
[82:13] So AI is going to create an abundance of
[82:15] more stuff. Elon talks about this all
[82:17] the time. And it's true. Think about it.
[82:19] Housing. We're going to be able to build
[82:21] faster and cheaper housing because of
[82:23] AI, because of humanoids and robots.
[82:26] Medicine. People are coming up with
[82:28] cures to cancer already. Crazy. So we're
[82:31] going to be able to create a lot of more
[82:33] drugs, a lot of more medical care, a lot
[82:34] of more medical solutions. We're all
[82:36] going to be way more informed on how to
[82:37] be healthy. We're going to know what to
[82:40] eat, when to eat it, how to work out.
[82:42] We're going to be able to measure our
[82:44] bodies much better. What about energy?
[82:46] We're going to have way more energy, an
[82:48] abundance of energy because of AI. What
[82:50] about education?
[82:52] We're all much smarter, much more
[82:54] educated. We have access to much more
[82:56] information because of AI. So, this is
[82:58] an abundance of real resources. Remember
[83:01] back when I said there's real resources
[83:02] and then there's monetary claims on
[83:04] those resources. We're humans are
[83:07] constantly innovating. It's actually a
[83:09] shame that we live in in an era of
[83:12] inflation because we are constantly
[83:14] producing more resources for ourselves.
[83:16] But they're printing more money than
[83:18] we're making new resources, which is
[83:20] [ __ ] crazy. It's [ __ ] It's
[83:21] absolutely absurd. If we had a fixed
[83:24] money, then everything around you would
[83:26] go down in price because you're
[83:27] producing more resources than money.
[83:29] Think of it that way. Which one's
[83:31] growing faster? Resources for all of us
[83:34] are money and creating more resources.
[83:36] Just innovating like using AI to make
[83:38] housing more affordable and more
[83:40] efficient and build it better or more
[83:42] medicine or more energy or more
[83:44] education. That's creating more
[83:45] resources in the economy. But they're
[83:47] creating more money more than we're
[83:49] creating resources. But on a Bitcoin
[83:51] standard, there's only 21 million and
[83:53] that's it. So as the world gets more
[83:56] productive and produces more stuff, that
[83:59] stuff is competing for the fixed 21
[84:01] million sats.
[84:03] So it's not Bitcoin competing for stuff.
[84:05] It's an increasing amount of stuff
[84:08] that's competing for bitcoins.
[84:10] All of human pro I I've said before I've
[84:14] I don't know if I've ever been able to
[84:15] explain this quote, but I've had this
[84:16] quote that is owning Bitcoin allows me
[84:19] to be long humanity. And what I mean by
[84:21] that is all of human progress competes
[84:24] for a fixed amount of bitcoins. Oh
[84:26] great, someone invented AI. Well, guess
[84:28] who gets the benefit from that? Me. I
[84:30] do. Because they can't print more money
[84:33] than humans are making cool [ __ ] with
[84:35] AI. So all of this progress that's going
[84:37] to be made with AI is going to have to
[84:39] compete for the fixed amount of SATs.
[84:41] And I got mine and I buy my more every
[84:44] single day in cold storage.
[84:46] So in a soft money world, you have a
[84:49] relatively fixed amount of resources in
[84:51] a growing amount of monetary claims. The
[84:53] money grows faster than the resources,
[84:55] which causes inflation. On a Bitcoin
[84:59] standard, you have a relatively growing
[85:02] amount of resources. So on a relative
[85:04] basis, which one's growing faster?
[85:06] Resources grow faster than the monetary
[85:08] claims. So you get to benefit from human
[85:11] human innovation, human productivity,
[85:13] from a growth in resources. That means
[85:16] prices fall. When I got into Bitcoin, my
[85:19] dream house was hundreds of thousands of
[85:22] bitcoins. Today, my dream house is like
[85:25] five or whatever. I What's the price?
[85:28] 80,000. Your dream house is 10 bitcoins.
[85:33] What are we talking about? So, every
[85:35] single year, my life gets cheaper
[85:38] because of the money I use. You have to
[85:41] understand this. Not because I'm better
[85:43] than anyone else, not because I'm
[85:44] smarter than anyone else, not because
[85:45] I'm faster or I'm stronger, none of
[85:47] that. Simply because I use a money they
[85:51] can't make more of. As long as my money
[85:53] is not growing faster than the resources
[85:56] that I want to consume, I win. I win.
[86:00] It's that simple, guys.
[86:03] So my life is getting cheaper because we
[86:05] as humanity got better. That's it.
[86:09] That's it. I get to benefit from human
[86:12] innovation. That's it.
[86:18] So it's a fixed amount of Bitcoin and as
[86:20] humans continue to innovate and build
[86:22] cool [ __ ] more stuff. That's it. That's
[86:25] it.
[86:28] So anyway, and I mean I already made
[86:31] this point. The dollar system can have
[86:33] rate changes and credit expansion and
[86:35] fiscal spending and buybacks and balance
[86:37] sheet and liquidity programs and all
[86:39] this nonsense. If Bessant wants more
[86:42] Bitcoin, there's only one place to get
[86:44] it. The market. The market. He can spin
[86:48] up as many miners as he wants. The
[86:50] difficulty will adjust and he'll get a
[86:52] block on average about every 10 minutes.
[86:58] That's it. That's the system that I
[87:00] want. That's a system we deserve. By the
[87:03] way, these people telling me, "Well,
[87:05] without any inflation, you'd save
[87:07] money." [ __ ] yeah. I'd save money and
[87:09] I'd have kids and I'd have a big yard
[87:11] and I've had a nice car.
[87:15] [ __ ] you guys.
[87:19] So,
[87:21] that's what I'll leave you guys with. A
[87:23] little bit of macro, a little bit of
[87:24] one-on-one inflation from first
[87:26] principles, and then what what money
[87:28] would you want to own? And what money do
[87:30] you want your parents to own and your
[87:32] friends to own and your colleagues to
[87:34] own? And again, it t it takes time to
[87:38] have to build the conviction to go all
[87:40] in on Bitcoin like me. But owning zero
[87:43] Bitcoin to me is a bigger risk than
[87:46] owning any at all.
[87:49] You got majority of the world out there
[87:51] flying blind, sitting in dollars and
[87:53] government bonds, and they're going to
[87:56] get crushed. I just walked you guys
[87:58] through the math. these guys have to
[88:00] implement some form of yield curve
[88:02] control and let inflation run. I promise
[88:05] you. Or we're living through some form
[88:07] of austerity or something equally as
[88:10] insane. But it it seemed like this was
[88:13] always going to be the answer according
[88:15] to the math. And now Bessant and these
[88:17] guys are effectively communicating it.
[88:19] That's why Bitcoin has started to move.
[88:21] That's why this bare market looks like
[88:22] it might be ending. And if this is
[88:24] what's happening, you guys think you've
[88:26] seen a bull market in 2025. I promise
[88:28] you, you haven't. I promise you, you
[88:30] have not because that we would get real
[88:33] money printing in 2025. The Fed was
[88:36] still shrinking their balance sheet. We
[88:38] were still living through monetary
[88:40] tightening.
[88:44] So, in summary, no man should work for
[88:47] what another man can print. That is the
[88:50] case for Bitcoin. Period.
[88:53] And with that, I rest my case. Uh that
[88:57] is 90 minutes almost on the dot for this
[88:59] show. And as I mentioned in the
[89:01] beginning, we're going to be moving Q&A
[89:03] to something that gives me more time.
[89:05] Like I can't talk for 90 minutes and
[89:06] then do an hour of Q&A right now. That's
[89:09] just it does a disservice to the
[89:10] questions you guys ask. I think we can
[89:12] just do way better job. So, we will be
[89:15] tweeting out the link where you guys can
[89:17] submit your questions hopefully in audio
[89:19] form so that I can sit and have an
[89:21] hour-long weekly Q&A and respond in a
[89:24] more fun interactive manner to your
[89:26] questions. So, we're not going to do Q&A
[89:29] today. Follow us on Twitter. Be on the
[89:31] lookout for that. We'll try and post it
[89:33] everywhere. We're we're doing we're
[89:35] posting more on Instagram and on
[89:37] YouTube. Um, and so we'll try and get it
[89:39] out there so that you guys have the
[89:41] link. And next episode, uh, or not next
[89:43] episode, we'll post a separate video of
[89:45] Q&A. I don't know what day I'll be
[89:47] uploading those, but I'll pick a day.
[89:48] I'll let you guys know. And, uh, yeah,
[89:52] that's it for today. Keep giving me the
[89:54] feedback. Uh, the feedback so far is you
[89:56] guys like the macro, you also like the
[89:57] one-on- ones. I tried to combine them
[89:59] and and move Q&A to a separate video. If
[90:02] you guys like this format, let me know.
[90:03] I will keep doing these live streams
[90:05] every single Monday. I won't let you
[90:06] guys down. I'm not going to have guests
[90:08] in a way that you cannot ever hear from
[90:10] me directly. I think guests will be
[90:12] cool. Let me know who you want me to
[90:14] talk to. And I'm doing a lot more
[90:15] educational content. So, these short
[90:17] form animated videos that uh tend to go
[90:20] viral and are easier to share. They're
[90:22] not 90 minutes where people have to
[90:24] listen to this crazy guy yelling at
[90:25] himself in a closet. So, subscribe, keep
[90:28] giving me feedback, and be on the
[90:30] lookout for our new version of Q&A. Love
[90:33] you guys. Appreciate you guys. What a
[90:35] fun journey this is for me. I hope you
[90:37] guys enjoy it equally as much. Really
[90:40] appreciate all the support and uh I will
[90:42] talk to you all soon. More content. More
[90:45] content. Orange pill. Orange pill. See
[90:48] you.