The 100-Year Reset with Luke Gromen: Gold, Bitcoin, and Fiat’s Demise

What you're telling me is that music is about to stop and we're going to be left holding the biggest bag of odorous extra ever assembled in the history of data. 1974, 1987, '92, '97, 2000, whatever we want to call this. It's all just the same thing over and over. We can't help ourselves.

>> I say when we sell. Hey, Muhammad. I say when we sell.

>> We are living through a 1 in 100-year global monetary reset. We sat down with Luke Roman this week. I've been a fan of Luke for a long time. So really enjoyed this episode and I'm sure you will as well. We discussed how the United States, China, and other major players are positioned for this reset. Talked about gold and Bitcoin and stable coins' role in this reset as well. And ultimately, why everyone should own gold, everyone should own Bitcoin because if you're going to inflate the debt away, you need to own hard assets to preserve your wealth to participate in the economy. And so if you already own Bitcoin or you want to purchase Bitcoin, reach out to On-Ramp. We help investors like you, whether you're an individual, a business, an institutional investor, secure Bitcoin for the long haul. A lot of our clients already own Bitcoin. Some are just stepping in for the first time, but we are talking inheritance, insurance, Bitcoin back loans, trusts, you name it. We're really a one-stop shop for everything that you would need for your Bitcoin. So, head on over to onrampbitcoin.com, book a consultation. I would love to meet you if you're a listener of the show. So, yeah, let's have a conversation, reach out. We love to hear what you're enjoying about the show, what we could improve, and of course, talk about your Bitcoin journey, and how we could potentially help here at On-Ramp. Hope you enjoy this one.

All right, we are live. It's the last trade. This is a special edition. We have Luke Roman joining us. Joined by my co-host as well, Brian and Michael. Luke knows, but I'll say it on air. I'm a big fan of your work. Luke, I've been a subscriber of uh FFTT for I think four years, I want to say. Maybe shortly after I discovered you in 2020, so could be five. But that point aside, I think you do a great work. You're one of the best macro analysts out there. So, anyone who's not familiar with Luke's work, certainly check out his ex account, check out his research after this conversation today. And I want to call out as well, if you are tired of me recording from my grandmother's attic, give us a like and a comment on the YouTube video here. I might be able to upgra up upgrade my podcast studio in the next few weeks. So, Luke, great to see you. How are you doing?

>> I'm doing great, Jackson. How about yourself?

>> I'm having fun as always. Yeah, thanks for joining us. Jackson's our weekly u like insight into you know current macro trends as millennials and Gen Z struggle to find a home buy a house. So we hear weekly or every other week we'll hear about him getting priced out by boomers not being able to afford a home in the Philly area. So that that was his plug to share that his his struggle is real.

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>> That's right. Yeah. It's uh it's I sympathize.

>> That's right. for now. To quote uh President Donald Trump, I'll have fun playing with my Bitcoin, but uh we'll get to the home ownership at some point. So, Luke, want to be respectful of your time. Thanks again for joining us. I think an interesting place for us to start is just to comment on where gold currently is as a the market price of gold and Bitcoin as well. I I would love to hear your thoughts of just what the market is telling us. I did see something two weeks ago. Uh this is the first time ever where gold and Bitcoin were the number one and number two year-to-date performers. So interesting data point there. What do you make of that?

>> You know, I think for gold, I think it's a trade where all roads lead to gold. Like pretty much anything that can happen, I think it's good for gold. And I think ultimately it's good for Bitcoin, but but you know, Bitcoin still trades with a risk-off component to it as as people have talked about uh you know, VCV, NASDAQ, and what have you, stocks more broadly. But gold seems to be kind of a winner no matter what happens. Rates go up, we get a a fiscal crisis uh which may be maybe part of contributing partly contributing to uh the breakout today. Good for gold. Uh rates go down aggressively. Real rates go negative. Good for gold. Uh we get a trade deal. Um or we don't get a trade deal. We saw that with Liberation Day. Good for gold. Uh we get war. Good for gold. We get peace. Increasingly looks like the peace is going to be dictated at least in part by uh the bricks. Um that's probably good for gold. Any piece dictated by bricks rather than by the US. Um and so you kind of look around and just go all roads lead to gold. Um that's, you know, that makes sense to me. From a Bitcoin standpoint, I think it's it's kind of the same thing. Uh, like I said, Bitcoin does have a bit more of a drag with what risk assets are doing in the short run, but ultimately, I think the reason why both have done so well year-to-date, uh, is neutral reserve assets, uh, you know, all of a sudden long-term sovereign bonds are no longer risk-free on a real basis. Uh, and that's something that is, you know, the math has been crystal clear, uh, for 10 plus years. Uh but I think just in recent years and then overlaying the geopolitics on top of that post-2022 with the Russian FX reserve sanctions, all of a sudden people are thinking about you know and maybe even layering in the nationalization and Trump and tariffs and stuff like you know do I actually hold what I own and is it actually inflation proof? And you know, there's really only two assets in my view that that do a really good job of that as a neutral reserve asset. Energy Link, you know, supportable, etc., etc., etc. Um, and it's gold and Bitcoin. And so, it makes sense to me that those two are are leading or, you know, top of the leaderboard here today.

>> Yeah, it makes a ton of sense, Luke. Um, one one thing that you referenced in there was um 22 when um you know, Russia's treasuries were seized. I think that's uh it feels like a long time ago at this point but you know in in the grand scheme of of monetary history it's pretty pretty recent and um at that time uh Zultan Posar from Credit Swiss put out a fantastic report which you were all over at the time and I think a lot of his ideas you know you had actually been saying for years prior to that um but I'm curious like what are your thoughts on his thesis around really Brettonwoods 3 this move towards uh forms of outside money, namely gold and Bitcoin, uh, versus inside money and and sort of three or so years after that, like how do you think that that thesis has played out? Because in my mind, like, you know, he was spot on with with sort of uh forecasting what was about to happen in the in the next few years and and so like, where are we in that thesis? What inning are we in terms of that really playing out in your mind?

Yeah, I mean shortly thereafter, you know, I think I said to someone, I think this might be every come to be seen every bit as big as Nixon closing the gold window in 71. Um, and yeah, I think it's played out quite well. Um, central banks have bought on average, I want to say a,000 or,00 tons of gold a year, every year since. Uh, gold is now the second biggest reserve asset that just surpassed euros. Uh another probably I don't know two years of of decent price appreciation in a thousand tons a year and gold will be the number one reserve asset surpassing the dollar and treasuries. Um and so I to me it's it's there's an absolute sea change going on since that happened being driven by you know real politique which is you know I heard from multiple different people um that don't know each other that um major Gulf uh Persian Gulf nations were quote unquote uh um you know scar basically like scared to death uh petrified I think was the word uh by that seizure of FX reserves. And so regardless of how you feel about the actual seizure itself, it happened and there was a reaction and that reaction makes perfect sense. And I don't, you know, I don't think you can put the genie back in the bottle as it relates to that. Everyone has seen that. And so I think that's done. U in other words, going forward, you're going to have a neutral FX reserve uh asset. And you know, that's gold. And and I think, you know, on some level it can be Bitcoin. We've seen some marginal sovereign wealth fund type buying uh out of the Gulf. I think Abu Dhabi last late last year. Uh but it's been that's that's been about it. It could hold that or or or um you know complement the gold in that role, but we've not really seen it yet. But I think that's I think that is that's like I said, I think that was the 1971 moment in the other direction. That was we are going back to a system with a neutral reserve asset that floats in all currencies and that then has just absolutely enormous uh uh implications for the global macro and global financial system because what it implies is that currencies are going to trade more on balance of payments. Uh and so the nations that run big deficits are going to have weaker currencies and the nations that run big surpluses are going to to strengthen relative to those that run big deficits. And you know that was sort of how it had always worked kind of except for the dollar. You know the dollar ran the biggest deficit but was still the cleanest dirty dirt or the the cleanest dirty shirt. And I think that's I think we're you know the worst performance in the dollar in 50 years to start this year. I think might be a warm-up to sort of you know it the dollar getting marked to its its balance of payments fundamentals.

>> Yeah, it's it's a great um outline. It's something I'm curious how you reconcile and also um maybe sharing a little bit of monetary history specifically after 08. I think one of the best podcasts you've done um at least that I've listened to was with Robert Breedlove. We actually did a recap on it. uh I think it was about two two and a half hours but really broke down a lot of these concepts and one of them um it reminds me when you were speaking a little bit of tether uh and it's it's not widely known and I can't prove it but it's I think widely understood in this industry that tether is dagged multiple times from the dollar but the exchanges were incentivized to not do anything about it because it is the trading pair for BTC so everyone waits to to يش up and then you know keep at par with the dollar so everyone you don't have like basically just kind of like fleeing of assets. And what that reminds me of is that's a a small microcosm of a larger global uh environment. It kind of I think about in this same sense with um assets, insolvencies, counterparty risk is there's just an unwinding that's going to take very long. And there's to your point, you've been looking at this much longer than we have. It's like point blank, you want hard assets, gold and Bitcoin, but we live in this world today where the 6040 like we're still looked at as insane people. When you think about even the Paul Tudtor Jones of the world that are gold and Bitcoin are taboo. How do you get exposure? Up until recently it was GLD and these ETFs. I'm fairly confident you don't hold a large position ETF. You probably understand why you would want spot. But that's where the market's going to, you know, get cattle herded into because that's just what they know. Equity like exposure. And so there's just still such a long like learning of to your point FX and and uh trade was net settled u but we went away from that on this dollar standard. And so we're in a multi-decade process of just relearning what money is and what assets are. Just curious how you think about like where we're at and and how this started much longer than this past few years even with the FX uh the the Russia season of of Treasury reserves.

>> Yeah, it's I I think we're in like, you know, two pitches into the first inning to what is a probably once in a hundred-year monetary system change. Um, and I think it's going to impact sort of everything around us. Um, you know, there was a a I don't know if it was a hot mic or intended to be heard, but but Putin and Xi in early '23 as Xi was leaving Moscow said, "Look, we're we're making changes to the system not seen in a 100 years and and we're driving these changes." is and to me I thought that was a really important comment because a 100 years prior was 1922 roughly which was the Genoa conference of 1922 which which uh historians and macro people far greater than than me point to as as arguably the original sin to sort of this present dollar system which um that was when um the uh it was decided that gold that that the dollar and the British pound would be made on par with gold as an FX reserve. And that basically made the dollar and pound as good as gold and every thing else less. And that kind of kicked off this whole um dynamic of you know paper is as good as gold. And as soon as you do that where you don't have to settle imbalances in gold in physical specy, uh those imbalances are allowed to grow and grow and grow and there's a winner and there's a loser and there's political reasons that that those choices were made. You know, and I think part of it was allowed to continue post World War II because, you know, the choice was pretty simple. Like the world was trashed except for the US. And so the US had all this industry and no customers and the rest of the world had nothing u certainly industrialized world. And the choice was like, okay, either we live hand-to-mouth for the next 60 years um or we basically create a system for a period of time where debt becomes an asset and in a very widespread manner as a way to basically pull forward from the future, rebuild the you know centuries of capital that was destroyed from 1914 through 1945 in in two world wars. And politically there was no there was really no choice, right? Once people start to starve and live hand-to-mouth, they're going to vote for you know really bad people again and you know you're just going to go right back to where you started from. So the decision was made at a very high level to basically have this system as we had out of World War II which was you know the dollar at the center of it, dollar pegged to gold, everything else around the dollar. And that was done for very real politic reasons, which was just like the choice is everybody lives in caves and rebuilds hand-to-mouth basically after World War II. Uh, and we rebuild over 60 years and everyone's quality of standard of living sucks for 60 years and we have a new another depression for another 60 years. Or we can rebuild really aggressively by sort of, you know, stockpiling debt as reserve assets. And and that's the choice that was understandably made. The part that I feel like most even senior market participants don't many don't recognize is a that this was a decision that was understood and made and b that there was a follow on to that which was it was always understood that at some point they were going to have to go back to a neutral reserve asset a gold presumably um type of system or a bankore type of of neutral reserve asset as Kanesh talked about it at at Brettton Woods So, uh, you know, it's one of these huge changes where I think we are now in in sort of two pitches into the first inning of going back like it is we have now reached the point we can see it in the debt. We can see it in the deficits. We can see it in the geopolitics. We can see it in the imbalances that are just far so far beyond anything anyone ever imagined or intended. like we've got to go back to what they always knew they were going to have to go back to, which was a neutral reserve asset that settles trade and that floats in all currencies. And so I think we're in very early stage of that. I think there is some disagreement around that. I think much of the global south wants gold. Uh I think the United States has uh started to stand up Bitcoin essentially through the stable coin initiatives uh in particular uh to perhaps compete with this or offer an alternative. You know, we'll see. But to me, the imbalances are so massive and it's so early on. And I don't think people have, you know, as as this 100-year original error and then understandable political decision post World War II was made and needs to now be unwound exactly what that implies for, you know, the international trade value of the dollar, for the price of gold, the price of Bitcoin, different asset classes, the for what happens to the real value of bonds. There's just so many things it potentially impacts.

>> Yeah, incredibly well said. appreciate you walking us through that, Luke. I I would love to love to hear your thoughts on where we go from here in terms of neutral reserve assets. I I had some notes down. I think it's fascinating and I I don't know how to quite parse this myself because you you've covered extensively how China, Russia, BRICS nations have been accumulating gold at quite a rapid clip the past decade. you just mentioned earlier this show that gold is now the second largest reserve asset globally and I've always tried to think through is are the BRICS nations or is China if we focus China specifically are they at more of an advantage than the United States is as it relates to gold as a neutral reserve asset and I there is uh a second part of that question on Bitcoin and stable coins but I think I I would love to just understand and pick your brain on the gold aspect first like how do you weigh how China and US are as it relates to just gold reserves and also the um the the mechanics of revaluing the gold uh not only in terms of how that works. I know it's kind of like an accounting thing but what would that signal to the market if the United States revalued gold on their books?

>> Well, I think if the US, you know, that's they'll take the shorter one first. I think the US did revalue it just with the accounting uh move. Uh, I think it would signal that that the US is on board with gold being moved back into the system as a neutral reserve asset. You know, fully on board and sort of, you know, I think it would be bullish for gold. I don't know that you we'd wake up and gold would be up, you know, $1,000 or something, but I think it would be very bullish for gold over the ensuing however many, you know, over the coming quarters and years. Um, as it relates to China visa v Gold, it's kind of a two sides of the same coin type of question because I do believe there are uh interests in the US government and and intelligence world that that see that if gold prices went much higher as part of a reset of a system where gold is the neutral reserve asset that it might benefit fit the Chinese and the Russians uh to the detriment of others particularly given inground reserves. You know, if the Chinese and the Russians have more inground reserves of the neutral reserve asset then that is an an advantage you know relative to what they may have uh in you know, in vaults and I think there's some validity to that objection. The flip side to it is the US spends its most of its interactions with China telling the Chinese they need to consume more of their own production. And the Chinese government has been paradoxically the communists have been telling their people for 25 years to buy more gold, buy gold, buy gold, buy gold, buy gold, buy gold, which is a very non-authoritarian, decentralized, you know, freedom-loving thing to do, which is why I say it's paradoxical. Um and so point being is that I think the grand bargain to be had on the table is look we the US needs to weaken the dollar. U the US wants the yuan stronger against the dollar and the US wants China to consume more of their own production. And as you go down that list of three the price of gold's a lot higher. It's like check check. It takes care of all three. You can recap Chinese consumer balance sheets. they will have a lot more money to spend on their own production. If the price of gold goes up a lot, you will have a weaker dollar. Uh and uh I forget what the third one I just said was, but but the gist of it is is that you know the the price of gold going up a lot helps all three of those things. So there's sort of two sides of the house. I think from a grand deal to be had within sort of a reset, I think it is in the US's interest uh for for the price of gold for the price of gold sitting in China to go up a lot. Uh but it's not in the US's interests arguably for the price of gold in the ground in China and in Russia to go up a lot. So, you know, it's kind of one of these it's kind of one of these uh you know, the US needs to decide what it wants because ultimately China's happy to keep buying gold here because they they know relative to US debt, it's still wildly undervalued. So, uh they'll happily just keep piling it on regardless.

>> Yeah. I mean, it sounds like a the natural paradox of a neutral currency. Uh it benefits everyone. Um Luke, I I followed you for a while. I think when you first initially kind of at least in the Bitcoin scene um came on at least from my remembering was with Marty who's a good friend uh and this was years ago and it's been I think where to Jackson's point earlier one of the clearest you know best thinkers in the space helps because you don't necessarily come from the Bitcoin world which usually helps because uh you look at it from a you know a broader view than a you know a singular asset and also what it fits into a you know just a traditional market construct and it feels like over the past few years you kind of grown to realize that Bitcoin may play a larger uh role in global macro and also in your personal portfolio. Just curious how that's shaped and how you see that playing through this because I think um the beauty and what we're trying to do a little bit more of is kind of isolate Bitcoin to be closer to gold than it is to crypto, right? this notion of proof of work, um, you know, sovereign currency, neutral currency, it benefits if you're able to isolate it because it feels like for most retail investors, the path to understanding Bitcoin is has been historically through gold. Um, but very similar with gold's appreciation and people understanding why it's appreciating and its value as a neutral asset. Well, you can't help but also start to see and understand Bitcoin's value prop given that it kind of like gold with wings effectively, right? So just curious how you've been thinking about that and how you see that playing out as investors naturally start to go to gold they will be more open theoretically to Bitcoin when in a world where they would have never gone to a sound money because of cash flows and all the other associated things that a normal traditional financial investor would not uh be interested in.

>> Yeah. I probably not even probably I first bought Bitcoin right shortly after Coinbase launched right so 2013. So, I own Bitcoin and I was on this, you know, this is in a prior life. I hadn't formed FFTT yet. Uh, but I was on there with another uh partner of mine who was in institutional equity sales and we each bought slug of Bitcoin and we're like, "Hey, let's, you know, I mean, I can still find the, you know, the receipts on my Coinbase account from 2013. It's like, oh, like I just, you know, I sent, you know, I sent 10 Bitcoin over to John and John sent 10 Bitcoin back and hey, this is so cool. It cleared, you know, sort of like, wow." And now you're like, "Oh my god, we were sending $1.2 million of rattle." Wow. Um, wish I'd have known that. Um, you know, so obviously, uh, I don't know anybody says, "Boy, I bought enough Bitcoin back in 2013." As I I definitely did not. Um, but I always kept it around that whole time, even after I started FFTT and even after it had gone from whatever. I think I, you know, I probably bought it from like 600 bucks to like 1,300 bucks and then it went like back to 500 bucks or something and and I just held it there because it's kind of one of those things where if you have just a stub of something, you still pay a little bit of attention to it and I just felt like I wanted to pay attention to it. Um, and then in 2017 when it ran to whatever 17,000 and split from Bitcoin Cash, now I've got, you know, this other stub in there and I've got Bitcoin and, you know, that forced me to pay attention because all of a sudden I was like, "Oh my gosh, like here's this is like found money and it's like actually real money. I should probably know something about this." And so I started kind of digging it again. But again, to me, it felt like it felt like a bubble. Like it it it felt like every other bubble I'd seen in my career where it sort of, you know, and when in early '18, I mean, you can still find the old tweets that I put out there just, you know, to heads up the Bitcoin people like, look, they're bringing up these these derivatives. That was when they were launching, I think, Bitcoin futures like in the first quarter '18 or something. And I don't even know if they ever did a whole bunch of volume in them. But my point in those tweets was like, look, this is how they've worked to to contain gold all these years. This is why gold isn't 10,000 an ounce is because, you know, you've got all these unallocated paper derivatives. So, just, you know, be aware cuz a lot of the Bitcoin community was super excited that, hey, this means institutional exposure, blah, blah, blah. And I'm like, well, it might not be good for it. And whether it was the futures or whether it was just the natural four-year cycle, I don't know. Uh, but Bitcoin then proceeded to kind of do what it what it does. And so to me that validated, okay, well this was just a bubble and whatever. I can forget about this thing again and I'll just leave it here. Um, because I'll be honest, it was in '17 it was really giving me um a really hard time mentally from the standpoint of as I'm watching it go at 17,000 and I had a a tiny Bitcoin position and a big gold position and I was like, "Oh my god, I'm wrong for the right reason." like I was right about what was going to happen and I'm on the wrong horse and then they did the futures and it fell down. I was like, "Oh, okay." Right. He's like, "Okay, my priors have been confirmed. I'm good to go." Um, gold was the right one. Bitcoin was just a onetime bubble. We got all excited. Okay. And that was about when I think some of the Bitcoin community, maybe 2019 into 2020, started reaching out to me and having me on some podcasts, you know, Peter McCormack and uh some other guys. Um, and I give them a ton of credit cuz they sort of dragged me into it kicking and screaming cuz I I was still at that point I was like, well, like it's kind of interesting, but I think it's just a bubble. Like it did its thing and now it's back. And you know, their overriding point was just Luke, you you come at it from this macro like you were saying, Michael, and like you're walk you're running the ball to the one yard line going in. Like all you got to do is like say hike one more time and like step over the goal line and you'll get it. And like so they were just and thank God that you know I mean as you guys know the Bitcoin community is is very um optimistic and uplifting and enjoyable to be around generally speaking and

>> persistent.

>> Yeah. And persistent. And so they're like you know and and you know to my credit I wasn't a dick. You know I could have been like you know piss off and and like they probably would have said you know well f you. But uh but I didn't. I just I'm like okay all right. Like I never said no. I just And so finally like where it really hit big for me finally where I went from like this is interesting to like oh my gosh was in I guess it would have been like November of 2020. If you remember Bitcoin went back over like $20,000 with authority. Uh it was like whoom through it. And I looked at my wife and I just said look I'm wrong. like this is not a bubble that went up because every other bubble in my career was you know up crash and it's dead for like 5 to 10 years and yet here I am three years later not even two two and a half years later and this thing's breaking through the prior highs with authority and I looked at I said this is a currency issue this is like if I look at the the chart of Bitcoin in dollars it looks like the chart of you know Turkish lira in dollars if I it looks like, you know, Lebanese pounds in dollars. It looks It looks It looks like a hyperinflating currency. It looks like a currency crisis and a weak currency in dollars, except this is dollars and bitco, you know, bitcoin and dollars. And I said, look, we're going to this is going to be a big position for us because I'm I'm wrong. Like I thought this I and it's not this is this is I I started calling it the last functioning smoke detector. like this is what gold exactly what one of the biggest physical gold traders in the world told me a couple years earlier like Bitcoin is doing what gold would be doing if it didn't have that gigantic unallocated gold market attached to it and I'm like okay here we go and so um I actually shifted a bunch of gold into Bitcoin and then I actually backfilled the gold that I had shifted into back bit Bitcoin and then I kept adding to Bitcoin and so for me it is now I think a and And then you, you know, once you already have a good position, then you really got to learn everything you can about it. And the more you learn about it, the better you feel about holding it. I mean, volatility aside, you you sort of learn that. But like the more you learn about it and the more you get involved in the community and and the more you realize, wow, this is a real this really is the last functioning smoke detector around what we're doing. And, you know, I want to be there. And so that it was really kind of a fun process through all of that. Um I mean I wish I would have gotten to the 2020 point in 2013 because I'd probably be on a beach somewhere having flown there on my own jet, but that's neither here nor there.

>> I love it. That's it's incredible anecdote and um it's a signs of you know obviously a great investor and somebody that's just uh has the self-awareness because most people have the sunk cost fallacy and just double down on kind of their buyer their their priors. And it reminds me of similar uh that doesn't get talked about enough, but Paul Tudtor Jones journey because if you remember, I think it was after the 2017 bubble, he referenced having his analyst do diligence and he looked at the supply and it was like 85% of the same holders watched it crawl down to $3,000. And he's like, "Nobody does that." Like nobody still holds. And he's like, "What are what are we missing here?" Um, and then the other thing is, uh, it probably helped the Lyn Aldens and other individuals coming in from the macro space to help in like because it helps to see other intelligent people follow the trade versus the persistent lunatics screaming at you on Twitter as well.

>> Absolutely. I mean, I know Lynn, I know Lynn, she's a friend of mine. And so, it's really helpful to be like, you know, it's a it's a it's a it's a true luxury and privilege to be able to like, you know, bounce stuff off her be like, "Hey, I don't understand this. Help me understand this." and she's got this great, you know, way of breaking things down like an engineer like, "No, think of it this way." And I'm like, "Oh, okay. Got it." And once you have that understanding, that leads to what Paul Tudtor Jones discovered, right? Of of, you know, why weren't people selling? Because they knew like they once you know like, you know, you you don't you don't sell unless you really have to.

>> Yeah, that's a a really fascinating uh sort of peak into your your journey, Luke. I think one thing that stuck out to me there was your I guess initial curiosity to get some in 2013 is actually super critical to the rest of your journey because in my mind most of the people in traditional finance um they don't have enough curiosity to do the initial allocation and then they don't watch it like you watched it. So having that initial allocation made you continue to at least think about it in the back of your head and actually in the future be willing to say what if I was initially wrong about this thing because that's the recurring pattern with a lot of um more traditional finance hedge fund types. You know, the most recent example is uh Philippe Lefant from CO2 who talks about his journey and he initially just dismissed it for many years and ultimately woke up and realized like I have to be willing to question if I was wrong about this thing and that's almost you know that's one of the greatest skills of the best investors of all time is willing to say being willing to say what you know what if I was wrong about this but I think the the sort of uh the initial allocation is actually critical in that because then you're you're more predisposed to say, well, at least I at least I got some back then, and so I I'm not going to be as um biased against this being uh you know, not originally what I thought it was.

>> Yeah. And you know, I I I was had some advantages in that and that, you know, I was work on the sell side calling on big institutions. Uh and very dear friend of mine was who uh was working at one of the biggest hedge funds in the world. He had a couple of friends that he introduced me to, call it, I don't know, probably 2009 or 10. Um, and they were both played minor roles. They're both mentioned in passing in the big short, but they had made, you know, they had made good money uh in the big short, right? The the mortgage derivative trade. And what these two guys were doing was they were buying Bitcoin in like 2010, 2011, right? And so people say, "Oh, if I could have bought an '11 for whatever they were buying it for, a buck, 20 bucks, 100 bucks." Gosh. And like it's easy to say, but like like these guys were like like flying down to like Ecuador and like buying Bitcoin from like video gamers and like it was the wild faking west. And so they were kind of going around and so they were the ones that really like '10 '11 were starting to tell me about it. And they were the ones, you know, finally like by 2013, you know, I said, "All right, I want to own some. How do I do it?" They're like, "Here, go to Coinbase, download on your phone, away you go." And I doubt I would have ever done it if not for that. But I will say one thing as an investor. I've always had an ability to do for whatever reason. It's like when I'm wrong, like I can just flip. And I it's just like I it is almost like uh it just completely ownership gone with I'm wrong, move on, wipe the slate, like go forward. So luckily it played out well this time.

>> One thing that's really crazy to me still is that Bitcoin is 100K and yet most people don't care. Um maybe I was the crazy one for thinking that 100K was going to be a psychological barrier. It was going to get a lot of press, a lot of attention. And uh here I am. you know, my family, my friends, they still think I'm this crazy guy who's, you know, buying this magic internet money. But one day, you know, one day I think we're going to be on to something here. And um if we are, that's a good thing for a number of reasons. But it's also a bad thing because you can imagine right now there's not that much awareness around 100K Bitcoin. Yet there's still been hundreds of billions of dollars of losses. There's still billions that are hacked and social engineered out of people's accounts every year. There are more and more kidnappings happening, not only of high-profile people in the industry, but also of everyday people as well. And so, unfortunately, this is going to get worse. I mean, there's really no arguing that as Bitcoin continues to appreciate and people with bad intentions recognize that a lot of Bitcoin sits in people's homes or nearby, this is going to get worse. or people recognize that it sits on exchanges with very weak authentication points. Again, lots of threat vectors typically for people's Bitcoin. And so at On-Ramp, always looking to stay ahead of the curve and part of that effort is launching On-Ramp Guardian. It's included with your On-Ramp account. And it really in a number of ways protects against digital and physical threats. So if you want to learn more about it, just reach out to us or you can check out our website onrampbitcoin.com and schedule a consultation. It's always funny to hear when people say, "Oh, I if I had known about it then, I would have bought it." Right? Because even to this day with the ETFs just going live in 2024, everyone effectively, not everyone, but 99% of the people or let's say investors in the US could easily have made an excuse. Well, if I known about it, I would have bought it. But they did know about it. They didn't buy it. And now only starting to buy it very, very small percentages. It's still a retail driven market because the ETFs are allowing for that liquidity access, right? Very, very few investors have actually gone into like Bitcoin Native Rails and purchased Bitcoin, let alone flown into South America and, you know, done a cash deal for 10,000 100,000 Bitcoin, right? So, I always find that fascinating. Luke, we um Brian and I both are from the traditional finance world. I actually remember in 2020 after I was living in New York at the time after everything shut down in the city. Uh my dad had to drive to drive up on St. Patrick's Day actually to evacuate me uh out of the city. Normally the craziest time in the city like St. Patrick's Day is probably the one of the busiest times in the city. Not a soul on the streets anyways to get back to Pennsylvania. And um I it took me having to go look into like macro voices, right? find some of these like more off thebeaten path or esoteric um interview podcasts. And that's how I found you. That's how I found uh Brent Johnson, Lynn, a lot of the great macro thinkers that I I think do a phenomenal job. But when I got back to the office and I had this different view back in 2021, it was remarkable that nobody in my office, I'll put Bitcoin aside, but even gold, right, even under this new fiscal and monetary regime that we were experiencing for the past 12 or 18 months at that point, nobody was talking about gold at all. And that was that was very strange to me. And I I curious to hear your thoughts just like I know there's a stigma uh historically about being a gold bug and all these things. Same could be applied to Bitcoin. I I'm wonder if you think that stigma is starting to shift and do you think that gold is finally kind of at a point now of getting let's say more institutional credibility in portfolios or or not so much?

>> No, I it's interesting because I Okay. I I was at a conference probably 18 months ago and you know sort of you know somebody said to me you know Luke I get you understand what you're saying but if I buy gold and it goes down 30% I lose my job and if I buy treasuries long-term treasuries and they go down 30% I keep my job and so it's super interesting because at the same time without getting into any specifics I'm also having conversations with people at the very at very high levels in finance, very recognizable names, and they love gold. They love it and they own it big. And so there's almost like this, you know, sort of the the the I mean, even look at Bessant, right? He's a self-admitted gold buck, right? He's now the Treasury Secretary of the United States. And yet like most of traditional f finance is still where you know that that person who said that to me is like look I can't own it because if it goes down I get fired whereas if I lose money in treasuries like everybody else then I'll keep my job. Um, and so I to me it just speaks of being an early innings, right? It's kind of the classic, you know, you know, early adopter, late adopter stuff. Like the the early adopters, you know, they're partly there. Uh, but they get it. I think and and part of it is is, you know, it's not a question of intelligence or of sophistication. I don't want to make you think that's the reason for it, but I think I do think what it is is, you know, the average person in finance doesn't not only get paid to think about, but but is actively discouraged from thinking about things like what does it mean uh that central banks are buying all this gold and stuff? What does it mean Russian FX reserves being s like like the average average financial person in America is like, you know, oh, we seize Russian FX reserves. All right. Yeah. H # America. Great. And that's the extent of the thought rather than, okay, what does this mean? What does this mean? What? And so the guys are going, what's this mean? What's this mean? What's this mean? Are going, oh my god, I got to buy gold. I got to buy gold. And the central bankers are going, oh my god, I got to buy gold. And sort of the people that aren't thinking about those second derivative things are like, well, just not thinking about that yet. Uh, you know, price is probably starting to wake them up to that, right? America, Americans, right or wrong, right? the average American investor won't buy anything if the price isn't moving and they'll wait till the price moves. And that's just how we are culturally. You know, c certain cultures are value buyers, certain cultures are are are momentum buyers, and Americans culturally are generally a momentum buyer. So, you know, we're it's probably starting to get on people's radars, but even then, like, you know, most hedge fund prime brokerage agreements, I'm told, uh, prohibit specifically being able to take physical delivery of gold from your prime broker, right? By the

Time this cycle's over, I don't think that will be there still. That prohibition.

>> Yeah. Yeah. That's what makes this time incredibly exciting, exhilarating, because um while it's bleak out there, we know it. When we see inflation, we see the the the trends, demographic trends.

Um there's this notion that, you know, you hear Dalio come out, we were talking about it on a previous pod. I think he came out at like 5% or 15% allocation for something with gold and some smaller in BTC. You know, he's much more allocated to that. But the inertia that exists with his investors and we talked about this as well with the all-in guys who pretty popular. It's like Chimatha was on this trade in 2013. He doesn't talk about it because he has a whole LP base. Like these people aren't incentivized to discuss it. In the same way u to your point institutional investors either by design or because they can't talk about it and really uh pitch it as a as as anything viable. But in reality on the back end there's a bunch of people allocating. It goes back to safe in his book about you can't really uh insulate yourself from a harder money than others are holding. And so whether it's a sovereign or just an individual or company balance sheets now there's the pub code craze which we have our own opinions on but the notion of like a company like Figma that's just pure good business to be able to hold a harder currency and if you're a business if you're an individual personal balance sheet and you touched on something on pod that u most people don't talk about. It's something that's been instinctually in my mind because I' I've been in the space for a while and um you talked about the ETF and approval and how there was a little bit of I don't want to call weirdness but it was a little uh curious in your mind on you know that from a from a I think you know where I'm going with this that from the US and and inflation and and effectively um the 350 million Americans need to be able to preserve if if you onshore production and inflation runs people need to be able to hold a better form of money or they're not going to be able to buy any of the things you produce.

And back in 22 and 23, this doesn't get discussed, but institutional investors wanted nothing to do with Coinbase. I talked to them, the folks at Citadel and Black Rockck, they wanted nothing to do with Coinbase. It was a web 3 company. In their mind, it was the same thing as BlockFi, FTX, Celsius. And something in shifted between like that summer when everything collapsed in 22 and and fall and then 23 when Coinbase was just blessed by everyone and the ETF was blessed and the guys was thrown and the common narrative was that the Grayscale, you know, ETF and it was the lawsuit and that really did it, but it never felt right. And you're the only person I've heard kind of talk about this publicly.

Uh do you know what I'm do you know what I'm referring to on Brie Loves podcast where you're discussing the ETFs getting approval?

>> Yeah. Was I just saying that basically you got to get you if you're going to inflate things really inflate things you've got to have let people hold an asset that's going to preserve or grow some purchasing power ahead of time or else you're just going to you're going to spur a revolution basically.

>> Exactly. Right. So in that in that vein then that was the real reason or a large component of the ETF approval was to get consumers the ability to hold uh a form of money that would be able to you know hold their purchasing power.

>> Yeah. And I'm not all in the weeds on the sort of uh Biden administration versus Trump administration regarding um favor favorability towards uh Bitcoin. My understanding is that that that the Trump administration has been far more favorable and obviously that was still during the Biden administration. But yeah, I think ultimately I think our leaders for as it it really there really is a a version of the Churchillian uh uh commentary, right? The Americans always do the right thing after they've exhausted all the alternatives. Like I do think that's kind of a a cultural phenomenon where America will ultimately do the right thing. They won't go down with the ship doing the wrong thing. Uh, and I think that might have been an example of that where there was this belief of, hey, you know, we can we can, you know, 2022, right? We were, how many times were we hearing that Powell is going to be the next Vulkar, right? He's going to fight inflation. He's going to stamp it out. And I was writing for clients at the time, you know, in not so many words that, you know, people saying that are high. There's like zero chance they can do that. Like it's and it's not, you know, I went to public school. It's very simple math. you know, it's impossible that he's not going to be able to do it. He's going to it's going to blow up. And fall of 22, it did blow up. Yellen started weakening the dollar. And so my view is that, you know, probably sometime shortly thereafter. And if not then, then in probably, you know, first half of 23 when they had to come out and save, you know, signature and basically, you know, the BTFP, it's like, oh boy, here we go again. Okay, we thought we could do this. We can't do this. We're going to have to inflate. And if we're going to inflate then if we want to avoid you know the sort of uh you know pitchforks and torch outcome then basically you know we cannot keep bond holders whole on a real basis and inflate away the people. We need to inflate away the bond holders and keep the people whole on a real basis. That's the smarter thing to do and politically. And so I that's you know I have no sort of proof of that or I've not heard anything to suggest that there was you know some decision made in that regard. I just watch the favorability shift as you described sort of after 23 in line with what was happening. And you know I I think you know there were other things Yellen showed throughout that time that were very pragmatic where she kind of said oh you know even even as far as going like oh my whole academic dogma around neoliberalism and free trade was totally wrong. Sorry.

I would love to talk about um, you know, digging a little bit deeper into the administration because we brought up uh Bessant and being a gold bug and then Luke you just mentioned and Michael about how if you're going to inflate everything away you want to get your citizens into a better form of money or a scarce asset to preserve purchasing power so they can participate in the economy. Love to hear Luke your thoughts on this first eight months or so of the Trump administration. um what sticks out to you just from their economic policies and more specifically the embrace of Bitcoin and stable coins as part of the uh you know bidding up the treasury market creating demand there. Just love to hear what sticks out to you there. I'm sure Brian has thoughts as well. Uh Brian actually sold all of his Bitcoin for stable coins. That's how much he loves stable coins. But uh Luke, yeah, what are your thoughts?

I think I think they have shown an ability to course correct from starting on the wrong foot, right? So like if it was me and I was pretty vocal about this at the time, I would have come in and done kind of the big bath, right? I would have just said, "Look, the prior administration did all this. We're going to devalue the heck out of the dollar. Uh we're going to revalue gold up. We're going to buy down debt and we're going to go." Um, and they did weaken the dollar over the course of the over the course of the first half. Of course, uh, but like to me, the whole Doge thing was a complete airball and was always going to be an airball. I mean, you just look at what we spend money on. It was, you know, maybe that, you know, it's entirely possible there was a political nod there for that that that sort of ground ball had to get run out, whatever. Um, I think so. From an economic standpoint, when I say they changed course, I think they I think they wasted time with a with a with a completely flawed Doge effort uh that was never going to work. I think they completely uh overestimated their own ability and their own leverage as it relates to China specifically, but the trade war more broadly. um both visav things like rare earths and and the balance of trade, but also critically about the treasury market. um, you know, they did liberation day and seven trading days later the treasury market's blowing up. Like that shows a to me an astonishing lack of uh second derivative uh thinking or understanding of of what was going to happen. um, with all of that said, uh, they have shown an real ability to, I think, change course. And I think what we're so maybe the best example of that is just sort of you know cramming through this genius act and stable coin thing which is ultimately in my view uh the pace and the aggressiveness with which this was pushed through I think is a should be taken as a read on how uh concerned they are with the US fiscal situation. In other words, they've got to find significantly repressible balance sheet. They need to find somebody willing to buy lots of bonds at near 0%. Uh now, and so I look at that and go, that makes sense. But it only really makes sense if you can get rates at the front end down. And you know, there is sort of 40 years of dogma in the US around, hey, well, they can't cut rates if inflation is still here or unemployment is still low or what. And and you know, that's what we're living through in real time right now, which is no, they don't. They they are, you know, why are they why are they firing this woman? They need rates down now. Like, and the reason they need it down is not because they hate the Fed or because Trump's an authoritarian or wants to be some dictator. It's because the US fiscal situation is that bad. They need rates down to zero. They need to finance a lot more of it in the bull market. if they need to means they need to get bitco or stablecoin market cap up a bunch and then I look at all that and go in that world you know it's hard for me to see a world where stablecoin market cap goes to two three three and a half trillion over the next two three years like Besson just talked about and Bitcoin doesn't move right or or goes down in price I just don't see a world where that makes a lot of sense to me so if not explicitly they're kind of standing up Bitcoin in that way as a as a neutral reserve asset at of sorts, but at the very least they need Bitcoin up because if Bitcoin goes up, you know, I think that's going to drag, you know, it's you we can have a chicken or egg discussion. What comes first, stable coin or Bitcoin? I don't know. I and I don't I could argue that either way to no effect or to to limited effect, but ultimately I can see the relationship. And so it's hard for me I I think it's hard for me to see a world where where stable coin market caps up a bunch which they absolutely need as a result of the fiscal situation like yesterday um without Bitcoin rising a lot. So it's suddenly in their interest for Bitcoin to be a much bigger number.

Yeah. Credit to you. I think you were one of the only people calling out at least loudly how Doge just the math didn't check out pre to the discussion and most people were excited about it. It's like this just doesn't this isn't going to work. um one thing to call out on the stable coin aspect that people generally don't bring up is uh it'll soak up demand on the banking side as well because I think pre this uh Genius Act and I I it's still I think this is going to tie more to market structure, but pre Genius Act um banks could custody the asset. They just had to have a 1:1 ratio uh in treasuries or dollars sitting next to the underlying. And so I think there's going to be something naturally that would happen like that as well as BNY and these banks step in. They'll be able to custody the asset, but they're going to have to have some kind of uh pairing with, you know, naturally treasuries or dollars, stable coins, um which is naturally going to soak up more of that kind of demand you're talking about.

>> Yeah. You know, there's a world where, you know, they can get Euro dollars flowing out of other places into stable coins, T bills. Again, it's it's it's easier if dollar rates are lower. um, but they don't have to be because best can just go, you know, and throw the grenade of like, hey, in the next crisis, you know, we're not backing any of that stuff. No swap lines for anybody. Have a good day. You know, put it all in stable coins. And, you know, with yields around the world doing what they're doing, particularly in a lot of these places, you know, we we look to maybe not be that far potentially. You we're a couple bad bond market days away from a crisis of sorts that might start to sort of, you know, light that fuse. So, let's see. But I to me that's I I it makes sense to do um, you know, and then we can get into economic policy around you know, what they're doing with some of the what whatever we want to call them nationalizations or investments or however we want to spin these things. You know, the these are these are capitalism not socialism or whatever we're calling it. It's it's I'm equally unpopular on both sides of the aisle actually cuz I try to actually call a spade a spade.

>> That's how you know you're on to something or crazy is uh if nobody agrees with you. Maybe I don't know. We talk about that very often at our firm because we work on something called multi-institution custody and it doesn't allow for any uh institutional counterparty to hold unilateral control of the asset. But the individual doesn't hold I got one here just to always keep it the plastic device with all the money. And we make the hardcore Bitcoiners not too excited because it's not your, you know, obviously not your keys, not your coins. But then there's obviously institutional capitals like, well, if you're being wire fidelity, it's like, I gotta hold all the money and this is that middle ground. And so it's something I I tell the guys often when when you get laughed at, you're either very crazy or you might you might actually know something. um, that would be maybe a good transition uh on the the productivity side of things, like where do you see the nationalization effectively of Intel? uh because at the end of the day we know government intervention ends up with inefficiencies not efficiencies. And maybe starting there u because I have some other follow-ups but just curious like what your take is. It just seems like a preposterous uh path we're going down but curious on what do you think?

>> I think it is I think it is I think it is a preposterous path but I think it's it's the right path. The problem is is that it's as with the Doge stuff where they were doing the wrong order of operations, right? Like Doge would have worked fine if you'd have devalued the heck out of the dollar first and devalued the heck out of the debt. Then it would have been fine, but without having done the first first um it was never going to work. And I feel a little bit of the same way as it relates to some of these nationalizations, which is to say like we had no problem backstopping banks. And you could say, "Well, that was an emergency." Well, this is an emergency. Like NATO just got its ass kicked in Ukraine. And we got its ass kicked because we literally the US military on the margin is now made in China. And um we were out produced by the Russians, a country that we used to laugh at. That's a country with a gas station attached. Yeah. Well, they outproduced us four to one. The entirety of NATO. And why? Because that's how much our industrial base is hollowed out. So like as as much as nationalizing the banks was in '08 was an emergency, this is an emergency. Now with that out of the way, the challenge is is that they're treating it like a narrow emergency. This is like, well, we have dollars and we can do this and so let's do this. You know, it's basically like we're going to out China without the requisite infrastructure, without the requisite electrical grid, without the requisite like uh uh strategic planning. Like it's just like, well, if we own Intel and we own Lockheed Martin, then it'll be better and they'll make weapons and chips faster. And it's like, no, no, no, no. There's like like there's still an order of operations, guys. Like, you got to have a grid. Oh, by the way, for 40 years, you've been telling people like, "Go into finance because engineering sucks and it's hard and you're never going to make any money." And you know, oh, by the way, if you go into the skilled trades, you know, you know, you're you're useless. Well, 40 years later, we are now woefully short welders, uh, skilled tradesmen, engineers. And so if we're going to nationalize some of these critical industries, which I I I think is on some level the right thing to do to get some money directed into them, you still have to do the uncomfortable part, which is you got to direct some money into these trades. You got to you got, you know, all of us need to get out of finance and go weld because we can make $1.2 million a year welding and we don't have to think about our jobs when we go home. And we're not worried about what Trump's going to tweet at 9:00 that night. We don't give a We're watching Monday Night Football. So that's the And now the tricky part with that is the bond market blows up. You like they if they want to nationalize companies to reshore industry, they they don't have the long-term plan, they don't have the infrastructure, you know, in terms of grid, etc. They don't have the welders, they don't have the engineers. And making matters worse, in the next 5 to 8 years, a quorum of the engineers and welders in this country are going to age out. So then we won't have them at all. And now you're, you know, kicking labor out. Not going to talk politics of it. I can just tell you, you're going to, you know, a lot of this labor, you're not going to be able to make welders in 5 years anyway because they, you know, they don't even speak the language, right? So you're not going to be able to turn someone who doesn't speak English into, you know, an engineer in 5 years probably or three years, say, right? So maybe five years you could, but not in three. um, so but at the same time that removal of labor is also going to put upward pressure on wages. And again, it gets back to this elephant in the room, which is trying to do all of this without just taking your medicine as it relates to the bond market. It's not going to work. Like you basically the thing we should do first is just blow up the bond market. Like just blow it up. revalue like and and I'm not saying get rid of it, but I'm just saying devalue the currency enough so that it is no longer like making the decisions because right now it's making decisions for us. We can't grow too fast. Why the bond market? We can't hire too many people. Why the bond market? We can't, you know, subsidize welders and engineers. Why the bond market? We can't do this with with growth initiatives. Why the bond market? Get rid of it. Like we would never, you know, when we, how many times have you guys heard we're in a great power competition or even amongst the more hawkish, you know, we're at war with China. Great. Show me in 1941 4243 where FDR said, I'm going to make bullets and tanks and ships and jets to fight the Nazis if the bond market will let me. It never happened. It never happened. And I think part of that is what we're seeing. I I think that's where we're going, but it's one of these things where you don't want to say it. You know, I can say it and people say, "Oh, Luke's crazy. I think Luke's gonna be right, but Luke's crazy, right?" um, that's fine. I'm a crazy guy in Cleveland. I can say this. You can't say this if you're Scott Besson. You can't say it if you're Steven Meer and you can't say it if you're Donald Trump. But I think that's what they're going to do, right? Like, when we really look at what this whole Fed thing is about, this is about subjugating the Fed. Get them out of the way. They don't get a say in this. If we're in a great power competition, they have one job. Buy every bond we issue at 38 at the front end and two and a half at the tenure like they did during World War II. That's it. And bonds get killed on a real basis.

Yeah. I mean, from a first principal perspective, the Intel um, it's it's effectively a distortion of capital markets, but also to your point of incentives, right? because you referenced earlier in Trafy and individuals in finance, they're looking at their benchmark in bonds, they're not going to get fired, but if you blow that up, it ch it realigns the incentive, which ties back to u it was a tweet you had uh retweeted. It was somebody paraphrasing that they were like um I think they were in defense manufacturing or some hard skill and they were trying to raise venture capital. The venture capitalist told them to go to the PE firm, the FE firm told them like you're not Musk and to go to the VC firm. And it's that just basic like concept of nobody's incentivized to do anything productive in this world because the underlying unit is fundamentally flawed. um, and that's what's I guess not exciting, but gives at least somebody, you know, younger or I think everyone hope that if we get back to like the sound renaissance that I think we're upon when it comes to gold and Bitcoin and people just understanding money doesn't grow on trees, well, the free market will ultimately bring in those plumbers and the um welders when people if they say pay me in gold or Bitcoin, I'm not going to produce it. And then they'll demand their market rate. I think we end up there. Now, if it's 2 years or 20 years, that's TBD, but that's where the market goes because people just will uh want the better money. um, so yeah.

>> No, I think that's right. I mean, and I think you're seeing, you know, someone asked me that the other day on a podcast or somewhere they they said, "Well, well, it's not fair if if Bitcoin goes to a million, then it's going to be the Bitcoin or some narrow subset that gets rich." And everybody else, I'm like, "Yeah, but look at the Bitcoiners. They are net producers that understand money. What do you think Bitcoiners are going to do when Bitcoin goes to a million or whatever the number ultimate? They're going to turn around, they're going to buy and invest in an HVAC business. You know, you look at you Google up like bis I think it's like biz biz sell buy or something like that. You can find people selling these small businesses. The internal rates of return on these things are insane right now. Insane. Like you can buy, you know, a business an HVAC service business that's like for 650,000 bucks and you're going to make 250 a year. like and no one wants to touch it because it's like there's an artificial there's an artificial uh uh um obstacle there. There's just there's no there's there's nobody going to trade school. So, they wouldn't know what to do with it. So, it's this fascinating thing, but at the right number for Bitcoin, at the right, you know, you would you would start to do it. Now, like you said, time TBD and and what does that look like? because we don't, you know, the interest doesn't sleep and it's growing really fast at 5%. And you know, at the same time, some of the entitlement stuff's growing really fast and, you know, we may not have that. So it that ultimately to your point like the free market will work. It's just a question of, you know, you know, Bitcoin will force that free market to work and then Bitcoiners will, you know, sort of pick up the pieces and rebuild things and away we go.

Yeah, I know Jackson has some thoughts, but one last thing to share there is um so Texas obviously or not obviously but had approved the strategic Bitcoin reserve and we're talking with them and you know others on around custody and ended up in a without you know uh killing any confidence in a very high level room in Texas you know uh working for the governor when it comes to um just everything related to accounting for the state of Texas and GDP and what came up was like how do we tax this thing and how do we like you know just measure it and all that. I was like, "Okay, look, that's important, but that's like incremental um very small, you know, receipts as compared to just make this favorable for people to come and build businesses and work and and you've already kind of seen this because to your point, this is something UAE's really like figured out from not only the the tax environment, but they've been mining. It's like you want that within your borders because naturally to your point, it's very first principle like people don't hoard money just to hoard it. they have certain things they want whether it's just personal goods and services that they want to live lavishly and then that'll reinvest or they're naturally going to reinvest in productive goods and services and you want that within your sovereign borders if you want your citizens to thrive and uh I think people are slowly waking up to that and that's kind of positive in kind of the structure of the states where you have that competition happening here

>> it's it's fascinating because money's been so distorted for so long that everybody kind of has it upside down which is to say think about OPEC exists. It's a cartel, right? And why does OPEC exist? It exists to restrict the output of oil in order to maximize dollars. Why do they have to do that? Because the dollar's a fiat currency that is, you know, you you have to do that. If OPEC was selling for gold or if OPEC was selling for Bitcoin, there would be no need for OPEC because every producer would be incented to run oil production full out all the time to get as much gold and Bitcoin as they could today because it was a finite harder money. And as a result, you would have a deflationary highly productive and and every business around the world would have that same incentive. maximize output and productivity. Today, I'm I'm going to invest to improve productivity because I'm competing for a harder money. You end up with this this wonderful world, this high growth, low inflation, highly productive world just by changing the incentive like that with the money. But it's, you know, it's like if you ask a fish, it's environment. The various thing it would describe would be the water.

It's so funny you bring that up because that's something some of the uh highest gigab brains on the uh engineering side of Bitcoin have referred to as the Nakamoto point that eventually when you play this out 50% of all production will go to mining right the other 50% it's actually a book you probably have read it where it came from u the prize which effectively breaks down kind of like oil production you can kind of

>> oh I've not read it but I know of that one

>> yeah and it basically I think stems from that that all you can look at geopolitical conflict exists around oil production and how do you have to transfer it for dollars? But if you have a neutral asset, you can literally mine it directly to the decision point is either directly to the asset or to the consumer good and that just creates an equilibrium that we've like effectively never seen.

>> We've never Yeah. Because it's just all, you know, humans are flawed basically and you know, greed, fear.

>> All right, so just the other week my co-workers, I think it was Michael or Brian told me I it looks like I'm recording from my grandmother's attic. and that really hit home. And I really do want to be able to upgrade my podcast studio. But in order to do so, I'm going to need you to like the video and subscribe and comment. We just need to um you know, get the word out there. Let's let's help to get this episode with Luke out to more people. So, if you can just help us with the algorithm here, if you can subscribe to the channel, leave a like, leave a comment, I really appreciate it. Hopefully, I'll be able to upgrade my camera, my audio, and by no time, I'll be a professional podcaster. And so, please do it. It just takes a few seconds. We're spending time every week. We are booking guests. We are preparing for the episode. We are sitting down, editing, distributing, you name it. And so, it's a long process, but it's a worthwhile one. And um yeah, I would love if uh I don't need to get picked on by uh my boss anymore. So yeah, please leave a like and a comment and hope you enjoy the rest of the show.

So yeah, on this topic of just where this is all heading, my question is how weird does it get? And and what I mean by that is so Luke, we've discussed a lot of the underpinnings of where we are today, the discrepancy between labor and capital and learn learn to code is now learn to weld. And I'm just curious like where does this all go, right? because now we're under crazy deflationary force with AI. Like probably a year from now, I won't have a job anymore because uh I'm just going to automate myself out of one. And um how do we reconcile the $37 trillion of debt with more and more compounding at crazy rates? So how do we you know inflationary system that is just exponentially growing? How is this going to end with AI just eating everyone's jobs?

>> Yeah. How weird is it going to get? I think it's going to get pretty weird. And I don't know, you know, ultimately I keep harping on as it relates to AI, like most AI is way over my pay grade. Uh other than this, I can tell you with absolute certainty if AI does even a fraction of what a lot of people think it could, it's fundamentally incompatible with our debt based monetary system. Like I've seen this happen already. Like I can, you know, I have an advantage being in Cleveland, being in the rust belt. People like, "Oh, the productivity would be great." Like for some, like, let me tell you how this went. The last time we had an AI productivity miracle, it was called Chinese. It was called China. It was called take all the manufacturing and move it to China. And it was great for the corporate execs. It was great for their stock options. Uh, it was not so great for the working and middle class. It was, you know, they who had, you know, their $30 an hour job at the at at GM with full benefits knocked 12 bucks an hour as a Walmart reader, no benefits. But for a period of time there from like 0203 to like 0708, it was fine because they got a subprime mortgage or a subprime home equity line. And so they still got the bass boat. They still got the truck. They still got, you know, the vacation. Their their standard of living didn't fall immediately with their actual standard of living. It hadn't been marked to market yet. And then home prices stopped rising. And then everybody couldn't refi all those lines and it all came unhinged. And we know how it ended up which is the Fed's balance sheet went from 800 billion to 4.5 trillion over the next four years. Okay, that's the model. And you know that's the model which is massive productivity gain. Okay. Are are we going to get some sort of subprime lending to paper over you know white I mean it struck me the other day. I mean you guys saw if you read my work like New York Times had a had a map showing in 38 of the 50 biggest US states the biggest employer is healthcare. And that's not docs and nurses. That's mostly administrators. That's mainly paper pushers. That's stuff that like AI is uniquely uh um, you know suited to disintermediate. And those people all have mortgages. They all have car loans. You know, student loans not so big. That's just defaulting on the government. But you you actually can't default those. But that's neither here nor there. But like we we saw this before where okay, when they stop paying on the mortgages, when the mortgages start getting delinquent, then what where's that show up? Are we going to bail out the banks again? So you can see very quickly the path is okay loss of jobs on the margin. It doesn't have to be a lot but you just wage deflation, loss of jobs. You start to see some uh consumer credit defaults. Do we get some sort of you know it would have to probably be universal basic income because I don't think there's any subprime that's going to be coming up to really paper over any of that. Maybe maybe we're seeing some of that with the, you know, the the the buy now pay later on, you know, frigin burritos. You know, maybe with maybe some of the growth of that industry is is this version of of subprime. That certainly could be the case. um, but ultimately, we know like, you know, you're not going to be able to refy a burrito more than a couple of times. And and ultimately, like the debt based monetary system doesn't work with what AI is going to do. And therefore they're going to have to backs stop this the like you know they're going to have to backs stop the whole system. I was I was talking with Jeff Booth, you know, and I'm sure you guys all know either know Jeff or know of Jeff. He had the great book, The Price of Tomorrow? And he and I talked about it first time we met in person and we're talking about at a conference and people like, "What's going to happen if you've got, you know, all this debt growing exponentially and and technology is getting exponentially deflationary? How's it going to work out?" And he looks at me, I go, "They're going to have to fully reserve the debt." He goes, "They're going to have to fully reserve the debt, i.e. 150 trillion in debt, you know, whatever that's consumer and and and sovereign, I don't know, 80 trillion, 100 trillion, it's all going to end up on a central bank somewhere, central bank balance sheet somewhere printed and those dollars will be printed to fully reserve the debt. And so to me, like most of AI, I know is above my pay grade, but if it does what even close to what some people think it could, many people think it could. To me, like you you got to own Bitcoin and gold, like you have to because basically they're going to have to fully reserve much of the debt to prevent it from blowing up the entire system as a result of the deflation driven by AI.

>> Yeah. And I would go as far as you can to just say if you one of the data points you shared earlier this week, Luke, was just on the birth rates in the US hitting all-time lows, right? If you want to own a home or you want to start a family, you need to own gold and Bitcoin as well. And so, um, yeah, it is it is going to get weird and I don't think any of us have a crystal ball, but um, it truly is unprecedented times. And so I like to think at least um even though I'm not out there welding and producing anything with my hands. Hopefully this podcast makes it to some people who you know can share it with friends or family so they can start to peel back layers of the onion, get a better understanding of what's actually going on here because it is critical. And um you know we like to pick on the boomers all the time and maybe in some part for good reason but I also have some level of concern for the boomers. maybe not the, you know, the ultra wealthy boomers, but model portfolios tell you to own bonds, right? And we've made an entire case this podcast why that may not be the best idea if you're living through a one in a 100redyear global monetary reset. And so I I not only have concern for people of my generation, millennials and Gen Z, but also on the other side of the barbell, a lot of, you know, there is going to be a lot of um wealth that's destroyed if you're not properly allocated. So, you know, I I really appreciate the work that you're doing.

>> Oh, I appreciate it. Yeah, and I think that's exactly right. I mean, it's not what it's one of these things, too, where for the average investor, you know, it's put 10 20% of your net worth into gold and Bitcoin based on, you know, volatility adjusted, right, with what you're comfortable with. And then like go live your life. Like, it's not one of these things you need to be monitoring every day. And it's not a huge fix, right? It's not like, you know, in a in a country that really really loves like, okay, just give me the pill and and I'll do it, doc. Like the pill is simple. The financial pill is simple. It's 10 20% in gold and Bitcoin volatility adjusted based on what you prefer and like go live your life.

>> All I was going to say is that the gold in and Bitcoin uh the trades are going to persist much longer than everyone expects or maybe forever. Uh you you hit on it earlier, Luke, about having a big position in gold and then naturally moving a little bit into BTC. I remember in 2020, you know, when COVID happened, I like I was all in Bitcoin. I've been all in Bitcoin for a while, but I naturally shaved some off for gold. It was like if this thing is real, you know, this is pre kind of finding out what whatever co was like you're just going to want something physical. And uh I've been thinking about that more recently because I'd encourage anybody listening, you know, because there's a certain segment of the market that is all in or very heavily skewed towards Bitcoin. And uh I end up randomly watching u Cinderella Man and I and it's a movie about a boxer or whatever, but it's really actually a movie about the Great Depression. And I think we naturally forgot about like what happens in a great depression and how you get wiped out and you're not going to be able to eat your Bitcoin. like you you may be able to use it, but you may want a little bit of gold just in case. And I don't think that's we see this with very like significant holders. I'm talking people holding $100 million plus in BTC. They'll naturally cycle out a position into gold for a number of reasons. It's just a prudent thing to do. And I think the opposite is also going to happen as gold runs and people have been the gold bugs. They're going to naturally diversify into into BTC for a number of reasons. And I think that's still an early kind of theme that most the both those camps have been in separate territories and they're naturally starting or going to have to converge um because that plumbing is also in the works as well.

>> Yeah, I think that's fair.

>> Yeah. Well, um Luke, appreciative of your time. We didn't get to cover uh the rare earths, but we'll point people to your X speed because I want to be respectful of your time. So, if you want to learn more about what happened this week, check out Luke's work. But thanks again, Luke. Really, really do enjoy your work. Encourage people to read your research. If um people are not following you already, where's the best place to get in touch?

Yeah. Uh they can learn more about our uh institutional and mass market research at fft-lc.com. And as you guys noted on X atluke Groman, all one word.

>> All right, thanks, Luke.

>> Awesome. Thanks, Luke. Appreciate it. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that Onra Media is forformational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com/cont to schedule a consultation with one of our private client adviserss.