Bitcoin Could Explode On Global Chaos

Bitcoin Could Explode On Global Chaos

we’re at a hinge in history right now there’s no doubt in my mind that we’re at a hinge and in the last 20 30 years have been driven by economics the next 20 or 30 years will be driven by geopolitics and you better change the way you view the world um and you better adapt quickly because uh those changes are coming and they’re actually going to come much faster than you think they are all right guys bang bang I’ve got Kyle here uh Kyle it feels like um conflict is a huge theme of this decade uh we have had conflict uh in terms of competition we’ve had conflict in terms of you know violent Wars um it just seems to be everywhere all at once and I think a lot of people are trying to wrap their head around that and so I know you’ve got some views on like why Wars are happening both from financial reasons and also kind of these inflationary pressures so maybe you could unpack just like why on a on a global scale is war seemingly like the default position that we’re in at the moment that’s a great question first of all pleasure to be here I think that um you know there there there are idiosyncracies for let’s say why Russia wants to put Mother Russia back together again why Hamas wanted to disrupt the middleast peace process uh that was actually coming together so nicely after the Abraham Accords um and then you know again why why China um and and their militaristic belligerence is going to you know let’s say cause a few Global flash points in the Philippines and Taiwan and those those are those are yet to come but you know for the people that are protesting at universities for the people that are screaming for a ceasefire that are hoping to go back to um this period of time in which we had a peace dividend for a long period of time right uh I think you and I and all of us felt uh like you know post 1988 1989 when the wall fell fell and kind of democracy somewhat overcame communism um back then and created this enormous you know several decades of prosperity um we all thought the great wars were over but unfortunately there this things called human nature uh and long periods of prosperity create weak leadership and uh disproportionately I think allocate resources and then all of a sudden uh you’re back into conflict what makes conflict worse uh what makes conditions worse for um ever achieving some kind of Denon or some reproach Manon uh of these these Waring factions is is the financial architecture of the world and I think if you look back to 2008 I mean what are we uh uh we’re 16 years past 2008 today and um I think we’ve got a scenario where you you you the fed’s balance sheet we just start with the US and and starting with the US is very important right we’re we’re 4% of the world’s population we’re 25% of GDP and we’re 40% of the world’s Capital markets we are the financial foundation of the world the world’s Commodities everything that trades in the world is priced in dollars if if it’s priced in a foreign currency it’s priced in dollars then converted to that currency if you think about it right Global pricing is dollars crossb settlements 85% plus happen in dollars today um again don’t let any of the numbers from the IMF or the World Bank change that uh it’s you you you deal with uh traffic gura you deal with any of these Global import export businesses and everything’s priced in dollars so the dollar is the world’s Reserve currency and it and it will be for a very long period of time anyone that says it won’t um just doesn’t understand in my opinion the way that the world Works um now can we do things to jeopardize that over time absolutely are we doing those things absolutely um but we’re still the tallest by a long shot uh and and we can get into the different areas of the world different currencies and I know we’ll probably get to crypto at some point in time today but the point the point being is the architecture of the world starts with the dollar and then it moves to the Emerging Markets it moves to the first for the rest of the developed world then to the emerging markets and the fed’s balance sheet going into ’08 had less than a trillion on it basically basically it was a very lows sloping yal MX plus b line that was fairly predictable um you know we would counter cly spend in recessions but it was it was just very low standard deviations from the mean then 2008 happened we were at roughly 990 billion going into 08 and from ‘ 08 to 2018 uh we grew it from 990 billion to 4.5 trillion it’s hard to believe that we actually created that much money uh in actually a as timelines are concerned I’ll say as history is concerned a pretty short period of time right um and then we started to try to wean ourselves off of that fed balance sheet uh went from four and a half to roughly four trillion and then the the uh the the disease started emanating from Wuhan the virus and we took the FED took its balance sheet from roughly four trillion to 9 trillion in 18 months we increased the the money supply the broad money supply of the US by 40% in 18 months we’ve never done that before um that is sheer um I think it’s recklessness I think that none of us knew how what what the mortality rate of of the uh covid was going to be it was a guess everybody was panicking we wanted to do plan after plan after plan even before the money was spent we were talking about new plans thank God Joe Mansion was alive for heaven’s sakes we’d have another one and a half to two trillion uh uh of of fuel on this fire and we’ have seen more than 40% inflation so that inflation is really important to understand in the context of think about countries around the world like Argentina or Lebanon or the Gaza Strip when the world’s growing at let’s say Global GDP is growing 3 and a half% inflation’s at 1 and a half 2% the world’s growing nicely finely and everybody’s doing okay and then no conflicts those countries are still poor and they’re still mismanaged and or regions and the poor though they figure out how to live they figure out how to feed themselves they have some housing basically life can go on as they bounce along the bottom what we just did is we shocked the system with what I deem to be 40 to 45% inflation and let me let me back that up with some numbers you look at the average price of milk up 40% in in 3 years look at the average price of soda 45% 3 years you look at the average price of use the government’s own fhfa housing index that is not chain weighted it’s just the number it’s up 47 in three years you know they’re all rhyming with about 40 which is about how much we expend in the money supply so if you can’t tell I’m a monitor at heart yes I’m an Austrian School Acolyte and it’s something that I all wish we could operate under but unfortunately the pattern was set a long time ago and we’re in a Keynesian system and that’s just the way life goes um but being a monetarist I just believe that that inflation is and always will be a monetary phenomenon U then it becomes a psychological phenomenon but if we push inflation like that to the rest of the world and those economies that were just bouncing along um everything’s priced in dollars so the poor already didn’t have disposable income so inflation breaks them it breaks them completely and the middle class that we barely kind of making it now they have no upward Mobility whatsoever as you know middle class can’t reach and buy a home anymore because home prices are are up 50 and you and I both know that wages are not up 50 uh right so uh in some places you can point oh minimum wagees moved up this or that but wages RIT large in the United States and worldwide are not up 50% in the last three four years so um real rates of uh real wages are down pretty substantially um given inflation so when you push inflation like that to these places they hyperinflate so there’s a negative convexity to the emerging world when the US shocks the system so we shock the system and we we there were already countries that were mismanaged financially and and militaristically and uh politically uh but what we just did is we just broke them and so when you look at Lebanon or you look at at Turkey Turkey is a large country with a huge number of of people that let’s just say may not have the same religious views as as the the developed World um turkey’s hyperinflated Argentina’s hyperinflated lebanon’s hyperinflated Pakistan’s on its way there I can go country after country after country Iran Iraq all of them have broken so for anyone that believes there’s going to be a magic ceasefire because people demanding it at like colleges in the United States I have another thing coming it is not happening it can’t happen and it can’t happen because the financial architecture of the world is broken and then you look to places like China and Hong Kong who had a miracle in quotes of GDP but that miracle was was basically built on u a foundation of sand the foundation of s was real estate they let real estate go um unchecked for big basically a decade uh and what what did that do it got the prices so high that median home price to median income in tier one cities in China got to over 25 times well at the peak of our subprime greatness we were like 6.6 we tried to get it between three and five times so what she figured out too late uh was that that’s why their demographic curve hooked down and started collapsing because men in China when they got out of universities couldn’t afford an apartment so they lived at home they weren’t having sex they weren’t having children they weren’t marrying they were living with their parents and so any of these statisticians and and actuaries that were modeling the Chinese uh mortality curve they they were shocked when their model that was showing a decline to 2050 hooked down and collapsed well xinping was shocked too and remember they’ve only been at financial markets for about 20 years since they entered the WTO right uh in 2001 we’ve been financial markets for over a hundred years and look at how bad we screwed it up going in 08 so I think it’s important to understand that the architecture of the world was just shocked it was already pretty bad and we just broke it uh and the FED has 18 unelected people running the FED that are all academics uh that answer to no one and that may sound conspiratorial to you it’s just the truth they don’t answer to anyone they if you go meet with them they believe that they saved the world from covid and they were self- congratulatory about that and now they’re self- congratulating themselves saying well we have this kind of inflation Dragon tamed um when they’re the ones that went so big on the front end that the only institution policed with or tasked with policing inflation caused it uh and now they’re the ones trying to put the fire out um so I believe that understanding the architecture of the world is is so integral in into trying to handicap geopolitics going forward when you look at the United States the FED to your point um they have immense uh influence and uh they definitely helped cause it they definitely are trying to put it out uh whether you think that they did a good or bad job let everyone else decide that but what I find interesting is the Fed pretty much since the end of 2021 has been verbally uh saying hey we’re going to bring inflation de we’re going to create these tighter Financial conditions we’re going to take all these actions that historically they’ve been able to pursue you know draining liquidity of the system the politicians didn’t get the memo they they continued to to just pump tons of liquidity into the uh system via all these bills and legislation Etc so like how do you balance like who’s actually in charge now yeah is the Fed overwhelmed by the politicians in kind of this pursuit of just these spending bills all right let me give you one answer and it’s just look at 2023 2023 is fiscal year the US government receipts were about 4.4 trillion we spent 6.1 trillion and a lot of people say well that’s just 7% of GDP it’s a big number but you know you know when you start when you start characterizing things like that as percentages of GDP it kind of is their way of throwing it into the ether because the average American has no idea what that means and I bet many people on Wall Street have no idea idea what that means if you really think about it um the way I think about it is you know we ran a a deficit that was 40% higher than our re than our than our income so if you made $100,000 and you spent $140 it’s really a tough thing right uh and that’s basically what we did um and we did that at full employment so that is something never really been done before I I I I’ll I’ll retract that statement it’s been done one other time to my knowledge and that was going into World War II and by the way that’s when you do it right um You that’s when you go you you literally go For Broke if you’re headed into a big war you deficit spend as much as necessary to win and To the victor go the spoils and to the loser goes defeat and default just about every time and so you know I worry that we’re at a point where spending con Congressional spending is out of control control at full employment and we’re only spending 3 and a half% of GDP on defense if you look at the at the uh call it distribution of low and high of spending on defense you know the lowest we’ve ever spent as a percentage of GDP on defense is three and we’re at three and a half and the highest we’ve spent call it 1945 we spent 47% let me repeat that 47% of GDP on defense you know why we had to win that goddamn war and we did right so in the Cold War we spent six to n% of GDP on defense one could argue that if you try if you if you were to pin the tail on this donkey today you would say well there’s a ground war in Europe there is a war now that Iran has entered and its proxies are fighting with Israel and China’s threatening to invade uh basically take the second Thomas soul in the Philippines and invade Taiwan and one could argue that we’re not at the peace dividend level of um defense spending nor should we be should we be somewhere in the Cold War region absolutely should we maybe be spending even more than that anticipating a hot War I don’t know maybe that’s where I’d come out and you’d say well where do we get the money and I would say well we’re going to have to deficit spend so uh even more um so you know it the the answers here are just not good uh but what they tell you is if you’re thinking about investing around what I’m talking to you about you know if China invades uh this takes the second Thomas Show in the Philippines or starts a a fight there um we have a mutual defense treaty with Philippines if it gets invoked we’re in this fight Japan has already said they’ll be in the fight why China’s pushing you know 700 miles from its Coast big question mark um other than it’s a big protein source and they’re the US’s number one longest lived Ally in Southeast Asia but these things are happening and I think we go dayto day you know yawning and oh yeah there’s a headline it went by no we are at a hinge in history and this stuff’s going to happen and I’m I’m certain that it’s going to happen it’s just a question of when and so when you get to that point what do you do about it how do you think about defensively positioning your your portfolio or more importantly your net your your net worth you know not everything is public stocks right um I’m sure some people are that way but some people probably have real estate they have some crypto they have stocks you know how do you position yourself so that you don’t um you know deal with the the trials and tribulations of what of what I think is coming geopolitically uh and the answer is in the world I just explained to you what I’m telling you is I think the FED is at a permanent 7 trillion balance sheet uh plus or minus some uh and going higher right um I think that conflict will not settle anytime soon it will only increase it tears at this the inflation we just pushed to the world tears the social fabric of the world even more it was already tearing because there were so many decades of prosperity uh and we and we had weak leadership uh and then idiosyncratically there were reasons why again why these these wars popped up uh but more Wars are coming and I think you’re going to see the FED expand the balance sheet and I think that um yeah if I’m right about this interest rates will head back down um and the FED will expand its balance sheet and that wealth gap between those that have assets and those that rent assets and those that can’t afford them will continue to widen which just means social conflict both domestically and inter Al will increase even more we’re kind of on a path where we need a big reset and in the past let’s take World War II for example the US on balance sheet debt to GDP got to 106% 1947 um we paid that down to 35% you know why we won we helped rebuild two continents postwar we ran trade surpluses with every single counter party in the world that we traded with in 1950 just think about that right these things and and World War II we were close to losing right there were a couple of events that changed the whole war and thank God those dominoes fell our way and not the German Way and we’d be speaking German or Japanese right or both today um so those those moments are pivotal we need proper leadership and and we actually have to deficit been I know that it’s something you don’t like it’s something I don’t like but there are practical realities of the world between what we hope for versus what we know has to happen and those are two different things and by the way I don’t hope for War I have three kids I don’t want my kids growing up in a wartime economy or in in a in a world full of conflict um but unfortunately you have to call the Spade the Spade you have to call a baller a strike and it’s obvious it’s going to happen when you say that we need the deficit spending how much of the deficit spending could be reduced if we stopped spending on dumb things right I’ll put dumb things it’s a very kind of naive term that can be encompassing of many many things give me an example there something’s on the top of your head give me two well well let me give you a serious example that’s not really a dumb thing but would fall under this thing of like probably needs to be addressed so like there’s entitlement spending which obviously I think people say hey look we’re kind of flying off a cliff here and we’re going to have to do something or we’re just making empty promises and then if you get to like the really dumb things if you go back and um at one point uh we did a breakdown of like I think it was the infrastructure Bill and in it there was all kinds of crazy things like you know they were doing studies of like driving while high and the joke was like trust me we’ve got plenty of people in the audience that’ll do it for free right you know type type thing and so like is there enough money that is quote unquote like wasteful that could actually be pulled back and redirected to things that are like higher impact or towards defense or is it something where like you know if you’re running a business and you’re losing a little bit of money uh but you just need more Revenue like sometimes it don’t worry about saving like just go and and get the additional revenue and like where are we as a country with that yeah I you hit on one that’s actually look whether anyone wants to admit it or not on entitlement spending I’ve spent a lot of time looking at it there’s something really easy to be done now again this may sound um that I like I have a lack of uh Humanity Compassion or empathy for those that are U now in their Twilight years um but if you think about it um all you have to do and I’m just going to be a pure numbers guy for a second if you move the uh entitlements forward if you if you raise the retirement age into the curve of mortality you you can actually solve that problem if you do it slowly uh but certainly um you can actually get to a formulary that works because you cut the tail off uh the longer tail off if you follow me you know it’s a terrible way to think about things but I I mean I could solve it um I wouldn’t be anyone’s favorite person but I could again like there’s no easy button so Anthony there isn’t there isn’t a button we can press and magically fix everything but I think that you’re not gonna be we can get to you’re not going to be anyone’s favorite person also if we keep the path that we’re on and then you can’t you don’t have money to give them you know in 12 years 13 years it’s kind of like absolutely CH choose the uh choose the worst position to be in right right uh today’s episode is brought to you by meanwhile meanwhile is the world’s first licensed and regulated life insurance company built for the Bitcoin economy operating on the Bitcoin 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BM go check them out today I actually think that when you look back through history you know real leaders didn’t have it easy real leaders got through some tough tough times by making incredibly difficult decisions um many under duress and that’s why they’re known as as true leaders today I mean do you think Joe Biden is a true leader I mean nobody does not even the Democrats do uh right so um and and I’m an independent for what it’s worth and I don’t want to bring politics into this um but the point being uh I think that there are a few things that can be solved there are a few things that just can’t um the fact that we got to energy Independence uh and then just turned it off and said we’re going full climate crazy um it is clear to me that there are certain positions of strength that we have number one uh we are the Saudi Arabia of natural gas and the only two byproducts of burning clean natural gas are CO2 and water um and we can figure out how to sequester the CO2 we are the Saudi Arabia of food we have we grow we have we are blessed with a land that is that that is uh defensible uh because of its its proximity to two oceans um it is a Bread Basket uh one of the bread baskets of the world uh and we’re energy independent if we actually choose to be um and we’ve got the nuclear technology and we’ve got the best schools in the world we we still believe it or not live in the best country in the world despite what you’re seeing with the weak um fral I don’t even know what to call them rabers that are that are pushing all of these different agendas at schools whether you know whether we’re going to the right bathroom or not or our hair is the right color or not or whether we’re forgetting about October sth and saying pramas things it’s like there’s crazy stuff happening in our world but that’s just because we we’ve had it too easy too long you know at some point in time we’re going to get to a point where we realize we still have the best country in the world to live in people vote with their money you see it’s all here um it’s not going anywhere else um so what we need is real leadership and I think we can solve some of these these fiscal problems but I say but you know when was the last time you heard the two words T te and party together right um what the fed and the treasury just taught Congress you you said they didn’t get the memo I actually think they got the memo the memo is we got you go for it yeah right that’s what they just learn it just doesn’t matter we can just spend and do this AOC mmt crazy because it’s just going to work out now we all know that the very people it affects most are the poor and the lower middle class who supposedly these same people um you know who are extolling the benefits of modern monetary Theory um are trying to in theory protect they’re the ones destroying the poor which is just the ironies are so thick here uh that going forward again what I expect to happen is asset price inflation I expect you said you know can the FED arrest the inflation it’s super easy to understand where they get the word transitory if you and I are running the FED we drop 40% more money in the system in 18 months we create 40 50% inflation do you think if we raise rates 550 basis points that we could get an inflation print year-over-year at zero hell yes we could be a piece of cake however the price level would still be 150 right we took it from 100 to 150 could we get it to print 150 again year-over-year maybe 153 over 153 that’s going to happen like wages are sticky because asset levels went up so much so fast but somewhere in here you’re going to have deflationary forces fighting inflationary forces and you’re going to get a year-over-year print and you’re going to see the FED Victory lapping and slapping five and patting each other on the back but they just change the price level 50% right that’s that’s that’s the that’s the thing that maddens me here so one of the things that I’m really interested in is um we obviously have this like Southern border crisis and I think a lot of times investors will look at demographics and there’s places around the world um where people will point to and say look young demographics are are in the favor of a country like Nigeria it’s fast growing it’s big it’s you know internet penetration Etc China at one point I think got people excited now maybe not so much Etc but in the United States we just had one of the biggest population increases in a given year mainly driven by these illegal uh kind of immigration Trends and so on one hand I think that you myself many other people you know on Twitter Etc like wait a minute we’re like basically watching an invasion of our country with no checks no understanding of who these people are and we jump to the extreme level of like defense should come first you shouldn’t have a porest border Etc on the other hand from an economic standpoint there’s a pretty strong argument like we may need more people in the economy and I don’t know if that necessarily means the economic argument should Trump the defense argument like actually I think the defense argument may be the single most important argument and so therefore even though you need more people like you need to know who the people are there should be legal immigration there should be you know these Pathways so I think that’s kind of like maybe one a of this theme but then the second thing is like maybe human demographics aren’t going to matter as much in the future because Robotics and you see these like you know humanoids and all this stuff coming and so like are investors now going to have to watch immigration Trends and also like what humanoid you know manufacturing facilities are pumping out in a given country and like that is going to be the new you know quotequote investing behind demographics yeah I look on the Border Side uh it’s really important I have you been have you been to the southern border uh not not to go look at the actual crisis itself so I would say I’ve probably been down there I don’t know seven or eight times in the last three years uh and I go with the state police I sit on the board of the police foundation and so um I’ve seen it firsthand I think I understand what’s going on I think um we have a complete completely open border not porous it’s open uh anyone that wants to come across will help them in um I foed um CBP in October of 23 and I asked for two years of data on what what we call what CBP calls uh special interest aliens those are aliens that come from countries that are deemed to be supporters of terrorism Andor uh known um enemies of the United States the number was 160,000 special interest aliens uh have been in in the last couple of years it only took 19 guys to take the buildings down so when I think about security the enemy is already behind the gate uh and that’s by design it is uh we have we have um we have almost treasonous allowed people in I would say it is treason to just open the border so when you think about the economics of positive population growth VV or let’s say as opposed to um border security look the definition of sovereign is you control who comes in and out of your border it’s the basic definition of sovereignty right um and so I believe that if we are looking for the right economic mixture we set I’m very pro-immigration but I’m very we need to build a wall uh we need to build a big wall and then we need to decide what our immigration policy looks like and then let’s do it right meaning let’s let in a certain amount of skilled workers highly skilled workers skilled workers and then uh basic immigrants they don’t have any real skills that are just willing to work but let’s set forth a plan and let’s execute a plan a certain way to disaster is to have social welfare PR programs like we have uh and have an open border it’s a certain way to destroy our country it’s absolutely certain Eep economic suicide is doing what we’re doing right now and so I believe that that security is is key number one number two I’m very pro-immigration but there should be a formulary uh in a plan uh and let’s do that uh and let’s have a proper border structure you want to call it a wall a fence whatever you want to call it we must have a structure um and so it’s vital that we do that unfortunately here’s think about this we’ve we’ve allowed our country to just kind of follow some path of pure open borders and crazy ideological protests going on we basically we’ve taken our eye completely off the ball of what got us uh to the level of greatness as to where our country uh once was and um I think we’re going to get back there but the way we’re going to get back there is through crisis so I guess I always say in our in our office that we’re at a hinge in history right now there’s no doubt in my mind that we’re at a hinge and in the last 20 30 years have been driven by economics the next 20 or 30 years will be driven by geopolitics and you better change the way you view the world um and you better adapt quickly because uh those changes are coming and they’re actually going to come much faster than you think they are yeah um before the recent uh Iranian attack on Israel where they launched the missiles and drones um literally the day before the attack was on Saturday on Friday I wrote this piece to investors and I said hey gold is running is somebody prepping for some sort of attack and it was just a thought process of like Bitcoin and gold seem to be like the alarm systems of you know kind of geopolitics at the moment and if gold is running this aggressively now on a dollar basis it wasn’t like it was going up hundreds of dollars but still was hitting a new all-time high and you could see that it was definitely kind of breaking out um and the US has now shown their hand and in being very quick to the financial sanction kind of trigger if you will with Russia and going after so many people how do you look at either gold or Bitcoin you know in the backdrop of geopolitics and like are these now going to become the assets where people will go and they’ll buy them before they go and make these geopolitical moves yeah so I I view sanctions very differently I think than the crypto Crow um if you put me in the treasury if you if you put me a Secretary of Treasury and and um China goes and attacks or Russia goes and attacks Ukraine China goes and attacks on the Philippines or are Taiwan you have you have a couple of potential responses one is just keep shoveling basic Munitions and advanced Munitions and energetics um and just shovel tens of billions of dollars their way and and hope they can win or hope they can even keep fighting which is what we’re doing in Ukraine um or we can take the the the tip uh the shiny tip of the spear on the financial side and Institute crippling sanctions so when I look at Russia you look back to what really brought the wall down it’s important to think about what brought it down the Russians didn’t wake up one day and think you know what democracy is just a better thing you’re right um communism is a terrible idea we’re just going to relinquish power um and we’re going to embrace democracy you guys were right what happened was we through through our ourselves and our allies over pumped crude crude is 60 to 65% of Russia’s GDP and we took crude to 11 bucks we broke Russia and we did it intentionally and that’s how we won the Cold War now fast forward to China China’s really economically integrated we have a certain amount of trade with China everyone says that we can’t possibly be at war with China because of how how much money we have invested there and how economically intertwined we are well I’ve got news for those people they obviously haven’t read read history um they haven’t read what happened going into World War I and World War II because those same things were said about the world economy and and uh our level of interconnectedness um so uh when I think about sanctions we have not implemented sanctions that matter yet and what I mean by that is we have primary sanctions and we have secondary sanctions primary sanctions if I were running our country if I were running Treasury and I were actually able to be the wizard behind the curtain I would have sanctioned the entire Russian banking system I’d have removed them all from Swift I’d have sanctioned every Russian Energy company and every every state actor and I would have banned Russian passports from the United States RIT large no more so and I hope and I would hope our our allies in in Western Europe would have done the same if we could get them both to do it because today Russia exports 8 million barrels of crude what’s 8 million time 80 everyone’s pretty good at math they make half a billion dollar a day of state revenue um and we haven’t touched it you know why we’re too afraid of moving gasoline prices and being thrown out of office like so we have cowards running our country there is only one button to press well there there were two I guess there was the Easy Button says we’re going to sanction Russia we didn’t do we sanctioned a few people we sanctioned 10% of the oligarchs we didn’t touch their banking system kind of RIT large they can all still process payments for energy and international payments yeah we kind of went after some Munitions and some drones and some bad guys but we didn’t even Implement second secondary sanctions right secondary sanctions are for any other countries or people around the world that continue to trade with the primary sanction entities that is the tip of our economic spear if you want to shut someone down that’s how you do it when I see friends I have friends that live in Moscow that when I go to various locations in Western Europe or St Barts or this or that they meet me there and I say so how’s it going and they’re like yeah it’s fine I said that so how’d you get here I said well we just have to get to Istanbul then we can go anywhere we want cool that’s awesome so they’re like yeah so you know I went to London and shopped a little bit had some fun nights out I went to New York we’re good you’re thinking how are you ever going to like effectuate regime change with a Madman if his people don’t feel any of the pain if all it is is the military right so sanctions we get in my opinion I would give the administration a D minus almost an F on sanctions if China invades what we’ve got to do is one of the reasons the Cold War never went hot is it was this concept of mutually assured destruction right that if we launch they launch if we if if we think there’s a preemptive launch coming we preempt the preempt right and there was this belief that we both would get after it right um so today there is no real like China’s been running an economic war against the United States since 2001 they’ve been running a cyber war against us since 2001 we just recently realized that our intelligence and military industrial complex and Military realized that China’s the is actually our mortal enemy about 5 years ago are leadership still hasn’t called them that we still call them a strategic competitor that we really need that we want to grow with they are the enemy right under this regime Russia’s the enemy China’s the enemy Iran’s the enemy North Korea’s the enemy there are many more enemies but those are the key for um and so uh if China were to attack Taiwan what I’d be doing if I were leading our country I would say listen I have this red button and it’s not going to send you know five carrier strike groups to the want straight I’m just going to remove your ability to move Dollars around the world you know China Imports 12 million barrels of crude every day they import eight and a half BCF of LG every day they import 40% of their food every day and guess what they pay dollars for all of it imagine if we crippled China’s economy by pressing that red button and we didn’t have to send 00,000 men and women to fight like if you if you give me a or b and you say well oh well that would take the world GDP down you know three four perc that would kill us that kill China well I choose that button 10 out of 10 times over sending our men and women over there to fight and so do we have the greatest military in the world absolutely do we have the best infrastructure the world’s ever seen with financial sanctions we do I think there are best weapon I don’t view it as a negative now if we do so you know does that mean that the price of Bitcoin and gold and everything will go up yeah it it might but guys that’s what we have to do it’s the hard button leaders press the hard button but leaders also socialize the fact that they will press that button and we have people like Janet Yellen who doesn’t engender one ounce of confidence with me I don’t know about you um she’s a labor Economist she’s out of her League she doesn’t know what she’s doing and she’s over there bowing to her Chinese counterparts you know we need someone that projects strength that lets the Chinese understand that we will play hard ball and we will play the hardest ball in a game that they don’t want to be in with us uh and we’re understanding that it will hurt us uh but it will them and it could change the regime and if we can change the regime maybe we could actually have a positive relationship with them but under Xi Jinping who’s the in he’s ma incarnate of 2024 every single person in the standing committee of the poit bureau the rest of the poit bureau and the Communist party they all own owe their lives to him as you know he’s cleaned house he has kicked out any opposition to his Rule and he holds all five uh tools of dictatorship firmly in his hand today he’s a Madman he’s a Madman just like Putin is and when Mad Men are have a quote Limitless partnership that they publicly uh um announced and then reaffirmed uh several times that’s not good right so and you you asked me about sanctions sanctions are in my opinion our best weapon and the problem is we’re just not using them or socializing them right now do you think that’s why Trump was so effective geopolitically is just that you know there’s all the jokes of um I think he tweeted once at the Ayatollah and Iran and said basically keep America out of your you know the America’s name out of your mouth he tweeted at um North Korea and was like you know somebody tell little rocket man that I’ve got a big red button on my desk and mine works you know he went and and almost was I would I would categorize it as like unpredictable and uh put forward a a show of strength where if you’re another world leader you kind of don’t want to mess with the erratic you know leader and so by being unpredictable and showing that sign of strength um well maybe people in America didn’t like it because it felt chaos iotic um it actually was quite effective yeah I I I agree with that statement now it’s a double-edged sword um he’s not an expert in foreign policy he listened to his advisors almost all the time not all the time um he was unpredictable with his own staff a little bit more difficult um so again I’m not saying he’s a perfect leader someone like Reagan is a great leader right a thatcher a Reagan a Churchill we need a Highly Educated calculated um strong leader but you’re right about that level of unpredictability being an asset without a doubt um yeah the question is if we get to a moment where we actually have to send our men and women to fight I just I don’t I actually don’t know where Trump stands on this you know yeah you go back and you carefully listen to him um you know did he order the hit on solmani absolutely I give him full credit for that along with Pompeo the CIA and the team absolutely I do um was that much easier uh a tactical strike on a Suburban ABS that was super I’m not going to say it was super easy much easier than sending a a carrier strike group into the Taiwan straight to actually be in a hot war with China I don’t know if he’d do it um and you know there’s a lot of calculus on whether Biden would do something like that um our military leadership transcends um political presidential administrations our military leadership we the best in the world at kinetic movement and we still are and we have the most advanced military in the world despite what you read China May outnumber Us in boates but I can tell you this there is no one better integrated with the more you know again with the with the best war fighting capacity in the world than we are uh I don’t I’m certain that we can fight and win do we want to no I definitely don’t want to go to war but guess what there are periods of time in which you’re going whether you like it or not think about think about World War II and go back and read um read read Churchill’s uh first book in his six book series called the Gathering storm it it it will remind you that even with people like Chamberlain and Halifax who were begging for meetings with Hitler after he invaded after he took the Ryland back and after he was invading Holland they were like please please please meet with us we want to maybe give you your advances and just stop invading right they were begging for meetings when what we should have been doing is fighting like a son of a from day one and we needed strong leadership and thank God Church Hill took over right I mean you think about the series of events that kept us on the right trajectory us meaning the the Western Alliance um moving forward today we have got guys like secretary blinkin we have people like Janet Yellen we have people like John krey giving you know taking climate promises out to 2050 for Action today we have people that I mean I don’t know what else to call them but somewhat you know for for accepting 30-year promises for immediate action like who does that it’s just crazy what kind of leadership we have right now and and and would Trump be a better leader I mean you can’t break your arm jump out of the basement window is what I think about that but is he the best leader you know probably not is someone like Pompeo um better without a doubt let’s hope that there is leadership at State and Leadership at treasury that’s actually wartime leadership because that’s what we need we need a war cabinet yeah um people will be very upset with me if I don’t give you two or three minutes to talk about your thoughts on bitcoin and crypto in general U we’ve talked a lot about geop politics but there’s also just kind of the general financial markets ETF approvals regulation Etc um you are very well known for you know housing market bet uh nickel uh plenty of things that you’ve done over the years um so where are you kind of thinking on Bitcoin today you know if you’ve noticed i’ I’ve stayed out of that conversation as much as I can I know but I also know everyone will be upset if I don’t press you on it you know um I don’t I don’t is total crypto today worth about 2.2 2. 3 trillion is that about somewhere around there and bitcoin’s still worth like a trillion eight or trillion six somewhere in there it’s like it’s a big number oh wait no trilon 50 53% of it okay trillion three something like that right yeah um so look it is it is the it’s it is the Belle weather you know it’s the it’s the it’s the one uh that people really um you know gravitate towards I I’ve said it before and I’ll say it again I’m not going to be like people are not going to like it uh but you know you can’t win everyone uh at every time look I think it’s a sunny place for shady people I think it’s a NE I actually see its use case and by the way that like Parker Lewis who runs Unchained uh a capital down in in Austin is still someone I admire and one of my close friends uh and will always be one we just have a differing opinion um and I just think about it if I were in the secretary of the US Treasury how I would think about it so I I try to put myself in different shoes now do I own a big stake in um blockchain.com I do um do I own stakes in in some crypto I do believe it or not um but when I think about it RIT large is it going to keep growing as a universe if the world heads in the direction I think it’s going to head that I actually think it’s going to keep growing am I going to allocate a significant portion of my assets to crypto I will not now if it grows from here and it grows crazily again you know will I have a meaningful portion of assets there yep uh will I sell it absolutely I will sell it right um so I’m just I’m not I’m not the person that says you know I’m going to hold it forever and we’re we’re riding things to the rocket moon or whatever these people say yeah um the use cases like for places like for places like I discussed earlier where governments are call it they’re poor they’re poorly designed and poorly operated from the get-go and then inflation happens and they break so if you’re Turkish or if you’re Lebanese or if you’re Argentinian like there is an outlet you can get your money into Dollars you can get your money into Bitcoin if you get into Bitcoin it’s easier to hide um so I understand use cases for um populations that have horrible leadership I do I understand that um I don’t understand why look I pay my taxes um I pay them every year happily do it I what per let me ask you what percentage of people in the United States that own Bitcoin declare 100% of their Bitcoin or crypto Holdings globally to the IRS every year uh on on their on their tax statements I think five years ago my guess would be less than 10% yeah I think that today probably closer to like 50% and headed higher mainly because I think that um too many of them use kyc like uh crypto exchanges and those folks are reporting and so like you kind of can’t not report um and then also I think that the IRS realizes along with politicians like hey this is kind of a honey pot of uh tax revenues and so they’re making a concerted effort you see it showing up as a question on tax forms you see the politicians you know putting it in bills and things like that yeah to your point though could we get to 100% I think that there will always be bad people who do bad things and you know people will try to avoid paying taxes um I don’t think that’s an American uh thing we’re not we’re not so special I think it’s just around the world um but I guess I I’ll extend the question then um maybe we can end on this which is uh given where you think the world is headed how are you allocated today you know kind of positioning yourself to weather whatever does come yeah I I I just think this is a this is a time to own real assets again in your own mind if crypto is a real asset well you know that fits that category for me it has too much volatility uh scare it it scares me too much now you know what’s going on out there today and you know in in new ideas that have uh quick interchangeability and and less latency you know there’s some interesting things going on in certain cryptos out there um but when I think about real real assets and call it real portfolio allocations meaningful to me um I actually think that if if you look at the population demographic in the US you have high cost High tax mismanaged jurisdictions you happen to live in one that doesn’t indict you um it’s just poorly managed fiscally politically uh and it’s pushing people out uh and the whole West Coast the Northeast the west coast is and and those people that are moving businesses I’m not talking about rich people moving to Aspen or Palm Beach like we every all the rich people can do what they want to do let’s just talk about core America is moving to places like Florida Tennessee and Texas now that’s painting things with a broad brush but that’s actually what’s happening so if you’re buying um land or assets that will soon be developed um or if you’re investing in things like what what I’m doing is buying land and um I’m actually offsetting envir Al impacts that sounds crazy but it’s a pretty good business um so I think the land will appreciate faster than inflation will because of the population macro Tailwinds um I think that anything that you can do to enhance those returns is great so I have a huge allocation there I have a huge allocation to energy uh old old energy actually like hydrocarbon based energy because we’ve fat shamed so much money away from Pure hydrocarbon based energy it takes 4 40 or 50 years to change energy sources we’ve proven that over time um people in the current Administration believe you just snap your finger and say we’re going to go all Alternatives we’re going to turn hydrocarbons off you know I have news for them that’s not going to happen um we’ve only replaced about 18% of reserves globally this year we typically replace 85 to 90% of reserves annually we are setting ourselves up for a massive hydroc carbon rally both net gas and crude um if you think about it in in real terms let’s say inflation non or say inflation adjusted terms you know crude before covid was about where it is now and we’ve had 45 50% inflation and almost everything and crude still where it was pre-co so in real terms crude is down like 40 or 50% right so if crude were to just move to 120 it’d probably be a break even from where it was preo think that’s likely to happen so I have a call it 40% of my capital is allocated to hydrocarbon based energy um because I think it’s the golden I think the next decade is the golden decade for family office investing in crude uh in in hydrocarbons so I like I like productive assets hard assets so like Apartments investing you know investing in things that can actually move with inflation um energy and then land and where where the macro Tailwinds are uh are at your back um and I and I don’t think that um in the environment I just described to you I don’t think in that environment uh that you do poorly there is no foolproof way to never lose money um but you can definitely allocate your assets in a way that um you you you don’t like you win over time and and with the macro environment in the FED doing what we know it’s going to do you’re you’re going to be safe investing the way that I that I’m invested so you know it’s p personal preference I think you’ve done just a fine job investing over the years so uh we’ll leave it there I appreciate the time today I learned a lot as always and we’ll definitely do it again in the future yeah pleasure to be here with you

Kyle Bass is the Founder & CIO of Hayman Capital Management. In this conversation, we talk about global conflict, why the traditional financial system incentives attacks on each other, China, Taiwan, Ukraine, Russia, Hamas, Israel, why inflationary pressures will continue to be a problem across the world, bitcoin, gold, and portfolio construction. 

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TIMESTAMPS:
00:00 – Trailer
00:25 – Current default of war, inflation, economies
12:08 – Federal Reserve vs Politicians
20:00 – Government spending
27:50 – Immigration humanoid trends
31:15 – Sanctions, gold
42:40 – Trump, military leadership
47:20 – Bitcoin
51:40 – Portfolio construction

Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

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