CBDC, Digital Currency, Great Reset, IMF, Debt Cycles | Raoul Pal

so we don't need to go deep into that. But um, you are a macro investor. That's kind of been your career. UM, and that's kind of still what you're doing today. Maybe just kind of give us an overview of what that is and kind of what you're doing. Yes, So macro investing really is looking at major economic trends and dislocations and and investing in asset process the UM versus that framework of understanding. So you know, if the business cycle is going down and go into recession, you're gonna be

short various things. You're gonna be long one country versus another. You're looking to choose the right assets. You're kind of asset agnostic, and you're looking across the world to see, Okay, how is the global economy moving, is this mispriced, underpriced, or what is the trend based on that? So so it's a lot of kind of where economics meets markets and it's super interesting because it takes you everywhere, whether

you're investing in Indian equities or cryptocurrencies. Yes, so you're kind of taking into account the politics, the economics, I mean, all the data, and just kind of what they say about Wayne Gretzky trying to skip to where the puck is going to be almost that's right. So as a macro investor, you're trying to solve the world's most beautiful puzzle. It's this endless three D puzzle you can sold for seconds then it disappears again. So it's a great intellectual pursuit.

But the way to do it successfully's to live in the future and look back for probable futures. You know, what is the potential outcome? How's this price? Is this miss price not priced in or correctly priced? So that's what you're trying to do all the time. I find the further out you go, the more edge you get.

But the harder it is to get to certainty, so then you're really thinking in terms of, well could this that, look at that happen, Which is why you know, stuff like the crypto wild really interest me because there's a ton of possible futures out there and different outcomes that we can invest in that all have huge upsides. So that's, you know, that's the basis of what we try and do, or certainly I try and do. Yeah, So for everybody that's tuned in right now, we're gonna dig into some

really good stuff. We're gonna I'm gonna ask you about kind of what you're seeing in the macro picture today. I want to dig into some of the work that you've done about what you're calling like in the regime and this insolvency phase that we're kind of going through. What that means for us on a global scale, from our money politics, central make digital currencies, cryptocurrencies, and if we have time, we might even get into some kind

of projections and things like that. So if everybody listening, just make sure you're sticking around for all that, because we're gonna we're gonna really dig into some good stuff. We're gonna start at a higher level and then we'll kind of push down as I think a good macro person would do so. Um. As far as macro, I think anybody investing is always trying to guess what the future is going to be. I guess it's probably just different time frames. If you're a trader, they're very short term.

Macro is probably long term. Do you think that it's easier probably to get the bigger picture right than it is the short term picture? Like if somebody says, hey, hey, Rald, what's the price of this asset gonna be next month or the next week? You're like, I don't know, because different people have different skill sets. Um, and I prefer the longer term time right, And I'm just better at it.

I'm a terrible short term trader. Doesn't mean people like Stevie Cohen will pulled to the journs to a brilliant short term traders. Um. You know, they can be incredibly successful at it. So it just depends what suits you, right. I'm a very visual person. I say the whole kind

of macro framework come ahead at all times. I'm always kind of adjusting it, and those things I find play out better over minimum three months but generally, you know, six months to eighteen and sometimes further out as well. I just find it. I just get better returns from it. Sure, yeah, I kind of feel the same way. Um, it's easier for me to see the big picture. Even with my business. It's like I can't really dig into the details. I

still like to look at the big picture. But talking about the big picture, maybe why don't you just set up for us, I guess what you're seeing in the macro economic picture right now. So we'll go back a bit very quickly. So we've been in this debt supercycle that we all know about. And the answer in two

thousand after the internet boom was more debt. It's led to the housing boom, which led to the banking bus and the answer to that was more debt at corporate level, now still somewhein the banking system, and then government debt because government started trying to monetize this debt. So and the central banks have now put it onto their balance sheet. So it's not going away. It's just keeps growing, keeps getting moved around like a game of Past the parcel.

So we kind of knew that the next time we had a recession, debt was going to be a issue again because it hadn't gone away. In fact that I got worse. So I've been you know, it's really interesting economists never forecast recessions, which is bizarre to me because if you show a small child a chart of GDP, they said, what, it goes up and down. It's like a cycle, right, it's a sign wave. You just don't know how deep or how high the peaks and troughs

are and how far they are apart. But you approximately no, which is why it's kind of forecastable. So I've been looking for the end of this cycle and a recession back from about two thousand and eighteen. By two thousand nineteen, I was kind of locked and loaded into bonds where the best trade was, and then it was coming. Then the pandemic came and I saw it immediately, is okay, this is the accelerator, right, this is a huge thing.

I was very early and got it very very right early on and luckily and that phase and looked that said, okay, now we've got the situation where we've seen the worst ever GDP dropping all history outside of the Great Depression, and the market usually goes through certain phases during a recession. It's normal. First is the liquidation phase, when everybody goes, oh my god, everything's changed. I need to readjust my risk right. Then you have the hope phase, which is, well,

maybe it's not that bad. You know, in the media tends play a big role in that because they don't want the negative narratives, so it's it's all going to be okay. And then usually what happens is you get the final reality phase, So the normal reality phases when people go, actually, you know, this is pretty bad. Unemployment is still sticky, and the economy, consumer confidence, and the

stock market tend to roll over together. This time around, I looked at this and thought, well, we don't know, because of central bank actions, how this is going to play out in some of these assets, but I know that everybody is probably pricing how long this episode goes on for wrongly, because every wants to assume it's going to be over and done with. And here we are now in peak pandemic across Europe, in the US, UM and in other countries again, and people starting to understand, okay,

actually this is gonna last longer. So I termed that phase the insolvency phase, because the problem is is GDP growth collapsed. It came up a bit, and then it's flat blind. If you see all that real time economic data, like the Google mobility data, it's flatline. In fact, it's rolling over. What's telling us is that GDP growth is still about negative five percent year on year, which is the worst reception you and I have ever lived through.

And that's ongoing after the kind of hope phased recovery because the first part was so bad. So if you think of what does that mean, it means that if you're a restaurant or a small business or even a large business that's not Internet based, right now, your revenues have dropped, but your cost base remains um and that makes you insolvent after a while, as you blow through your cash and then the government gives you some cash, and then they stopped the stimulus, and then you've got

no cash and you're out of business, and that's insolvency. Now. The FED stepped in quickly to stop the insolvency of big corporations like General Electric and Forward by buying their bonds, but the government stimulus gave that check a while ago. Whatever that was like made to people and small businesses.

It's been nothing since, even Europe struggling to get more stimulus through, so kind of it's a bit of a wily coyote moment, the insolvency phases where you run off the edge of the cliff and it's like it's fine out here, and then you're like, oh no, it's not, and we're seeing it everywhere. And I worry about what that insolvency phase means because in the end, it means

that central banks have to print more money. You have to try and jam it into the banking system and try and force the banks to lend it, which they don't want to do. And they also have to try their ext stimulus for fiscal stimulus by the governments and monetize that debt too. So basically we've still got this massive transfer of insolvency off that private sector balance sheet

onto the onto the government and balance shape. Right. The whole process is slightly scary, right, And I think, as you said, we're in this debt cycle and we're nearing the end. But I think a lot of people have been calling for the end of the debt cycle for a long time, and I think timing is always the hard problem, right We we always know what's inevitable, but when and so we have this insolvency phase. But it looks like we've seen the at least in the United States,

the FED um be very willing to work. Right In two thousand eight it was a trillion dollars pretty quickly too. This year was three three trillion pretty quickly, and with the government it was six trillion, you know, total. And it seems though, like I understand you're saying, like they've stalled out on this last round of stimulus and people are running out of money, but they've shown how willing they are to move fast and hard and heavy. Instead

of one trillion, it was six trillion. I mean, they wouldn't just spend six chillion to let it fall apart now. I mean, don't you think they're gonna do whatever it's gonna take, or do you think it may be too late? Of course, of course they do. And that's the whole point is you don't get rid of a debt supercycle by letting everybody go bust. You do it by trying to support every single part that you can. And what you're doing in essence is you're just printing a lot

of money, so you're devaluing the value of money itself. Yep. And that's the real issue here is there is no one off reset of debts and everybody goes back to the dark ages and you start again. It just doesn't work that way because, as you said, governments are highly incentivized to protect the people who voted them in, right. Yeah, So they're trying to keep all the plates spinning, so to speak, and eventually they can't keep mob spinning, and they aren't. They are crashed. So it's kind of a

as I've been seeing. It's kind of a go tell your blow tape tape scenario. Yeah. Now, And the problem is is people we don't know what that The end game of that is. Some people want to price in hyper inflation. I don't think that's coming. Some people want to apply to a lot of inflation. I don't think that's coming either, because of the aging population and the debt demographics. Icael, I think it's more deflation, right, Um, But whatever it is, this takes a long time to

play out. And what's what's a long time. I think the de leveraging that has to happen in whichever way, shape or form, probably twenty years um. And that's that means a lot lower economic growth, the less value of your own currency, and eventually we might move to a

different system, which is what we'll come into in a bit. Yeah, so I want to move into that conversation, but before we do, the the inflation, the the the inflation hyper inflation, or the de leveraging the deflation seems to be the debate, right, I mean, I've had I've asked that that question many times, but it seems like maybe it's actually a very nuanced conversation, and there's both because we're seeing I mean, where I'm at here in the United States, you can't buy anything.

You can't buy a bicycle, you can't buy a surfboard, you can't buy an r V, you can't buy a car, you can't buy a house. I mean, it's inflated so fast it makes your head spin. But yet there's deeply so it almost seems like we're going to see both. Yes, And one of the things I've written a lot about

is wage deflation. If you look at wages adjusted for inflation since nineteen seventy four, that basically remained flat, so people because of globalization, the number of people entering the workforce from the Baby Boomers and now the millennials, plus the globalization and technology have all meant that humans are getting replaced either with cheaper workers abroad, or they're competing against each other because there's so many of the people

of the same age, or they're competing against computers. That's a terrible situation. And that's not a fault of anybody. So if it's a fault of anybody, it's the parents of the people who had all these baby boomers, and that was World War Two that drove that. Well, that's not a terrible thing. I think per per like Jeff boosts argument you know about deflation, which I know you you know you're familiar with. Um. It seems like human

nature always wants deflation. Right, instead of making a bunch of trips holding stuff with my hands, I'll create a whil barrel to make my work easier. And like computers and robots, Like I watched the Jetsons when I was a kid, and they had a robot that cleaned the house, and it's like, oh, how cool would there be of

a robot cleaned house? So a seems like we naturally want that, and it's a good thing to do, but we've got this one problem is this to eight these two cohorts, the baby boomers and the millennials, too many of them. If you're Japan, which didn't have the echo millennial boom, this is exactly all you want. You want some deflation because you'll say a savings nation. And do you want over time because you've got a massive loss

of workforce to replace them with robots? Of course you do, And that's the right answers because of World War Two that we end up with these too many groups of people because all the baby boomers had kids as well, So this kind of demographic mess needs to sort itself through. It's not normal. This is a really weird time. That's why we store the massive inflation of the seven sis.

We've seen all of the debt cycle. What I did is I took average household earnings in inflation just in terms, and adjusted them for the amount of household debt, and then exactly mirrors the rise and asset classes. So basically what people have done the inflation we've seen in assets and wage deflation. The difference is the debt. So people could participate in the economy. So it's kind of they did a rational thing, but too many people did irrational thing,

tensively irrational. Well, it seems like we have I I do understand the demographics, and you're right. I've been following Harry Dent for like over a decade, and he definitely has to pioneered a lot on the demographics. But it seems like it's maybe because we have incompatible systems where we have a def human nature is deflationary, but we have an inflationary system. So if we had an inflation a deflationary system with a deflationary nature, maybe something would

be different. I guess we don't know. I think, yeah, that maybe it's the argument why we've seen wage deflation and asset price inflation. Um, maybe it's exactly that. I don't know. It probably makes sense. So, UM, we are where we are, as you like to say, right, whether we like it or not, Where we are and and and things are are moving very very fast. And UM, I want to get into um a big topic, which is, UM, a few things. There's a few things that seem to

be kind of converging together. And UM, really, I mean you've talked about like the Fourth Turning. And now we talk about I mean, we have the Bretton Woods calling for or I m F calling for Bretton Woods to moment at the same time that the World Economic Forums calling for this great reset, and they all seem to be kind of converging right here where something big is going to happen next year. UM. I know you've talked

quite a bit about that Bretton Woods Too moment. Maybe that means bringing the world back together onto a onto a one world currency kind of like Bretton Woods one. Um. And then we have the great reset that's coming together. I mean, what are you seeing in that whole mess kind of converging. It's um, it's a hill bloom. You've seen around on Twitter stuff talks about recently about the Overtson window, which is a political opportunity, moments of opportunity

when you can affect great change. Most changes can't happen except in extraordinary times, right, And this is what the Fourth Turning was about. Is when you get the shift in the handover of power from one demographic to the other, it changes the end of a system because people in different ways of doing things. So this overt and windows as wide as it's probably ever been, because everybody knows

they need something different. Whether you're on the left, whether you're on the right, whether a crypto anarchists or a gold bug, everybody knows something needs to change. Or you're a student, we all know you don't know what the answer is. But what it does mean is is that there's a hard probability that something big will happen, and

we're hearing about it. So one of the things that these central banks and these government bodies and supernational bodies are looking at, they're looking at one of the problems that they're seeing is that the fact that the US world GDP and of every currency transaction on Earth, and this can't work guides we can't, you know, if you're South Africa or Brazil or Argentina, you can't live in a world where you have to borrow in a currency that's not your own, that goes up and down in

huge cycles, and you're you're having to pander to both the swift payment system and and UM and the banking system that may or may not have access to dollars. So they're all saying, listen, this has to stop. It's creating a huge problem part of the big offshore dollar lending mark. And when you say they are saying it has to stop, who's they? So that is the I m F, which is basically the e c B, the Bank of England, the Bank of Japan, probably the Royal

Bank of Canada, I mean the Bank Canada. I mean almost all the central banks are saying this cannot go on. Obviously the FED wants it to go on because they're the reserve currency. Everyone's saying that, right, this has gone too far. This is one of the reasons why Bretton Woods happened in the first place. It's also the reason why the US left Bretton Woods. Is when something goes too far and it comes unmanageable for everybody, every he

seeks a different answer. And what we've seen is the rise of populism and anger, whether it's from the left or the right, that we want change. And that's classically Neil Holl's forth turning as well. So people are now realizing that the digital world is going to offer us

some change. Think of one of the other super narratives that we live in, the one verse, right, and we've seen that the printing of money and giving it to the banks only gives money to people who can get access to credit, which is the richer people, right, So it doesn't work. So that we're seeing the rise of the m m T story, a massive fiscal stimulus, but even that normally goes in the hands of the wrong people.

A few corporates lie in their back pockets. But we're seeing the central bank digital currency story rising, which is what the IMF for talking about, which is, well, maybe maybe we allow programmable money where Mark and rail get different rates of interest, or they stimulate your you know, your friends surf shack because it's closed down because of the pandemic, and they penalize them some savor or somewhere else,

whatever it may be. You can use behavior economics to drive incentive systems to get the economy to function better. That's amazing. It's amazing behavior and sensive systems work better than anything else. They're also terrifying because they can be

stronger than everything else. And we've seen that. But Twitter and Google, right, and politicization of people who are not that political, they got driven down alleyways where they hated everybody else because of how behavioral economics works on these big data platforms. So that's all that's all coming here now, Um,

just a sidetrack there a little bit. I mean, we talked about this debt based system and we have to keep paling more debt and it's almost like, um, it's not working, so let's just keep doing more of it. Like we've we've you said, we've got this divide between then and the one percent. We have this incoming equality. Um that's created by this system. But let's just keep

doing more of it. And now we kind of have again we have different political factions and some people are calling for everything has to be equal, not just equal opportunity, but now it has to be an equal outcome. But what you're talking about is the exact opposite. Now we're

gonna treat everybody not equally. So what again, If we think of incentives and game theory, individual governments will always choose to maintain the status quo because to do something dramatically different is terrifying, and that's all they try and do, really, and the status quo is really to protect their power. Exactly when you're the I m F. You don't think in those terms, Do you think, what is the problem

that everybody's got and can we find a better way. Now, maybe you can argue they're trying to protect their power, so sure the whole world works that way. It is what it is is. I always say, yeah, But what they're trying to do is, look, can we solve the whole problem. That's where the b i S, the Bank of International Settlements are looking at. It's to the World

Economic Forum. These are all these supernational governing bodies that are basically saying they're prepared to reinvent themselves um to affect massive change. Because if we do create change together, then we can do it. But if we rely aren't individual states to do it, they won't do it. And so their idea, which I think is pretty groundbreaking, is to go back to kind of some version of Keynes's original idea of this bank accrep which is a global currency.

But Facebook Libra were the guys who changed all of this because the bank corps before was thought of a will have a basket of currencies and it will be denominated in U S. Dollars. No, this idea is the dollar is part of the basket. That's what Facebook Libra did and all the central banks no, no, no no, no no, because this is all powerful because so let's say you're a gold exporter in South Africa and I'm a Brazilian

grain imports. All right, we get screwed by the currencies going up and down, even though we're not necessarily trading with the US. You might be trading with Russia and I might be trading with China, but the US dollar is what we're all holding too. But if you have a global currency basket with the dollar is part of it. The denominator is money supply, right, so it's really stable, which we already have. I mean, the the I m F already has the SDR, which is a basket of currency.

So it's just a digital SDR almost, it's sort of, but I think it depends how the waiting has done, how it works as could it be a digital SDR, could it be a different variation of that. I don't know whether the SDR has the dollar within the basket or the dollar is the denominator. I believe it's the denominator,

but I'm sure. So there's there's lots of things to fear from this, as you've said, I mean, obviously there's the there there's the programmable money piece, right like Hey, if you don't spend your money this week, you lose it, or you know, things like that, or or different interest rates or things like that, which again is the opposite of inequality, and it's it's it's scary surveillance, totalitarianism. But also what scares me a little bit about this is

moving to that. I mean, then each country loses its sovereignty in a sense, is that? I mean, right, they lose control to control their own currencies, their own only because we've all grown up in a world where currency sovereignty is the key issue. Right in the past, it wasn't because they were pegged to the to the dollar, or the breton Wood system to the to the dollar or before that to goals, right, so the breton Wood system was pegging it to the dollar, which was picked

to gold. So it's not currency is not always the answer. There's other ways of doing it. It's technology, it's competitiveness, is productivity, it's labor costs, stuff like that. So we only we just know this world that we've been grown up in. So I'm not sure you give up sovereignty. You just have to do things in different ways, and that's okay. Yeah, I guess maybe you're not giving up sovereignty.

I mean, and to your point, right, for for hundreds of years, the world was kind of working together on a single unit of account based off of a gold coin, and that led to massive prosperity because free trade could work very easily. And it wasn't until we've kind of got off of that where now everybody's competing against each other and it's turned into a big name. But don't forget with the gold standard too. We still had the leverage cycle, you know, the credit cycle still happened. People

borrowed too much money. They all went past. We have massive deflation. So it didn't solve anything. It's not pan of Sia, but it's different than this world we've got now with with it's always your currency, because in the end, you keep defining people's money. Right, Yeah, I guess I'm looking more like the four eighteen hundred period that that range right there. It seemed like we had a big streak of prosperity when the whole world kind of had that standard unit of account. I would just say it

was the benefits of British empod. But maybe that's me. Yeah, there's there's I'm only wandering you out. I got you, I got you. So another thing that that that seems a little bit scary though, is when the central banks can create their own digital currency, the CBDC, which of course has all this programable stuff that that that's a

whole rabbit hole that could be dug down. But it almost seems like they have the ability now to just send money out directly to the people, and potentially it could be bypassing all the layers of governments and banks and really turn it into that one world currency, one world government that's really not even a government. Maybe it's

just the banker's control in the world. And the question is, well, I'm not sure that the central banks that get to act independently, because when monetary and fiscal policy blend, it becomes the government's problem, not the central bank. So I'm not sure the central banks maintain their independence in this world. The other thing is, and again we don't know what the good parts and bad parts. There's going to be lauren of unintended consequences, and it gets to be some

really good parts of this. One part is I don't see why you need a banking sector. You can use fintech solutions layer for all the bits and pieces that we need for the access of the money and where we store it and how we transfer it and all of that stuff. Some of that's good, right, it's going

to get rid of all this friction everything else. But the other part is the government has direct control over your wallet, which is a bad part, but it can be used really well because when we've got an economic crisis, they can give you money directly instantaneously, and they can say, as you say, you need to spend this in the next three months, so we massively stimulate the economy. In

the end, that's a net good thing. The bad thing is they can control you and say, well, you've got another speeding ticket up, taking the money straight out of your wallet without you knowing about it. It's it's it's it's a great leap forward and a terrifying leap into the abyss as well. At the same time. Yeah, like you said, everything has trade ups. Everything is everything's got trade us and pros and times, and in the end, all of this CBDC stuff, you still fee money, so

it doesn't get rid of the core issue. Now, can you can you do one of the things that I left talks about was Okay, let's have these these coins and then these digital coins and then let everybody do a massive print at the same time to fiscally stimulate the world at the same time. So like a big new deal. So let's say everybody does GDP, everybody in

that basket. Then what happens if they said to be in the basket you have to restrict money supply growth to two sent That's kind of interesting, right, because then it starts looking a bit more like gold or like bitcoin. Obviously not the same, but governments will always cheat in the end, but it might be a huge period of stability, massive fiscal similars, and then limited money squad. So who knows how this plays out. It's going to be fascinating.

It too such a massive moment in time. Now, um, just real quick, you said it doesn't solve the problem. So the problem in my opinion, from my viewpoint, is that this always trying to create more money. So I'm curious You've mentioned Kinsei and you've mentioned m m T. I'm curious kind of your viewpoint on that Kinseian economics where we can just print and we stimulate versus like an Austrian model where really we have sound money. We don't have this never you know supply that constantly expands.

Where do you see on those two levels. I'm an Austrian by belief in the business cycle. I think we've just got too far. We had those two that that supercycle, and we can't pretend it's not there. You could be an Austrian economists all you like right now, and you're gonna blow up the world. You're going to drive the biggest economic destruction of all recorded history. If you decide to become an Austrian and say, fine, we'll just let the business cycle do it. We can't. So it is

what it is right now. How do you deal with it? I don't know. I mean there's a lot of people will point the fingers and blame everybody. The answer is we don't know, and I don't the central banks don't know. Everybody is trying to figure something out. But one thing we have got, the most powerful thing, is bitcoin just exists. We've got something to get us out of this that we can side step whatever mess this becomes. It might all work. Maybe they create another thirty or forty years

of prosperity. We don't know, but I'm really uneasy, as is everybody else around the world in how this plays out. But bitcoin is that gift, right, It's the gift, the life raft that can save us from all of this because we can side step it. Yeah, so that's how I want to jump into that. You you you actually made

a video or etie about bitcoin being a life raft. Um. So we have this ship if you want to call it that, that's heading into turbulent water and we don't know which way it's going to go, and we can decide to stay on for the ride, or we could decide to hop on a life raft and just kind of sidestep the whole thing. Is that kind of how you see it? Yes, I do. Because of the nature of the world is going digital. So bitcoin is the native digital thing that drove all without change in the

first place. You know, it's almost perfect. And its construction as a store of value, whether it is as a means of payment, we can argue about that all day, but as a store of value as collateral, it's amazing because the world's collateral system right now is US treasuries. Probably is the U S can issue as many of them as they want, lower and lower rates the more the issue, the more the rates go down. Really, and the currency itself, once you issue more and more of

that devalues every time. So it's actually not a great reserve asset. And you know what happens in times of economic stress is it should be harder. You should be at end out your collateral for more money. But look at treasury yields that you're lower in the recessions. You get less money for lendering out your treasuries in a recession,

so it kind of doesn't function well. Bitcoin well, that's a whole different game because it's a it's a private market, not driven by a central bank, and it has the limited supply feature, which means that in a recession, when money scarce, if I want to borrow your bitcoin, you're gonna charge me for it. Now the monetary mechanism works. Okay, that's great. Bitcoin doesn't have a yield curve yet, so

we're nowhere near there. You know, there needs to be a time value of money within bitcoin, but it's coming. It's this and therefore as a pristine collateral where it can't be printed more of it can't be messing around with. That is a very very valuable asset for anybody and to sidestep that system in something as perfect as this,

it's amazing. Right now, gold has been that you know, five thousand years of history as as as gold you know, um whereas money, but the gold market has been completely captured. And I mean the price is not set on the market, it's set in London, So gold doesn't really offer that like like bitcoin does. Do you see future when more and more institutions come into bitcoin where maybe that starts to change. I mean they're gonna want to try to

monetize it, right or or financialize that. I should say, yeah, that's gonna happen. And that's really sad is humans are humans. They create credit, They always did, and they will create credit cycle all over again on top of bitcoin. Because when you've got a great collateral asset like that, what's the best thing to do? Use it for lending? And you know, to be a money lender is the oldest or second oldest professional on earth. And that's not going

to go away because we're humans. And I think there is a slight misbelief in the bitcoin community that suddenly we won't build a fractional system all over again. We've always done it. We did with gold, We've done it with Cowrie Shells, We've we've done it with fit we will do it all over again. Well, there's a nice period of perspiracy when you go from zero leverage to a lot of leverage all over again. Yeah. Well, you know, I think the the the fractional reserve lending on top

of bitcoin isn't necessarily a bad thing. I mean, obviously we can see what happened in the free banking world before the central bank came around and banks were going boom and bust and people were losing their money. But

that's a risk that those people were willing to take. Hey, I'm willing to potentially lose this to make that potential yield, And and that's a decision that each person can individually make, and maybe I could be okay with that versus a centrally controlled model where we just inflated away forever, which kind of like so, you know, I mean, the free banking was kind of like a free model where people could do that, versus what we had today being a

controlled model. Don't you see that being different? Yes, I do. I don't know if then that results any different, because it depends how many people lose money from doing you know, we're borrowing money from the wrong lenders or whatever, lending money to the wrong borrowers who knows. Right, we're seeing that experiment playing out in Defy right now in real time, and that these things are blowing up media or even with black Fire and Celsius and those companies as well.

And look, I'm super fascinated by this. Um. You know, can private sector can the private sector send m set interest rates in a world where central bank still exists? I don't know, because the institutional money arbitrages it because they can borrow from the central back, they can borrow from the banking system. But you know, one and and flood the defied market at six and before you know, overtime,

all the spreads flattened down. So it's a shame. So they're not not connected because the money will always flow um. And so we'd need to see some whole soul change in that before we could really see true independent markets. Yeah, so I'm curious at your viewpoint on bitcoin because you say it's the life raft. So it's a way for us to escape all this whatever we're going into, this totalitarianism, this control whatever, it is manipulation and it's a way

for us to side sidestep it. So I mean there's there's some ideology that you see with it, I think, But at the same time, you take this this role of this macro trader where hey, I'm gonna trade it until the yield curve is over right. Um. So I'm curious what's your view on bitcoin? I mean, like you mentioned kind of the bitcoin community, which I kind of fall into, which I see it as like our life raft as well, but I don't want to see it get corrupted. Do you see it as just another asset

to trade? Um in the meantime and in a way to side step this. In the show again, I always got back to my point. Whatever we wanted to be is irrelevant. It is a network that is life, living, breathing and uncontrollable. So it is what it is. And some people wanted to be one thing, some people wanted to be another. Where it ends up is I don't know. Um. Now, I think it plays a dominant role in the global financial system. What does that mean? I'm not yet sure

what does that future financial system look like? I don't know. But as a macro guy, my job is not to say I want it to be this, Um it is, okay, what is the possibility that it's going to be this? You know it does? Does bitcoin maximism have a reasonable probability? Yes? Over what time Arizon don't really know, but it kind

of feels like twenty years. Um, So you know what is the what points in the Metcalf's law produces the best returns Because in the end, I don't really care about the philosophy of what the future financial system looks like as long as I'm all right, well, my family is all right, or my friends are all right, or the people I can help, you know, And that's human need, right. Human need is for your own personal security and security of your friends and family around you. So that's how

I look at it. So I'm kind of agnostick as long as I can do that. Now, I wants a new, different financial future. Um, but I'm not betting my money because I want it. I'm betting my money because I think this is the most likely helpcome right right right. So um, I'm curious though from your viewpoint in this, because you're somebody who's kind of an international man, right, you're your British I think you lived in Spain for a long time. Now you're in Caymans or wherever you're at,

So you're kind of doing this geo arbitrage if you will. Right, you're going to where you're treated best, I guess, or your money is treated best. So I'm curious, you know, kind of my viewpoint in the world seems like, you know, we're going to more globalism obviously, I mean that's obvious, right, I mean, they're they're pushing that the World Economic Form i m F, etcetera. And it almost seems like it's

becoming more totalitarianism. And we're gonna have technology that will continue to morph with economic as you're talking about CBDCs and more control, more surveillance, etcetera. And as you said, governments are always going to try to protect what they have, and that's power. At the end of the day, it's power. And so what breaks that grip of us becoming like total slaves. And from my viewpoint, it seems like the only thing that maybe could ever break that grip would

be competition. If they came and say hey, you can come live here and we're open and free, and then rich people want to go there. But in the past. I have friends growing up who who came from Iran or Iraq or even from South Africa left that oppressive regimes, but they came penniless. They couldn't get any money out of the country. And Bitcoin changes that because now I could go to that free country and take my wealth with me. But that system has always existed, right, because

you've got it in the US in different states. So you're in California and you're like, God, I wish I was living in Florida right now. Serfs was good, but the but the tax is lower, right, um, And we we have it in Europe. You can move to Ailand, which has a lower tax rate in Spain, for example, lower than France, and that has always been available, so I don't think there's any great change. And then this whole sovereign man thing. You've always been able to take

a euro across all of those countries. Now to leave Europe and bring it into Cayman, you have to produce your k y C and all of that, and you have to apply for citizenship or or a work permit. It's not it's never been that difficult. Well, it has been depending on what country are coming from. If you now if you're trying to flee country. So yesterday I was walking the dogs on the beach and there's a bunch of Cuban refugees growing up in a boat. And

we see this periodically. Every few months there's a boat arrived with twenty Cuban refugees and it's a basic raft, right. The economic poverty and the the regime causes people to do extreme things to leave, and that drives it home to you your exact point, they leave handing less, they start again. Uh. And yes, bitcoin does help this, and gold traditionally help that, but it's it's difficult because it wasn't transportable so easily. Yes, you can deposit in your

Singapore bolts and then you know access to it. It does work, it's a bit clunky. Bitcoin's grateful all of this. I mean, it does, it does help. But in the end, most people don't get driven by taxes, to get driven by quality of life. And my choices have always been driven by quality of life, of which taxes is only a small equation. Well, my mine is quality of life as well. And you before we started recording, you talked

about how California is starting to lockdown again. And for me and my family, I don't want to live in a lockdown country. I have money, why wouldn't I go somewhere that isn't lockdown, And of course I would want to do that. So it is driven by quality of life. Taxes is I think part of that equation of qual exactly. But it's the quality of life. And if you've gotten abuse so more to the point, if you've got abusive

authoritarian regime. So if China becomes much more restrictive on its freedoms by using all this kind of very smart behavioral economic techniques on its people, well you're gonna get a lot of Chinese leaving. And we've already seen massive capital fiers. Bitcoin has been one of the beneficiaries of those cover flows, and all these stable coins are really basically a lot of it's coming out of China. Um, we're saying. If you look at the largest countries by

usage of per capital use of bitcoin, Venezuela, Columbia, South Africa, China. Yeah, all for the same reasons. Right, it's capital flights, um, And it's great for that, it's great, but it's hard. It's actually hard for people to leave. It's really hard for Venezuelan. To leave Venezuela and get a country to accept them, that's really hard. You have to have money,

so it kind of favors the elite. Still, it doesn't actually favor the individual, right, But again, having friends that have escaped escaped oppressive regimes that were somewhat well off in those countries, they had to company less and so as your point, you can only really do that if

you have some means. But if your country doesn't let you get any of your wealth out of that country, then you're like, I could go to St. St. Bart's, but like I need a hunter grand to get there on a private jet, and my country doesn't let me get my money out, and now if I can take my money, it just it just changes things. Yeah, it does, it does, but you know that's what it probably does is bring it down a bit. So the very elites.

Right when Argentina had the massive default in the Coralito where they stole the money from everybody's bank account, the rich were flying out in private jects with stacks of gold and money and everything else. They already had it. But they've already gotten it, right, But it's the next tier down that got completely screwed. They lost all of their wealth. Everybody in Venezuela whose middle class or wealthy

middle class got completely destroyed. The poor in the end, they've been poor either way, right, So yes, they further abuses of the system, but it was that middle class and wealthy middle class got gutted in many of those countries. And South Africa they're still bleeding I mean out the door. I mean, yes, there's still opportunity in South Africa. It's hard. Yeah. Yeah. One of my one of my best friends is is from South Africa, and so they're a family left and

so I'm familiar with that story. But I guess so maybe then from that viewpoint, bitcoin is that life raft to to um sidestep the system, but are so maybe a way to our So maybe put a motor on that boat and then go somewhere else. Here's a conversation I had. I had a conversation with a big family office from Latin America, and they were bitcoin miners in Venezuela. They're not Enezuelans because it was free electricity two fourteen

also doing this. They were making a fortune in this and he's now sending up a whole family office network for Latin Americans for the wealthy families, and I'm like, and it's all around bitcoin, and I'm like, okay, what is the thesis here? Said? These guys are all dollar and gold people because they have to be, and what

now they've seen Bitcoin. They're like, oh, finally, I'm not holding to the US dollar, which is the US banking system and all of the issues of that, and I'm not holding to clunky gold that have to fly fly around in a private jet if I'm forced to leave my country because I've gotten the wrong side of the politics.

And they all get it in seconds. It's like it's very easy for me as a brit Or, you as an American to not really worry about it because it hasn't really affected us ever, right, But for Latin American this is part of their life and they've seen this cycle probably three times. If you're forty years old, you've seen it three times already in your life. So you know that the use cases are alive and well and it makes a huge difference and that is only going

to get bigger. Yeah. Cool, So we're we're running out of time here. Um, some great conversations. I appreciate you taking the time to do that. But UM, as as a macro trader, as a macro investor, obviously you've been uh, you know, you're you've been pretty bullish on bitcoin, So I just like to talk about that for a second. Um, we're starting to see bitcoin go up. I mean, we're a big, big right now, a great year. What do you see different from seventeen? It really is the story

of institutional adoption. I mean, it's not driven by the little guy, although the guys are still in it, you know, I average guy, Which is what I so love about this space is people in actual chance. Right people are having a chance to make some money, which is amazing and empowering, and that's why I'm really attracted to the space. But the thing that's going to change every of these lives is when the wall of money from the institutions

comes into it. Um, And that's happening. It's all I hear every day from all of the people you're running the big exchanges and all the guys I know operating this space. That whole kind of on ramping is going on every day. Now. That creates its own dynamic, which is called reflexivity, because the more something happens the more self reinforces. So the more the market cap of bitcoin goes up and the more it outperforms other asset classes. I've been talking about this bitcoin kind of eating the

world is. The more it does that, the more it forces institutions to look at it. The more the market cap goes up, the more they have to get involved. The more they're involved, the market cap goes up, the more Bitcoin out performs, the more they have to get involved. So it creates its massive kind of chasing a der tail to get into the space. So that's what I think. Lines ahead, and so you mentioned before I asked you kind of what you see like long term? What do

you you know? How far out do you look? So maybe you know twelve eighteen minds or one or three years? What do you see? What do what? What are you kind of seeing over that? It's hard not to be it's hard not to be biased because we all look at Plan B stock to flow model and we've all seen the previous cycles, so we kind of we're all kind of anchoring somewhere on that, so we know we

can't pretend we're not. I use a bunch of technical analysis, a bunch of other ways of looking at it, and I always came up with a you know, with gold here around these kind of price levels, if we look at the same sort of thing, I kind of get bitcoin worth a million bucks um. Now over what time horizon is that? You know, I give it two of the another harving cycle. Now, maybe the harving cycle doesn't work next time around, because maybe it's a flat harving

cycle because of the institutional adoption. I don't know. I think the space will change. I think also people don't understand how institutions act when they're in the space, They're going to act very differently. So I don't know, but I think a million bucks And I think, you know, this year, you know, we've we've gone up a huge amount or something. Dan Tapierrison a tweet out, we've been up from the low this year. Could you do another next year? Yeah, easily. I mean we barely noticed it.

This year. Didn't feel like a runaway bullmarket year. Yeah. I just felt like it was just getting started. So, you know, I still maintain I think it goes further than most people expect in the next eighteen months because of this institutional reflexive loop. So I think I think if there's a surprise to be had. I know there's a bunch of people saying work, maybe just got a fifty grand, fifty doesn't go much higher. There's a bunch of people in that kind of hundred to two fifty level.

I would say I'm more skewed towards the kind of two fifty level with an upside. I think everyone's wildly under price the upside for this cycle. Yeah, well that's good to hear. I I remember back in that bull running and they were starting to get all these crazy ballers projections and praised mccaffee staid he was going to eat his stuff if you know. So I tried to kind of temper that because I know when we get into these kind of ball markets it starts to kind

of pushing that. But but but it's but it's great to hear. I like it. Well, I know, and I didn't. I get it from a number of different ways and whether it stopped to flow. And I built a very basic stop to flow medal back in two thousand thirteen that I came up with offer the same output that was with gold at gold was about then, I got you know, comparing like for like at about a million. If we look at the market cap versus gold, we get to say similar kind of things, not the tennant,

so that twenty x from here or so. If we look at a log chart technical analysis, get to the same kind of numbers. If you mean, when so many things give you roughly a price project, when you look at met costs law to price it as well gives

you roughly the same numbers. It's like, okay, somewhere around here unless any wrong, and you look at the markets, it's it's taking over which you mentioned gold obviously ten eleven trillion dollars, but there's thirty to forty trillion, and offshore bank accounts and like it's an offshore bank account, right, so it's all these things. So, um yeah, great stuff. I appreciate all that. We're gonna go ahead and wrap it up right here. I thank you so much for

your time. Now. I know you're super active on Twitter, um, so I'll make sure to link that for everybody down below. I don't know how you find time to be on Twitter so much, because it it recks my day. It's wrecking mine. The other place to find me so at Raoul Jim on Twitter. Also, if you like crypto stuff, um and um. We build a whole channel in it,

so Real Vision Crypto dot com. It's free and anybody can find a ton of content around all of this, whether it's the macro, around the space, through all the bitcoin guys, and through to some of the other parts in the space too. Yep, and I'll make sure to link that down below for everybody as well. And uh again, Ral, thanks so much for joining us today. I appreciate it. I really enjoyed it. Thanks so much.