Transcription
[Music] Welcome back to the Bitcoin Layer. I'm Nick Batia.
Today I want to go through the Supreme Court decision on tariffs, the new health care proposal from the government, and the government's charge against Jerome Powell and the Federal Reserve for potential wrongdoing. Some even suggesting that this is an attack on Fed independence. Well, we're going to cut through the noise and I'm going to explain to you how all of these things are related to each other. We're also going to tie it back into Bitcoin and the outlook for Bitcoin in 2026.
I want to start today with this tweet from James Thorne. He's an excellent analyst that we've been following recently. He writes on the Supreme Court decision. Now, mind you, he is calling it the Trump doctrine. We're starting to hear that a lot more as the Trump corollary to the Monroe doctrine is a mouthful and the Donroe doctrine basically sounds stupid. So let's go with this Trump doctrine.
Now, what is the Trump corollary to the Monroe doctrine? In a very, very brief explanation here, the Monroe Doctrine, named after the fifth president of the United States, James Monroe, asserts the United States as essentially the controller of the Western Hemisphere that stretches from North to South America. Now, in the early 1900s, Teddy Roosevelt, Theodore Roosevelt, reasserted the Monroe Doctrine in an effort to shape the politics of Latin America. Now, in 2026, we have the Trump Doctrine or the Trump corollary to this Monroe Doctrine. It's not focusing on explicitly kicking European powers out of South America, but it is focused on removing foreign powers from South America. Who are we talking about? China, of course.
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We flagged the national security strategy for you guys in late 2025. We also explained that this shift in policy is something to watch for. What we didn't know, because we are not military experts by any means, we didn't know that the administration would begin acting on the Trump doctrine within the first few hours of 2026. We saw that with Venezuela. We've covered a little bit of Venezuela. We're not going to go into it much here today, but the important thing about Venezuela was that it certified the Trump doctrine is here. You can write a document and write a position paper all you want, publish it to the world, but if you don't act on it, no one is really going to pay attention. The Trump doctrine got the opposite treatment. Essentially, an announcement and then an action that reinforces that the announcement is for real.
Now, in the background of the Venezuelan move to start 2026, we have the Supreme Court ruling on tariffs. The case brought against the administration suggests that the tariffs are being used unconstitutionally, as certain tariff powers remain with Congress, written into our constitution. The president and the administration is arguing that it believes the tariffs are important for national security and therefore falling into the role of the executive branch and the commander-in-chief. Now, we don't have a strong opinion on which way the court should rule. That's not our job. That's the Supreme Court's job.
Now, let me read to you a little bit of this analysis from Thorne so that you guys can see an argument that I I wasn't in tune with. And so, I really found this useful and I learned from it. The Supreme Court is not merely tidying up a tariff statute. It is in effect ruling on the Trump doctrine itself. The EA tariffs case has become the vehicle through which the justices will decide whether a vision of economic sovereignty as national security is an acceptable constitutional operating system for the United States. This is saying that are tariffs part of economic sovereignty and that if it is, then that really reshapes the way that the courts are going to look at these tariffs. What began as a dispute over the reach of the International Emergency Economic Powers Act now doubles as a referendum on whether control over trade flows, supply chains, and capital should be treated as core elements of US security on par with tanks and treaties. The live question is no longer whether EA supports reciprocal tariffs. It is whether a permanent crisis-framed economic nationalism can sit comfortably within, uh, sorry, comfortably inside the constitutional architecture.
So why the delay? The delay itself is a form of judgment, and this is the key part here. By stretching out deliberations while leaving the tariff regime in place, the court avoids being the proximate cause of market turmoil or diplomatic rupture. Yet quietly preserves the very leverage the executive has built. So the executive has built up leverage through these tariffs. It is exercising that leverage with acts like what is going on in Venezuela and the seizure of oil tankers and targeting of the global shadow fleet, which is essentially a fleet of oil tankers operated between China, Russia, and their allies to skirt around sanctions that has been put on these countries by the United States to try to affect behavior. Well, what do the tariffs do? The tariffs also try to affect behavior. So, you have a Supreme Court that hasn't ruled yet on the tariffs. Then Venezuela happens. What do you think the court is thinking about watching Venezuela unfold? They might be thinking, and Thorne is suggesting here, that what they're thinking is, "Oh, wow. The tariff policy is actually part of a global strategy that has to do with security, military forces, and the security of the United States long-term, not exclusively in within the economic realm." And that's really the difference. Is it strategy, national security, or is it economic? Well, the court, while it sits back, is in some ways acknowledging that the agenda is potentially purely a security agenda.
Continuing with Thorne's analysis here, the Trump doctrine treats tariffs, export controls, and investment restrictions as routine instruments of national defense rather than exceptional tools reserved for rare emergencies. A decision that preserves the core of the AIPA based tariffs, even while pruning procedures or tightening definitions, effectively elevates that logic from political program to constitutionally tolerated practice. Now, remember that the court is there to judge whether these tariffs fall into the powers of the executive branch or the legislative branch. That's basically what they're trying to decide here. If the court accepts that Congress may delegate sweeping economic war powers to the president in the name of national security, it is blessing the underlying premise that economic sovereignty is itself a constitutional interest worthy of deference.
Fast forwarding to what Thorne believes is going to happen, the most plausible outcome is a ruling that trims the edges without toppling the structure, tightening how emergencies are declared, policing some excesses, perhaps clipping the most aggressive readings of AIPA, but ultimately leaving intact the president's ability to weaponize access to the US market. We were reminded of Steven Myron's speech that he gave after Liberation Day about the dual public good. The United States is focused on the dual public good it provides to the world, and it is demanding that the world pays for access, number one, defense, and number two, access to the US dollar system. The US dollar system as the global reserve currency.
So, what are we looking at? Potentially the Supreme Court letting most of these tariffs stand while addressing some of the ways that the administration has crossed over the line in terms of the constitutional appropriateness of its actions. We are looking at Poly Market to inform us on what insiders are really thinking and how they are placing their bets. Right now, only a 30% chance on Poly Market that the Supreme Court rules in favor of the Trump tariffs. The only problem with this 30% number is that it doesn't have a bunch of nuance in terms of leaving most of the policies in place and removing some of them. So, we'll have to see how this one plays out. The point here, and you can see a little bit of a rise from a dip around it was earlier this year, that the market believes that the more time that goes by, potentially it is more likely that the Supreme Court leaves these tariffs in place.
How are the tariffs and the Supreme Court decision over these tariffs related to the new health care proposal and the Federal Reserve Department of Justice case? They are all related. I'm going to explain to you now.
Today here on January 15th, Thursday, the president delivered an address from the Oval Office asking Congress to swiftly pass a new health care bill. Now, the details of this proposal have been outlined by the White House. It is not a bill yet, which means that the actual law has to be written by congressional leaders. That process will take its own sweet time to play out, and we don't have a strong opinion on some of the nuances here that have to end up in the bill. We're not experts on legislation here.
Now, what we do want to explain about this proposal is why it's related to tariffs, why it's related to the Treasury market, fiscal health, and Fed independence, Fed alleged independence. Honestly, the debate over Fed independence has been a little bit skewed by the mainstream media. So, I'll get into that nuance here in a second. The president said this morning that his idea on new health care, a new health care system for the United States, which includes maximum price transparency. This is actually the key here. The key in this proposal is something to the effect of, if a hospital or health care provider accepts Medicare payments, it will be the law that that facility has to post prices in the lobby in plain English for everyone to see. Now, that is, you would think something quite basic that can be done, but just watch the fight. Just watch the powerful lobbies. Watch them fight these pricing transparency aspects of this proposal, and you will see who is skimming off the top. That is a guarantee. The easiest way to the easiest way to determine who is skimming off the top on the $3.5 trillion in 12-month aggregate spending on Medicare and other health in the United States. Three and a half trillion. That is about 70% of our total tax receipts as a nation. Okay? And by the way, that three and a half trillion includes Social Security. So 70% of our tax receipts taken up by Medicare and Social Security.
What I really like about the way that policy has unfolded in the United States, even though the politics are so divided, is that the right, especially the administration, is not for a second saying, "Let's let's cancel or reform Social Security. Let's increase the retirement age. Let's increase the age at which people get access to Medicare. Or let's significantly cut Medicare benefits for senior citizens." None of those proposals are really in the mix. Now, I think that that is an effort to come to the middle. Medicare is popular. There are there are a lot of reasons why the United States can provide health care to its elderly. We are the richest country in the world, and there are ways to make that happen. However, the skimming off the top and the profiteering from that industry that is grossing $3 trillion a year from the United States Treasury. That is what is being attacked here. That is the focus. I am throwing my entire support behind maximum price transparency in the healthcare industry.
Hospitals all around the country are dependent on Medicare customers. And yes, to the hospitals, their patients are customers. They are dependent on the US Treasury as the ultimate payer. And in this way, this law could affect behavior. Now, it's not just pricing transparency at the provider level. It's pricing transparency for the insurers. Now, the insurers are the ones that are engaging in the clouding of prices so that people don't really know what it will cost. They don't know what the insurance will cost. There isn't transparency there, and they don't know what the care will cost. They also don't know what the care will cost if they're on Plan A or on Plan B. There is no pricing transparency in this country when it comes to the health care system. That is essentially completely the opposite of a free market system.
Now, the health care system, if Medicare is continues as an institution in this country, and I believe it will, and I believe it should. I believe that that's bipartisan. If that program continues, we don't have a true free market system because the government ends up being one of the largest payers in the system. Senior citizens are the largest utilizers of the health care system. Therefore, the government will still be the largest payer. However, the transparency that could come opens up both the seniors and non-seniors to achieve a more fair price of health care by simply going to multiple options. If there are three hospitals in your vicinity, they're all within a 30-minute drive, and you know in advance what the price of your stay will be without insurance or with insurance A, with insurance B, or with insurance C, you can make an informed decision. That dynamic is completely absent from the United States health care system, and why I believe that this is a a good idea.
I'm not saying that this is a law that should be passed tomorrow. There are a lot of aspects to this proposal. It's not even a law yet that's on the floor of Congress, and the president has essentially no power to force big, holistic changes like this through. It needs the president needs Congress to act. Now, my confidence in Congress to properly execute this is low. However, my confidence in leadership is, I would I would say higher than my confidence in Congress. So, let's see what the president can influence Congress to do. And let's see if we can get price transparency brought to the United States health care system.
Now, I'm going to tie it into the Fed in a way that you might not have expected. Here's a look at the US fiscal picture. The red bars are what we spend, and the green bars are what we earn through tax receipts. The black line is the annual deficit. So, remember $38 trillion in debt outstanding for the US government. That number will go up by whatever the black line is each year. That means that last year the debt went up by 1.8 trillion, uh, by 1.8383 trillion because we were 1.83 trillion in a deficit. It means we took, we spent $1.8 trillion more than we brought in, and that gap is funded through debt issuance. So, the treasury supply goes up. The the trick question that I ask my students after showing them $38 trillion in Treasury supply is, what is the debt of the United States? It's the supply of the Treasury debt. So when supply goes up, the debt goes up, and that debt is being carried right now in the 3 to 4% range. It is very, very expensive for the United States to carry this debt. Not that 3 to 4% is an expensive rate overall, but 3% times $38 trillion, guys, gets us to $1 trillion in interest expense every year. I just showed you that $5 trillion is our receipts. Well, if $1 trillion goes away just for interest, you only have $4 trillion left. And I just told you that Social Security and Medicare are $3.5 trillion in outlays. You add in defense, and let's go to the next chart so you can see these numbers. If you add in defense at a trillion, to interest at a trillion, and Social Security and Medicare at $3.5 trillion, you get to $5.5 trillion. Ladies and gentlemen, $5.5 trillion is more than $5 trillion. The United States, from Social Security, Medicare, interest, and defense, is over budget. No discretionary spending whatsoever in that number. This is why the fiscal situation is so dire. It's because the $1.8 trillion that we're spending more than we're bringing in is unsustainable, especially with rates where they are, because the interest bill is heading toward the total tax receipts. Right now, that gap is $1 trillion and $5 trillion. But if we keep going the next 5 years, another $2 trillion in deficit each year, that's, you get the debt up to $50 trillion. If rates are not brought down, and even the curve steepens a little bit, let's say 4%, you're talking about $2 trillion in interest expense on an annual basis. This is completely dangerous for the United States.
And now I'm going to explain to you what the government is doing in terms of attacking the Fed and trying to get them to lower rates. You can talk about the Department of Justice weaponized justice system, whether Jerome Powell lied under oath about the building renovations or not. Honestly, if he didn't lie, Jerome, just hire a good attorney and you should be okay. What we want to focus on here is whether the Fed is independent or not. That's not even the question. The Fed is chartered by Congress. During World War II, the United States kept the Fed to a lower rate. What, what I'm saying is that Congress and the executive branch basically mandated the Fed, took over the Fed, and said, "You will peg rates extremely low so that we can do wartime borrow and spend and not break the budget, not break the fiscal picture."
Now, bring back in the Supreme Court decision on AIPA tariffs, economic sovereignty, national security, and what you can conclude potentially is that the United States is in a war mindset. I've been writing about a technology cold war with China since 2017. That's nine years. That technology cold war has started to leave the cold phase and progress to a more hot phase. Venezuela, Russia, Ukraine, Iran. These are related to the technology cold war between the United States and China. As it becomes pretty obvious that one of the main goals of the Venezuelan extraction was to prevent the Chinese Navy from access to this heavy crude on which ships rely. So if we are in a war mindset, why wouldn't the government ask the Fed to keep rates low so that we can finance the operation? And mind you, the administration has suggested that the next fiscal year will have a military budget of $1.5 trillion, a 50% increase, more or less.
Now, let's do the math. Let's call it $40 trillion, or let's just call it $1 trillion in expense, which is about the $38 trillion times 3%. $1 trillion in interest expense with rates at three. What if they were at 1 and a half? If they were at 1 and a half, you cut your interest expense basically by 50%. And it takes time, of course, it takes time for it to play out as debt has to mature and then roll at the cheaper rate. With that being said, if we are able to cut interest expense from $1 trillion down to half a trillion, and we are able to lower Medicare spending from $3.5 trillion to three, let's say Medicare plus Social Security. If you are able to do that, you can shave a trillion dollars off of the federal budget. But if you are not able to cut Medicare spending due to these health, uh, proposals that have been suggested, if you're not able to cut that $3.5 trillion, but you are able to cut the $1 trillion in interest down to half a trillion or even less, you are then funding the rest of your budget. And that $1.8 trillion in interest in deficit can fall to $1.3 trillion. If it falls to $1.3 trillion, the amount of additional debt that we have to take on every year declines, and that can in many ways cause the percentage of fiscal outlays that go to interest, it can level it off and even cut it down.
A big part of the equation, of course, is tax receipts. The US economy has to grow at a very high nominal rate for the next several years to put itself in a better fiscal situation. Yes, that's also one of the goals of tariffs is to bring capacity back to the United States. Remember that GDP is a sum of four variables: consumption, investment, government spending, and net exports. Our net exports have been negative for many, many years. They are becoming less negative as the United States makes more and imports less. It is definitely importing less. We've seen a fall in imports. It's exporting more. That increase has been marginal, but it is accelerating. And with tariffs helping the United States produce more, import less, the Fed lowering rates, and maximum price transparency on the health care system, which will ultimately help the largest payer, the US government, pay less or at least engage in more competitive practices and force the healthcare industry to become more transparent in that people can use that pricing transparency to then put these providers and insurance companies in competition with each other.
There are so many components to the US fiscal picture that can support the health of the United States government on a fiscal basis. With that stabilization of the United States fiscal picture, you can then get the government to double down on productive capacity. Help the private sector to achieve higher productivity. Remember that the global balance sheet approach has households as wealth owners, governments as wealth enablers, and corporations as wealth creators. The corporations need enabling practices to create wealth, such as better infrastructure, better trade policies. These are the keys that the government can provide. But ultimately, it's the private sector that can be the engine that is the engine for economic growth. And the government is there to assist.
If the government can get its fiscal house in order, it can then relever itself. Right now, the government is already overleveraged. That's why interest as a percent of outlays is 14%. An insane amount of our of our outlays go to interest. And an even higher percentage of our tax receipts go to interest. 20%. $1 trillion on $5 trillion. That's 20% of all tax revenues going right out to bondholders. That is already a high degree of leverage. We need to delever so that we can relever. And remember, the the original leverage that was employed by the United States government, did it go to productive capacity? Not at all. Not at all. Stimulus payments to people and subsidies to private industry does not increase the productive capacity of the country. Things like infrastructure do. Things like scientific investment do. Those are the things that the government should spend its money on to enable wealth creation in the private sector. Instead, the United States government is taking in tax receipts, borrowing a bunch of money, and engaging in transfer payments.
So, the challenges are in front of us, and the solutions are visible. It doesn't mean that we can execute them, execute on them, but they are visible. The execution will take a lot of hard work, focus, and unfortunately, it will take a lot of unity in the political sphere, which the United States seems to be lacking.
Now, all of this fiscal equation will lead to healthier capital markets, a more productive United States, which then can invest in a store of value that is outside the double entry accounting system of corporations in the household sector and banks. That's what gold is. That's what mineral wealth is. And Bitcoin falls into that category. Bitcoin can be a stable store of value. That is real wealth, not just a form of paper wealth that has another balancing account elsewhere in the financial system, such as equity and such as debt.
Thanks for sticking with us today this time. Make sure to check out thebitcoinlayer.com/subscribe and our incredible new research dashboard. If you see here, our dashboard has a ton of charts. We have our proprietary TBL liquidity metrics and indicators that give you an edge on the Bitcoin market using these global macroeconomic factors such as the Treasury market, which we discussed here today. I'm Nick Batia. We'll catch you guys next time.