Lead-Lag Live
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Lead-Lag Live
Fiscal Dominance Challenges, Bitcoin and Gold Market Dynamics, and the Impact of High-Interest Rates on Monetary Policy Strategies
Renowned macro analyst Lyn Alden and several others joins us to unravel the intricate world of fiscal dominance affecting major economies like Japan and the U.S. Can massive public debts really constrain monetary policy's effectiveness? By analyzing Japan’s towering debt-to-GDP ratio, we explore the knock-on effects in sectors such as Social Security and defense. Lyn provides a comprehensive look at the future of fiscal dominance and the potential parallels with the U.S. scenario, making a bold statement about the evolving economic landscape and what it might mean for government spending patterns.
The landscape of monetary policy is in flux, and we dive into the transition from zero-interest rates to a world of rising rates. As inflation concerns mount, how do these shifts impact the Federal Reserve’s strategies? Join Jim and Larry as they discuss the challenges of adjusting to a high-interest rate economy. With debt growth outpacing GDP, we consider the possible repercussions for the dollar, and delve into the debate over alternative assets like Bitcoin and gold. This exploration sets the stage for understanding how fiscal and monetary policies intertwine and the possible shifts in spending habits they might provoke.
In our engaging discussion about Bitcoin and gold, experts like Peter Schiff and Jim Bianco weigh in on their current and future roles in the financial landscape. Is Bitcoin truly digital gold, or is it a speculative bubble waiting to burst? We tackle the emotional aspects of investing and how geopolitical uncertainties might influence market sentiment.
DISCLAIMER – PLEASE READ: This is a sponsored episode for which Lead-Lag Publishing, LLC has been paid a fee. Lead-Lag Publishing, LLC does not guarantee the accuracy or completeness of the information provided in the episode or make any representation as to its quality. All statements and expressions provided in this episode are the sole opinion of Quantify Funds and Lead-Lag Publishing, LLC expressly disclaims any responsibility for action taken in connection with the information provided in the discussion. The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
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It has been a minute since I've done spaces like this. I've been more often doing these lead lag live episodes as video, but I wanted to get as many people in here as possible for, hopefully, a really interesting, nice, long conversation and, as many of you know, I tend to be a little dramatic on X, so I decided to name the space a golden Bitcoin explosion and with that explosion comes a whole bunch of really thoughtful people, different depths, different accounts. I want all of you to do me a favor as you're listening, show some support. Not only follow all the speakers here, but also please like and repost this space. Want to get this as full as possible as we got so many great speakers here.
Speaker 1:This space is sponsored by Quantify Funds. They just came out with an ETF ticker Boy, tom Gold Dog I know that's not the military acronym, it's BTGD, which Steve, who's one of the architects of that, is going to be talking about that. Really interesting products. Check that out on day one. I think very relevant to the conversation and let's get right into it. And I'm going to start off with Lynn Alden, who's always a popular draw, as they like to say in the media. Lynn, you have a huge following. A lot of people look to you for your thoughts on macro, your thoughts on Bitcoin and where we are, and you coined this sort of fiscal dominance term, which everyone now seems to use, and you've got this whole meme around. Nothing stops this train. I want you to lay out for the audience some of your thoughts on how in the world we can get out of this debt trap that seemingly keeps getting bigger and more dangerous.
Speaker 2:Yeah, thanks for having me. Yeah, the term fiscal dominance goes back further. I didn't coin the term itself, I've just been repopularizing it because I've been arguing that we're in a state of fiscal dominance, glenn you're too honest, just say you made it Just, you're too honest.
Speaker 2:So fiscal dominance is basically? There's a couple of different ways to look at it. Basically, it's when public debts and deficits are so big that they start overriding monetary policy or limiting some of the actions that monetary policymakers have. A pretty clear example would be Japan, which is, you know, when, even when they were running inflation above target, they barely raised rates, because when you have 250 percent debt to GDP and you raise rates, you blow the interest expense out.
Speaker 2:The United States isn't that far along, but they're entering the phase where interest rates don't always work the way. You, a bigger amount than they blew out the fiscal deficit and therefore they had that tightening recessionary, disinflationary aspect. But one thing we've seen in the recent period is when you have 130 percent debt to GDP and you raise interest rates trying to slow down bank lending, one of the problems is that the money supply growth and inflation didn't come from bank lending. It came from monetized fiscal deficits. And when they raised interest rates, although they slowed down bank lending, they increased the deficit by a bigger total dollar amount than they slowed down bank lending. And so the levers don't work the same way in a high debt environment as they work in a low debt environment.
Speaker 2:And so my overall view is that with, with structural fiscal deficits, you know, in the mid to high single digits for the foreseeable future, that you know aspects of the economy are set to run hot. Aspects of the economy are set to run hot and that's, you know, basically any of the entities that are directly or indirectly on the receiving side of the deficit, so that's Social Security recipients, that's Medicare, which you know trickles down to all the employees in the medical industry, that's defense and all of those employees recipients of the interest expense. Basically, all of this is kind of fueling a hotter environment than one would expect if one just looks at the normal bank lending monetary cycles. So we have this kind of stronger fiscal backdrop than we're normally used to seeing in anyone's investing career today. So anything, anything the past 40 years is, is pretty markedly different than the environment that we're in now. So that that's been my view.
Speaker 2:My argument is that there's really there's no near term way out of the debt trap. That's why I use the phrase nothing stops his train. There's, there's very minimal chance of curtailing the deficit. Even if they do, the United States economy is so financialized, meaning that tax receipts are so heavily correlated with asset prices, that even attempts at austerity as unlikely they are in this political environment are unlikely to be very successful over a full cycle, and so I think this runs into the 2030s. Basically, I think there's in any sort of investable time horizon. The debt situation is not going to be fixed and it's instead going to be just kind of this continual background debasement that's happening.
Speaker 1:All right. So there's a lot that we should unpack there and, axel, I want you to come in because you just sent me a DM saying you attended the 50th year anniversary celebration of the Shadow Open Market Committee. So go ahead, axel.
Speaker 3:Yes, great, great to be with you guys. That's yes, the Shadow Open Market Committee has many former and had in the past future officials and they chime in on a bunch of things. It's organized by the affiliate with the Huawei Institution, so a tad more on the on a bunch of things. It's organized by our affiliate with the Hoover Institution, so a tad more on the sound money side of things. In any case, the reason I want to chime in on this is because one of the presentations talked about how, even in the current environment already, the Fed somehow somewhat gets drowned out.
Speaker 3:As we all know, the Fed is setting the federal funds rate and they're very good at that, except that the federal funds rate is not really all that relevant, because the real game in town happens in the repo market and they're setting interest in reserves and whatnot, but especially at quarter end this is nothing new the Federal Reserve has a very difficult time controlling rates in the market and the enormous supply of treasuries is already causing some quirks. Now, that said, we know, especially from the Eurozone, that policymakers are fabulous at kicking the can down the road. So I'm not suggesting there's going to be some sort of blow up tomorrow, but we'll see the side effects of the massive fiscal spending ever more show up in things, and obviously one of the things we see it show up in is the topic that we're talking about, and then I'll be talking about the gold side of things, and that's pretty little Back to you.
Speaker 1:But those that are speakers here, and I've got a few more people that are queued up. I'm sending you DMs, but feel free to raise your hand or kind of chime in. They'll just wait for you if you want to come in here. Jim, I want to go to something that Lynn said which I think is interesting, which is that rates don't work like they is. From your perspective, is the monetary side just not a big deal anymore? I know everyone still talks about the Fed nonstop, but is the tool just too dull at this point?
Speaker 4:No, the question was do interest rates matter as much? I think they do. I think where people are making the mistake with interest rates feeling after something that Lynn was just saying about the economy running apart, interest rate feeling after something that Lynn was just saying about the economy running apart is we're still all kind of anchored to that 2009 to 2020 period of zero interest rate policy in front of Peter Beasley. That era is over, that era of zero interest rate is done, and there is a debate at the Federal Reserve as to what is the neutral funds rate. And now that they're cutting rates, when do they get to neutral? And the answer might be somewhere at around three and a half to 4%, which is the camp that I'm in, and then that the appropriate level of interest rates for the 10-year yield might be 100 basis points higher than that, and that that means that the 10-year yield might actually have to go up in yield from here. Now, of course, I could be wrong on some of these measures, but the larger point is, maybe we should stop complaining about high interest rates and start realizing that, in this new post-COVID environment of the end of quantitative easing, that this is kind of the normal rate of interest rates we should expect over the next several years and what is a precedent for that? This is exactly what it was prior to 2009, a real interest rate of around 2%, a nominal interest rate somewhere in the 4% to 7% range, depending on how fast the economy or how slow the economy was moving.
Speaker 4:But there's still a lot of people that still think that, in the face of a slowdown, we should be looking at something like a return to zero interest rates and a return to quantitative easing, and I think that that era is over. If nothing else, as Lynn pointed out, we are in an era now of higher inflation. We're in an era where the core inflation rate is 3.2%, which would have been wholly unacceptable prior to 2020. But now we look at that level and we think that the Fed has achieved their objective and that in an era where, if we're already three-ish percent for inflation world, then we should expect the interest rates to be at least that, if not higher, and I think that's been a very difficult thing for people to get their head around.
Speaker 1:Larry's got a lot of experience, also in markets. Go ahead, larry.
Speaker 5:Yeah, I agree with what Jim said. I mean, we are in a higher interest rate environment and what we saw in the fall of 2023 is that the Fed couldn't stand 5% on the 10-year. So if we go where Jim is talking about, it's going to get ugly. I want to go back and just buttress what Lynn said. I mean, you know we're in a case of Stein's law here. If something cannot go on forever, it's going to end. And I'm just writing my quarterly report.
Speaker 5:You know, this year, September 30, back to September 30 last year the debt is up 6.9%. It's like $2.7 trillion increase in the debt, and GDP is arguably now growing at 3%. It was a little lower than that earlier in the year. So I don't know what the average of the year is, but the point is we can't grow debt in excess of GDP forever. I mean, that's, that's Lynn's. Nothing stops this train and there's really only one way to solve it and that's monetary debasement. And so that's not good for the dollar and that's why, you know, as I tweeted a few moments ago, I mean Sir, and that's why you know, as I tweeted a few moments ago, I mean Sir, Gresham is in the house, right. I mean, Bitcoin has taken off, Gold has taken off. I mean, I think this is just the beginning of what's going to be, you know, a spectacular run in money that can't be printed. Larry, would you say it's bad?
Speaker 6:for the dollar. Is that in a vacuum or versus everything else? Because it seems that if this happens with the dollar, it's going to be worse everywhere else. The dollar will still probably rage against the others sort of the dollar milkshake, obviously.
Speaker 5:Yeah, you may be right on that. I mean I think it's got to be. I'm not an expert on, you know, relative currency strength. I leave that more to Luke and Len and Brent, you know I just I look at fiat against hard money and I know who's going to win there. I think the dollar. I think, based on what I read from those other smart people writing about it, I think the dollar has got to go down. Luke certainly believes it does. It's the exit, you know it's the escape valve, but I'm not really smart enough to know exactly what the dollar is going to do.
Speaker 1:I want to. I want to go to Peter Brook for all this. I think the macro backdrop has implications on how to think about investing, and there's a lot of people that I think make a good argument that we're in an environment where fundamentals don't matter. It's purely about liquidity. I know that's Michael Alston, a big thing at Cross Border Capital, and several other people. You like the value style. It seems like the value style only matters if fundamentals matter. But I guess the question is do fundamentals matter when you got this fiscal dominance?
Speaker 7:Well, I want to say one thing first about the fiscal side is, you know, any religion on the part of the federal government won't be something that they wake up to. It'll be something that's forced upon them, and when that time is we don't know. But I'm pretty confident to say that if the 10-year yield goes to 5.5% to 6%, that would be one of those bell ringing moments for Washington to either respond to that or sort of deny it by not doing anything. So, yes, this is an unsustainable train until it's not and until I think that that happens where the bond market sort of revolts. But I've been beginning to think that maybe it's the dollar that is the first to give, rather than the bond market. And the bond market will then follow the weakness in the dollar and, I think, gold where it is, and the dollar versus other currencies, particularly the Singapore dollar, which is one cross rate that I like to watch because, you know, instead of a 6% debt to GDP ratio that we have here, theirs is about a half a percent, even though it's a country, city, state of about six to seven million people, and obviously one is different than the other. There's a lot to be said when your currency is at a 10-year high against the US dollar, I think from a value perspective.
Speaker 7:One of the most interesting things to me in the market was the AI tech trade seems to have topped in early July and that followed earnings season, where the market started to differentiate amongst the AI crowd, and even leading into that, people started to question the viability of all this AI spend in terms of returns on that investment, where all the big hyperscalers were spending $15-ish billion per quarter, most of that going to AI, and then, with earnings in Q2 that we saw in July, people started to wake up and say I don't know when I'm going to see a return on this and with this enormous amount of spend that you're capitalizing, that means your depreciation expense is going to be high for a long period of time and I don't know about this earnings growth rate anymore. Now the receivers of that spend, like NVIDIA and other infrastructure companies. They've obviously benefited, but even NVIDIA that's still seeing a robust sales cycle. Even their rate of change is now beginning to slow.
Speaker 7:So to me, the AI tech trade, in terms of its outperformance relative to everything else, ended after Q2 earnings and that allowed the market to open its eyes and start to add some imagination that, yes, there are other stocks out there, and I think that that's why I've seen a nice rally on the value side.
Speaker 7:And whether it's sustainable or not, I don't know, we've been teased too many times, but I do think that that's why I've seen a nice rally on the value side. Now, whether it's sustainable or not, I don't know, we've been teased too many times, but I do think that maybe this time around it is more sustainable. And whether that's a value stock in the gold mining sector or in some other part of the market, or even international investing, which I think has done pretty well the last couple of years, done pretty well the last couple of years. Look at the Hang Seng that was trading at eight times earnings, or seven and a half times earnings at its trough that investors are now beginning to look at other things. So you may own an S&P 500 index fund and I think that could potentially lag other parts of the market now after dramatically outperforming for the past 15 years.
Speaker 1:Which, by the way, I personally I'd love to see that. I mean, this has been the worst environment for ASL. Peter, for tactical traders. You can't beat the S&P when it's the only game in town and certainly when it's driven by a select number of stocks in terms of the most momentum. I see Peter Schiff is here. Axel, you unmute yourself, so I'll let you Axel go first, then Peter, then I'm going to talk about that shortly. But go ahead, axel, then Peter Sure.
Speaker 3:Just on the previous comment, singapore is a bit unique because they actually target the exchange rate in their monetary authority, and, while I generally have greatest respect for them, when the proverbial shit hits the fan, um, one has to see and monitor it. Um, during the years on that crisis, they behaved well. I do not know how they would behave if there was a serious crisis with the us dollar now. Um, I've been in this quote-unquote game for a while, because it's not exactly the first day that that is not sustainable. What's changing really is that the masses appear to be waking up to this, and I think the election is one of them.
Speaker 3:Neither of the lovely candidates that we have is really looking at fiscal discipline as a primary thing. It seems to be gone from the popular language. And so where do you hide? And it is something like gold where people hide, obviously, the other drivers, like foreign central banks and being quote unquote, incentivized to diversify out of the dollar. It's not like they pile all the money into gold when gold is a beneficiary in that process. They pile all the money into gold when gold is a beneficiary in that process.
Speaker 3:The remarkable thing is that we haven't had any significant correction along the way, and that, to me, just shows that the appetite or the fear, depending on how you want to call it is rather, rather significant, is rather, rather significant. And so just one thing that hasn't been mentioned yet I would like to add here is the geopolitical turmoil that's calling a flight into quote unquote safe haven gold. What's different from the past is that I believe we've entered a new era where the world as a whole is not as stable as it had been in the post-war period, that what's happening in Gaza and in Ukraine are those symptoms of a new era, and if that is correct, then that may also be supportive for the price of gold for the medium term.
Speaker 1:Peter, I want to go to you and I think this point that Axel brought up around fear, trade and safe haven kind of behavior is interesting. I myself have kept on saying for the part of like a year almost gold is sending a warning and gold's momentum keeps on going. Usually gold is a signal of bad things, at least when it comes to risk on assets. It has not been, at least not yet. What do you attribute this kind of unrelenting gold momentum to? I mean, there has been no buy the dip opportunities here.
Speaker 8:Yeah. So if you're looking for a substantial dip, that's correct. Maybe you get a $50 decline every once in a while, but ever since gold really broke out earlier in the year kind of above 2100, it's been a very steady increase and I expect that to continue. I think what's going on is you're seeing a move to de-dollarize. The central banks are trying to divest of US dollars and increase their gold holdings. This is because of the unsustainable fiscal position of the United States is going to deteriorate, regardless of the outcome of this election. The fact that inflation is not going to be anywhere near 2% over time. The Fed is not going to be able to stay within that target. Inflation is going to be considerably higher. The Fed is going to be returning to quantitative easing, probably by the early part of next year, because the rate cuts have not reduced longer term interest rates. Longer term interest rates are rising and they will continue to rise, I believe, until the Fed ultimately intervenes to start buying longer term bonds to artificially suppress the yields, and that, of course, just puts more upward pressure on the dollar, the yields, and that of course, just puts more upward pressure on the dollar, and I mean downward pressure on the dollar, upward pressure on inflation. But you know, I know that you know your spaces here is about. You know the big move I see in gold and Bitcoin and I think that the two are marching to very different beats.
Speaker 8:The rally in Bitcoin that we've seen over the last week or so, I think, has absolutely nothing to do with any of those things that are impacting gold. I think Bitcoin is another Trump trade. I think Bitcoin is reacting to the increasing likelihood, based on polling and on the betting markets, that Donald Trump will win, and so you're seeing that in, like DJT stock, which is, you know, been moving up considerably and you know anything that would be a Trump bet. And the reason I think that Bitcoin at this point has become a bet on Trump is because not only is Trump seen as being a lot more friendly to Bitcoin and crypto in general, but there is a hope and a belief that, if Donald Trump is the president, that he will actually use his office to get the US government to commit taxpayer money to actually buying Bitcoin and that might be a payoff to the Bitcoin community for helping to fund his campaign. The way they would be rewarded is now we're going to take taxpayer money. The US government is going to actively go into the market and buy Bitcoin, obviously, regardless of the price, just buy it, and if the US government were to do that, then obviously the price of Bitcoin can be much higher, and then US taxpayers could be the bag holders and a lot of the whales would have an exit strategy where they can sell to the US government. That is, just buying with other people's money.
Speaker 8:Now, I don't actually think that's going to happen. I don't think Trump would do that. In fact, trump did not actually say that he would buy any Bitcoin. He had plenty of opportunity to say that. He did say he might support a Bitcoin reserve strategic reserve and in order to start that reserve, he would not sell any of the Bitcoin that the US government owns.
Speaker 8:My thinking on that is that, if he does win and I still think he's more likely to win that the Biden administration will get rid of whatever Bitcoin they hold before Trump takes office, and so there will be no Bitcoin on the US government's balance sheet for Trump to hold, and I don't think he will buy any more, but I think that that's the reason that that Bitcoin is rallying. I think what's significant, though, is that Bitcoin hasn't made a new high. You know, bitcoin peaked out in early March and it's traded sideways for seven months, and those are the seven months where you seen this relentless string of new highs for gold, including this morning, where gold traded above two thousand six hundred and eighty for the first time ever.
Speaker 1:Gold stealing. I will not relent in price action. Let's go to hold on. I want to go to Chakansky and then Bukvar and then Scott was being patient and then definitely Jan, because I want to get some thoughts on Jan. Yeah, I had a great interview with Jan a few months ago. That was really insightful. But Chakansky first.
Speaker 9:Thank you everyone. I guess, Peter, my question for you would be regarding if you really think the balance sheet and deficit is going to be different regardless of who ends up as the president, whether it's the US or democracies around the world. Politicians are trying to win votes through promise of future stimulus and gold mines at a rate of about one point seven five percent a year, meaning the supply through mining increases about 1.75% a year and after the last halving Bitcoin mines at about 0.86 basis points, and that's not taking into account lost coins. So, while they do trade independently, and while one hit an all-time high and one has yet to, that shows some of the diversification benefits between the two. The scarcity profile of both are very similar, so I'd love your thoughts on that.
Speaker 8:Yeah, well, first of all, I do think that the gold production has actually been quite a bit lower recent years, maybe closer to 1% than its historic average. There hasn't been a lot of gold production, there hasn't been a lot of investment in exploration and development, and that's part of the thesis for a very bullish case for gold. But you know, I never bought into the idea that Bitcoin is really scarce in the sense that gold is scarce, that the scarcity of gold relates to the fact that gold has properties as a precious metal, and it's those properties that are scarce, it's the things that gold can do that are scarce, and that's what gives it value, because there's a need for that, whether it's in electronics or jewelry, or dentistry or aerospace. Those properties that gold has are scarce and therefore valuable and expensive. Bitcoin is only scarce in the sense that, yes, we have set up a constraint that there will be 21 million Bitcoin, which basically I like to look at it as 2.1 quadrillion Satoshis, because that's really what it is, and I guess when you talk about 2.1 quadrillion doesn't really seem scarce, but there's 2.1 trillion quadrillion Satoshis, but even though there's a limit to the number of Satoshis that there are, which would be about a few hundred thousand for everybody on the planet, whatever it is right. But even though there's some limit to the number of Satoshis that you can't really do anything with, you can hold them, but that's it. You can give them to somebody else. There is no value there that they have. That couldn't be replicated an infinite number of times with any other number of crypto tokens that can be created that are similar or, in many cases, better than Bitcoin as far as the speed with which they can move and the cost of moving them and things like that.
Speaker 8:I mean there's tens of thousands of other cryptocurrencies that you could choose from. There are tens of thousands of precious metals that have the property of gold. I mean there's just gold. I mean there are other precious metals that may be similar in some respects, that could be used, but they don't have all of the characteristics, and so when gold is needed, gold is purchased, but Bitcoin isn't really needed for anything.
Speaker 8:I mean it's just you know we've decided that, that. You know we like it. People decided I haven't decided that I like it, but there are a number of people who desire it, they think it's valuable, they think it's going to go up and they're willing to buy it. And as long as there are people who are willing to buy Bitcoin, you know it's going to have a price. And if the people who own it don't want to sell it, well you know the price can go up. But if the people who own it decide they don't want it anymore, then that's it, you know. I mean, it's over if the mania stops, if you know the pyramid just stops growing and for whatever reason, reason, uh, so it's. You know the scarcity.
Speaker 1:Uh, arguing again, it's not scarce in any real sense, other than the fact that we've decided to limit the quantity, uh, of, of the of these things that will be created by the way I I think it's I'm looking at the uh, the emojis that are coming up and you know I'm very big on the fasting and I've been doing this health journey and I got to say I'm imagining everybody's blood pressure is rising if they're Bitcoin fans listening to some of this.
Speaker 8:People who are in Bitcoin. You know it's. I've dealt with the emotions of manias. You know my entire career I mean really going back to the late 1990s with the dot coms and you know everybody had their pet company and then it went to the real estate market and everybody was convinced that their house could never go down and they were just going to be rich because they own this house. So people end up getting emotionally embedded in an asset in which they invest so much of their hopes and dreams.
Speaker 8:You know there are a lot of people that own Bitcoin and believe that they're going to be really, really rich simply because they've made a decision to buy this token and they really don't want to accept the fact that that may not be the case. So it's kind of very difficult to penetrate when you know so much is riding on this right and you know you get it, you get, you can. And then when you know you get, it's like the uh, a lot of people believe the same thing and they all get together then and they reinforce themselves in that belief and they turn out right.
Speaker 1:I mean there's a lot of everybody, but I want to get some of the other artists I've got. I mean there's a lot of everybody, but I want to get some of the other artists. I've got a queue here because there's a lot of people who have been very patient, so Scott's been patient. I want to get to Jan after that, then Bookvar Larry. I want to get Lynn bias of only following people based on your viewpoint. Anyway, let's go to Scott Milker, then we're going to go to Jan Scott Hi.
Speaker 6:Peter. So much to unpack with what just Peter said, and I will say that, as usual, I largely agree with almost all of it, and I think price of an asset is how we define correlations, and Bitcoin obviously rarely trades alongside anything else. It's beautifully uncorrelated by almost any metric, but that confuses people because there's a difference between price and value and there's a difference between price and narrative. So the narrative that Bitcoin could be like a digital gold, whether you agree with it or not, does not mean that Bitcoin needs to follow gold in price or that they need to both go up and down at the same time. So to Peter's point Bitcoin has not made a new all-time high. I would argue that Bitcoin since March has predictably, very predictably, effectively done nothing except for range sideways.
Speaker 6:And anybody who's been in Bitcoin for a very long time has looked at the four-year cycle. They understand the Bitcoin halving and they know that doesn't mean that it'll have to repeat again, but they know that historically you could have literally fallen on your head at any time in the last eight hours. Eight years skipped the Fed, skipped COVID, skipped Chinese stimulus, skipped literally everything, and Bitcoin would be roughly at exactly this price at this point in the cycle and would be behaving in roughly this manner at the back end of October at that point in the cycle, in roughly this manner at the back end of October at that point in the cycle. And so Bitcoin obviously made a new all-time high a bit ahead of the cycle because of the ETFs, but it's doing exactly what it should have done, and so you can't say that it's trading like risk or like stops the Nasdaq. You can't say that it's trading like gold. I agree with Peter, it's not. Whether you believe it will be an inflation hedge or any of those things, it's not trading in the same way as gold because it's completely uncorrelated.
Speaker 6:And so now, if Bitcoin goes up and makes a new all-time high in the coming months, we will literally have wasted hundreds of hours of our lives pontificating over how Bitcoin should trade this on the macro environment. We'll look back and say it's the same four-year cycle. There's a halving, there's an election, there's a global liquidity cycle. They all happen in the same phase and Bitcoin does exactly what it's going to do, whether it's a Trump trade, it's a Trump trade for a week, peter, and I think, yeah, maybe it's up from 60 to 67 here because of the Trump trade, but 60 to 70, 50 to 70, it's all the same range.
Speaker 6:It's been in now for six months and go back to my tweets or anyone who's been around a long time in March you would have said meme coins are going crazy, the casino is nuts. Bitcoin is irrationally exuberant on ETFs. We're going to go sideways for six months and that's exactly what happened, and now everybody loses their conviction that the next part is going to happen, which is we'll have a very down and choppy Q2 and three, and then Q4 will be constructive and head up. You lose your conviction when it hasn't headed up yet, and now perhaps it's starting, I will say the point about the Scott, your point you mentioned.
Speaker 1:About hundreds of hours of our lives will be wasted. Welcome to X, cause there's a lot of stuff that people waste their time on.
Speaker 6:Yeah, and, by the way, if your blood pressure goes up becauseeter or anybody else, has something critical. That means that you're here for the religious fervor and not because of any like food.
Speaker 1:You gotta fast, hold on. I'm gonna let have peter respond, but I'm gonna yawn.
Speaker 8:A lot of people want to get in here, so, peter, go ahead and then yeah, when I talk about bitcoin, the trump trade, I was really talking about this recent rally. Uh, you know, up from you know, 60, I agree over. All of a sudden, we've had this rapid shift in the infection outlook and outlook, for whatever reason, and a number of factors that have that have led to this, but all of a sudden it looks a lot more to more people that Trump is going to win and that is, you know, very bullish for Bitcoin relative to Trump losing. I mean, if Trump loses Bitcoin, I would believe that if he loses, bitcoin is going to tank. Oh, I disagree.
Speaker 6:I think, I think, I think crypto tanks and I think Bitcoin actually does exceptionally well. But well, I mean.
Speaker 8:I think that's. I think people are betting that Trump is better for Bitcoin, whether they're right or wrong, and of course, you can say that, ok, bitcoin will rally back, but I think the reaction to a Trump loss would be that Bitcoin would go down. I think if Trump wins, bitcoin will rally. The question is, will that rally sustain itself? For how long? I would think eventually, if not immediately, there will be a sell the fact from people who bought the rumor of a Trump victory. Because, again, I think that the reason that people think Trump is good for Bitcoin mainly is because they expect the establishment of a Bitcoin reserve and that the US government will buy, let's say, a million Bitcoin at whatever price they happen to be and then never sell them. So that is you know. I think it's interesting that the Bitcoin ETFs and you mentioned that we've had all these ETFs that has bought tremendous new players into Bitcoin that were not there yet it wasn't able to really drive the market to new highs.
Speaker 6:I mean briefly. I went from 40 to 74,. Peter, you're like revising timelines.
Speaker 1:It was at 47 when they launched. I want to, I want to make sure you have all those.
Speaker 8:ETFs now 11 ETFs that own all this Bitcoin and Bitcoin is lower than it was almost three years ago when there were no ETFs. So it hasn't. It hasn't exploded. If you go back and look at what all the Bitcoiners were saying in January and February, we were supposed to be way over 100,000 by now in Bitcoin. I mean, there were some really huge forecasts of where Bitcoin was going to be based on all this new institutional demand, and none of those forecasts have panned out. We haven't got anywhere over that period of time. So you know that should be something that should be of concern, because obviously somebody has been selling into all this hype. Somebody has been unloading their bitcoin to these etfs yeah, okay, so this is.
Speaker 1:I love this conversation. I love the passion. I want to get yon in here, extremely, extremely patient, and I'm a big fan of the way he frames things. Jan, last time you and I talked, we were talking about China's demand for gold. Let's switch a little bit back to gold here from Bitcoin.
Speaker 10:Any kind of insights on what's going on in terms of global central banks, in terms of this unrelenting momentum, the driver of that from your perspective, yeah Hi. Well, first of all, I want to comment to Peter. He said that Bitcoin is pretty much worthless because there are so many other cryptocurrencies that are better in transaction speed, et cetera. So there is no scarcity in Bitcoin. Well, I'm not a Bitcoin expert, but I think everybody knows that Bitcoin is the only decentralized cryptocurrency that has a security in it which makes it stand different from the rest. So I think everybody knows that. So I'm surprised he said that.
Speaker 8:Another thing he said was that I don't think it's the only centralized crypto. I mean they have different kinds, but there are plenty others that have the same characteristics. Yes, they don't have the same computer power behind it. I mean it's not as big a network, but they have the same things. I mean it's open source. There's a lot of all. The Bitcoin forks are pretty much the same as Bitcoin decentralized. Maybe the block sizes are different or whatever, but you got. I mean it's not unique, it's just you know it doesn't do anything. No, it's not unique, but it has the first mover advantage there.
Speaker 10:It has the greatest head power. And so let's talk about gold. Then Peter mentioned that you know people are buying gold now because of a US fiscal policy. What I saw in the last two years, especially after the war in Ukraine broke out, is that the price of gold has been going up by central bank buying, covert central bank buying, primarily the People's Bank of China and the Central Bank of Saudi Arabia. The PBOC bought 1,600 tons in the past two years and the Central Bank of Saudi Arabia about 160 tons. So that has been a major driver for gold.
Speaker 10:And we have all seen the decoupling of the gold price and the tip shield, the 10-year tip shield. That is caused by the uh, the people's bank of China mainly, and you know, uh in in in a few decades ago people spoke of the of the Fed put maybe this is the PBOC put, because they're the Chinese population has bought thousands and thousands of tons in the private sector after, let's say, 2009. Their gold markets kicked off in 2010 with the SGD being liberalized, or liberalized the Chinese gold market in 2002. They bought about, let's say, 10,000 to 15,000 tons of gold Now up until, let's say, 2021, that gold price didn't really go up a lot for the Chinese population. So I think there's also an incentive for the People's Bank of China and they have a lot of dollars to buy gold with and push the price up. And now they want to flex their muscle and also show we can do this and they want to reward the citizens as well can't do this and they want to reward their citizens as well. But there's great support from the people of China in the Chinese gold market or in the global gold market.
Speaker 10:Having said that, I'm seeing that and this is because also because Peter shared about the fiscal policy and the debt in the US. But you know, the core of the matter is, of course, the weaponization of the dollar. It's also about currency debasement. The weaponization of the dollar makes it all the more political. And then I actually have a question for Jim, because he said the neutral rate, or the Fed funds rate, should be at about 4% and then inflation will be come down to 2% and we have a real interest rate of 2%. But is that scenario sustainable for the US debt? Because then wouldn't debt to GDP continue to go higher and we'll end up in a debt saturation and just an economic deadlock.
Speaker 4:To answer your question yes, the US debt would go higher and it is unsustainable. But I'll drag in what Peter Buchbar said earlier. There's going to be nothing that's going to change Lynn's train. It will keep going and if interest rates stay low to stick with Lynn's analogy her train's going to speed up, it's not going to slow down. The only thing that's going to stop this debt accumulation is something's forced on it that's known as the Liz Trust moment. That's higher interest rate.
Speaker 4:If you think we're going to have a recession soon and we're going to produce 1% interest rates or 0% interest rates, the deficit that's $1.6 trillion is going to go to $3 or $4 trillion.
Speaker 4:The government is going to mail everybody even more money. The only thing that's going to stop them because in that environment you're talking about higher bond prices and you're going to be talking about it being easier to issue debt. The only thing that's going to stop the government from issuing debt is much higher interest rate, and it's going to stop the government from issuing debt is much higher interest rate and it's going to force them to be unable to issue it, and then they're going to have to have what they had in the UK and they're going to be forced to change their budget and they're going to be forced to do everything. So, yes, in that environment, rates are going to go up, the inflation is going to stay up, the neutral rate is going to go up. The inflation is going to stay up, the neutral rate is going to stay higher, and it's going to put more of a stress on the federal government and the amount of debt that we've been borrowing.
Speaker 10:But you're saying that a higher interest rate will force the government to austerity. But this is not what we have seen in the past two years, right with high interest rates.
Speaker 4:No, that's exactly what we saw in the UK two years ago. We saw 125 basis point rise in the 30-year gelp in one week and it buried Liz Truss. She was out after 47 days and they changed their budget. There is going to be no austerity if interest rates fall. There's going to be more government borrowing if interest rates fall. There's going to be more government borrowing if interest rates fall. The only austerity you ever see out of any country is higher interest rates.
Speaker 8:The only way you're going to see lower interest rates is if the Fed monetizes the debt and buys the bonds. That's the problem. The debt and buys the bonds, that's the problem. And so then we just end up with massive inflation as a way to finance all the so-called stimulus, because that's what the US government could do. Instead of cutting government spending or raising taxes, they just print money.
Speaker 8:Now I want to make a quick point about, you know, whatever the neutral rate is and a real rate you can't try to figure out and say well, you know, rates are 4% and inflation is 2%, because if you're taking that 2% from the CPI, that's meaningless. I mean the CPI so understates the impact that inflation has on prices. A bond investor isn't concerned about the CPI. A bond investor, a real investor, is concerned about his real purchasing power, and if real prices are going up by 4% a year and the CPI is 2%, then the bond market has to set interest rates based on the 4% that's actually happening, not the 2%. That is part of a government fantasy or just you know campaign to convince people that inflation is low. So it's hard to just look at a government measure and try to figure anything about where the neutral rate is going to be when the government's inflation rate bears.
Speaker 8:Very little resemblance to what's actually going on. Very little resemblance to what's actually going on. And also, you mentioned the correlation between gold and tips. Now I never understood what's going on with those treasury break-evens, because if you look at them, for the past three years, we had three years where inflation was like 4%, 8%, 5%, and at no point did those break evens really ever go above two point two. So every year the break evens were basically predicting inflation at two point one and two point two and they were way off every single year. And they're still predicting that.
Speaker 8:So I don't know what is the government doing quantitative easing, the idea that they're going to come in and not let those yields rise. But I think it's a fantasy to believe that the 30-year that inflation in the United States is going to average 2.1% for the next 30 years. I mean it's not even going to be close to that number.
Speaker 3:Peter, let me chime in on this. This is Axel. So first of all, on that last point, obviously nobody knows what inflation is going to be in the long run. The way I look at these long-term tips yields is that they are the market measure of confidence in the Fed, and many in this audience obviously don't have too much confidence in the Fed. But we see an erosion in confidence when those rates move higher. And when it comes to the price of gold, one of the frustrating things about gold is that correlations are for most assets for that matter. They're not stable and even the correlation to the chips yield has broken down, might get reestablished.
Speaker 3:And let me just make a broader point. We used a wonderful word pontificate about why people are buying what. In our shop we manage about $1.6 billion in gold and gold mining. So we see all kinds of investors buy and sell gold. And let me just maybe group them. We don't see the central banks because they don't interact with us, but we do see other, the traditional investors. I would group them into the investor concerned about the purchasing power of the dollar. So that's a big theme that we've had here in the discussion today.
Speaker 3:We see one group of investors is concerned about diversification. Gold historically has been a wonderful diversifier. A big exception was 2022, where nothing really worked, but for the most part it has been. Obviously, the always question is why you want to hold it going forward, but from a correlation perspective, gold has been there. The one type of investor we haven't seen much in gold is the speculator, and that's been a trend ever since the meme stocks have come up. Cryptocurrency the good in Bitcoin has come up, or be that some of the AI stocks that come up. Speculators are not very loyal investors. They will jump on a trend and if the price of gold were to go to the roof or, for that matter, were to tank, speculators will jump back on the bandwagon one way or the other, and so it's one reason.
Speaker 3:By the way, I don't think we are near a high, because we haven't seen too much activity of the speculators. So people buy things for all kinds of reasons and we quote, unquote, pontificate, because we want to make sense of what's happening there. But in the meantime, obviously, whenever somebody buys, somebody else sells. There's always a different sort of motivation out there, and it's just something we want to keep in mind when we we try to rationalize these things. That's it. It makes a wonderful storyline, um, and then just one final point. So, um, we are not the uk, um, the and the the uk kind of um, folded right when, when the bond market had a little hiccup. I don't think the the US, is going to fold, they're going to push this and we're going to have lots and lots of reasons and excuses to kick the can down the road. We're going to be much, much, quote unquote better than the Eurozone was, and so I don't think we have seen anything yet as far as policymakers trying to make deficits work for the long run.
Speaker 1:David, can you come up, just unmute yourself? This space, folks, is sponsored by Quantify Funds. They just launched an ETF. That's a Dave will get into it. That basically blends Bitcoin and gold, which is why this is such a pertinent conversation. So, david, go ahead for 15, 20 seconds here and then we'll go to Lynn. And then, I know Peter Pukvar has been patient.
Speaker 9:Larry, you've been very patient to raise your head earlier. I'm trying my best to go ahead, dave. Thank you, michael. And thank you Lynn and Peter and Axel and Jan and everyone else who joined us on the call today. Again, my name is David jikanski. I am the founder of quantify phones. We had our first launch today. It is the stkd Bitcoin gold ETF ticker bt. Stkd is short for stacked. In this ETF, we offer a two-for-one stack where $1 gets you exposure to both 100% exposure to Bitcoin and 100% to gold at the same time. Very much on topic for today's conversation, as we're talking about fiscal dominance and currency debasements, and we view this as an all-in-one vehicle to protect against that. So I just wanted to thank you all. I also wanted to thank our partners Abert Truesact for being so great with us on this launch, corey, adam, rodrigo, mike thank you guys all for partnering with us with this. We couldn't have done this without you. Guy, I'll pass it right back to you. Thank you very much.
Speaker 2:All right, lynn, all you Go ahead, lynn. So on the fiscal aspect, I would echo the point that the UK is not necessarily a perfect correlate to what we'd expect from the US. A parliamentary system is inherently a different system that's a little bit more responsive in that regard, and so in the US two-party system, and then especially considering how financialized our economy is, meaning how correlated tax receipts are to asset prices, with a fairly small lag, I think that the UK guilt blow up is just not fully structured for what we see in the US, I think. I think the train in the US is a lot harder to slow down and in the UK's case, it's not like they solve the deficit issue. They just ramped down how much the deficit spending would have otherwise been. They're still running structural deficits, just not as large as they would have gone In the United States.
Speaker 2:You know, and we go to the point of like what takes away the punch bowl, like what takes away their ability to do this? The hard thing is that they can toggle back between rates and currency debasement. So in the UK's case, when the rates blew out, they came in with emergency QE, even though they were going to reduce their balance sheet. They instead had to pause that plan for a little while, do some temporary QE to absorb the selling pressure from the market and then eventually they went back to a period of balance sheet reduction. And the US? They have very similar tools. Basically, if yields blow out, the Fed can go back to expanding their balance sheet and they'll lose credibility and they'll lose currency purchasing power. But then when that gets out of hand, then they can try to tighten again and try to be all steer again. And I think that the number of bounce backs they can do between softer policy, harder policy, as they navigate this two party system that has kind of lost all pretense of deficit control. I just think that goes on for a lot longer than people think. I don't think the punch will get taken away this year, next year, the year after that. Instead, I think it's going to be punctuated by little mini crises here and there and then they pivot to another direction.
Speaker 2:And one last that I'll make on is the whole like Bitcoin versus gold conversation. I think a key element that has to be considered in that discussion is network effects. That's kind of important for analyzing any sort of technological innovation, at least ones that rely on network effects, and so, you know, back in 2016, 2017, I would make similar arguments as Peter Schiff, which is to say look, there's, you know there's any number of cryptocurrencies. There's only a handful of precious metals. But where it becomes relevant is network effects.
Speaker 2:You know, anyone can fork Wikipedia, but you can't really fork the backlinks, you can't really fork the editing community. This is the sheer amount of network effect buildup in the real Wikipedia. Same thing for anyone can make a competitor to USB. Anyone can make a competitor to Ethernet. Anyone can make a competitor to the simple mail transfer protocol. Anyone can make a competitor to TCP IP, but protocols tend to become entrenched for multi-decade periods with really no sign of stopping. Any of these kind of internet era protocols are, in many cases, 25, 30, 40, 50 years old and showing no signs of slowing down their self-reinforcing network effect dominance, and so I think that's a key variable to consider when assessing Bitcoin's longevity compared to any number of open source competitors that can threaten it. But I have to keep going. So thanks everyone.
Speaker 1:Thank you, Len Edward. Make sure you follow Len Olden, if you don't already. Peter Brookvar has to leave soon also Go ahead, Peter.
Speaker 7:No, I was just that it sort of needs to prove itself in the sense of not being just very highly correlated to the NASDAQ, it needs to differentiate itself. Now it might I'm not saying it won't but to me right now it's still very highly correlated to the NDX. What I said earlier is that big cap tech, AI trade foreigners own an enormous amount of these stocks. The Swiss National Bank is heavily involved in US big cap tech, so where those stocks end up trading in the coming quarters, depending on how their earnings go, that could have a direct influence on where the value of the US dollar is.
Speaker 1:I think that's a very good point. Larry, I know you want to chime in too. Sorry, I'm doing my best here.
Speaker 5:Yeah, no, actually I think my question kind of got answered by Lynn and others. Peter made the point that gold mining production is actually falling, which isn't true. Gold mining production is pretty flat at about 3,600 tons a year. It's about 1.7% of the outstanding stock. And others have said well, you know, gold prices go higher, they're going to really ramp it up quickly. And I just want to point out that's very, very unlikely.
Speaker 5:You know there's only so much gold in the Earth's crust. The size of discoveries have been coming down substantially decade by decade. All the easy stuff has been mined. I mean, we'll be producing gold forever if people want it. But you know, the notion that there's suddenly going to be a lot of gold on the marketplace as a result of higher gold prices is just mistaken. It's very hard to find, to develop a mine. It's getting harder all the time environmental standards et cetera. So there's no risk. I mean those who pointed out and said, well, look, the gold prices are higher, there's gonna be a risk of too much gold and that'll be self-correcting. Um, I would point out that that's. You know, geologically that's unlikely.
Speaker 1:I want to go to, uh, scott milker and, of course, sian. Uh, for me the the last words here. We'll try to go a little bit further, but uh, scott, you, uh, you always have some great takes, man. What's your big takeaway on this? Uh, gold versus bitcoin. Yeah, to me it's like, well, why not just do?
Speaker 6:both. Yeah, I, I was going to say I think for me it's the little Asian girl meme why not both? Exactly what you just said. I, you know. I think you can be a supporter of both, and it doesn't have to be for the exact same reasons, which is why you know a golden Bitcoin explosion it's a great title because they both happen to be going up right now, but that doesn't mean that they have a long-term correlation or the same value proposition. And you know, we can agree to disagree between gold bugs and Bitcoiners, but I would say that 99% of the core beliefs between the two are largely the same.
Speaker 6:I think the finish line where people stumble is, you know, sort of Peter Schiff. Obviously, you know, as he speaks about it. Maybe he doesn't believe in the network effect that Lynn just spoke about, or believes that it's more of a religious further speculators, but I think that those could be the signs of a maturing asset. I just don't see why there has to be an argument of one or the other or a conflict, because I think in both cases, the supporters of them fundamentally believe that the government will print more money and be irresponsible and that you need to own something to protect yourself against that. And you know, at the very core, I think that's something, once again, that they can all agree on, kind of why I joked you know we were talking about the Trump trade, I think very relevant for crypto companies, for the crypto industry in the United States.
Speaker 6:But Bitcoin itself, I think, for whether you believe in it or not, it's been institutionalized. Larry Fink is arguably one of the five most powerful people on the planet and has been on a literal roadshow sounding like Satoshi Nakamoto on every mainstream media outlet that he can find. That's extremely powerful and he obviously, whether he's talking his book or really believes in Bitcoin, he truly gets it. So that's not something I would feed. And, peter, I mean listen, you and I have hung out in Puerto Rico. I would say that the same people who moved down to Puerto Rico because they're disillusioned with the government, those are the same people who are going to buy Bitcoin if Kamala Harris wins Right. So I think that there's a very strong argument for Bitcoin itself, regardless of what comes in the next administration, and I think it's only going to continue to mature, and you know we'll see what the future holds for, what kind of asset it becomes. But I think that we all fundamentally agree on most of the important points.
Speaker 1:Jan, I want you to get in and we'll wrap up with Peter and final words from Jim Bianco Go ahead, Jan, if you're there.
Speaker 10:Well, I see Bitcoin. I mean it can be a store of value. I don't think it's yet a store of value, so you can invest in it and it can become a store of value and become less volatile At this point, to tell you the truth, I see it as the guardian of the distributed ledger technology space, so I think I'm quite bullish on DLT in general. I think a lot of assets will be tokenized, a lot of blockchains will communicate with each other. I think this will be a revolution in the financial industry. I think you will have private and public blockchain side by side and I don't think one of them is going to win this whole race. So that's how, and the price of Bitcoin then is just a barometer of trust in this whole development in this new industry.
Speaker 10:About gold, yeah, my final words is what I often say is that if you look at extras, pyramids, let me put it like this In a capitalist system, you have financial instruments and you have credit instruments and you have money without counterparty risk.
Speaker 10:So the money without counterparty risk, that is gold, and the credit instruments are national currencies, equity bonds and derivatives. And in the past several decades, let's say from the 70s, from the 80s, more and more credit instruments have been issued and that meant that you know it's leveraging uh the system. And now you know there's too much debt because of the credit instruments. There's too much um also uh, in terms of geopolitical tension, um, and there's too much leverage in the system. So the only way to leverage, deleverage the system now is to increase the price of gold, and that is why I think that's the most bullish case for for gold at the moment. You can say it's about the debt problem. You can say it's about, you know, geopolitical tensions, but the financial system has to deleverage through a race in the price of gold Peter, go ahead, and then we'll wrap up.
Speaker 8:Jim, go ahead. Peter, yeah, I mean, that's always the choice. We can either have deflation or inflation, and under deflation the price of everything goes down, and under inflation, it's the price of gold that has to go up, right? So either, you know, we have to deflate the prices to come down in line with gold, or we have to let gold go way up in line with higher prices, which is what's probably going to happen. I mean, that's that was the decision that Nixon made when we went off the gold standard in 71, rather than bringing back down prices and cutting government spending and reducing the money supply, we just let the price of gold go way up and go in from thirty five dollars an ounce to eight hundred and fifty, you know so I it then settled in around four hundred or so, four or five hundred, and gradually move lower until 2000. But now you know we've begun the next leg up and I think gold has a long way to to rise.
Speaker 8:You know, I do agree that a lot of the people who are buying gold, buying Bitcoin rather, are buying Bitcoin for the same reasons that I buy gold. I think they're wrong. I mean they think they're buying digital gold and I don't. I mean, I think Bitcoin is no more digital gold than a photograph or an image of a hamburger as digital food. But you know people, people can make a mistake, but I think a lot of the people who are buying Bitcoin don't care what it is. They're speculators. There's a lot of money in Bitcoin that is only there because of the story of how much, how high, it's going to go up. When you have all this talk about a million dollars of Bitcoin, five million dollars of Bitcoin, there are a lot of people that are simply buying it because they want to, they want to get rich, and so you don't have that element really in gold, and I do think that ultimately, these guys are going to get flushed out of this market. We'll see what percentage of the Bitcoiners are true.
Speaker 8:You know hardcore free market libertarian guys who you know, I think, are just making a mistake in thinking that Bitcoin is, you know, somehow better than gold or alternative to gold. Versus how many people are just along for the ride. How many people are trying to just make a buck off of it, including guys like Larry Fink. You know they have a fund now and you know they want people to buy into their ETF so they can get their management fees. And so they have to convince everybody how great it is and how high a price is going to go, because the more people buy, the more money they make, you know, in management fees, even though they're not actually managing it. They're just holding a static portfolio of Bitcoin and they're charging a fee. You know, if you want to buy Bitcoin, just buy it. Don't buy those ETFs. Just go out and buy your Bitcoin. You know. Save on the fee.
Speaker 1:Everybody, make sure you follow Peter Schiff, everybody else here. Final word to Jim Bianco. Then we got to wrap. I'm actually late for another call. Go ahead, jim.
Speaker 4:Thanks, michael. I'll just come back to the deficit thing and agree with Lynn that we are very different from the UK than the US. But the larger point that I wanted to make is a lot of people are worried about the deficit. A lot of people are worried about the level of debt. You don't fix that with a bull market. You don't bankrupt the country by buying their bonds into a bull market. You'd bankrupt the country by selling their bonds and raising interest rates to confiscatory levels, enforcing a change. Now she said that they just did limited things in the UK.
Speaker 4:Sure, all right, maybe we need a bigger crisis in the US to deal with this problem, but eventually, as Peter Brookfire said, it will be forced upon us one way or the other. And understand that. If you think interest rates are going down, if you think interest rates are going to stay under 4%, this is a non-issue. The amount of debt in this country, the deficit, is a non-issue. The Treasury can issue all it wants and as far as what Peter Schiff was saying was well, the Fed can buy it, I'll make a quick point about that. And he did say that you'd have inflation. Well, that is just going to blow up the bond market.
Speaker 4:Anyway, my quick point is this is the seventh time that the Fed has started to cut rates since 1989. For the last 36 years, 35 years this is the seventh beginning of a rate cut. The rise in the 10-year yield, even with today's rally, is the largest of the previous six. Today's rally is the largest of the previous six. We saw the Fed cut rates in the 10-year yield go up 50 basis points in three weeks and it's never done that after the Fed has cut rates. The only other one that is very comparable to this was when the Fed started cutting rates in September of 1998 because they panicked over the failure of the hedge fund long-term capital, because they panicked over the failure of the hedge fund long-term capital. In retrospect, that rate cut cycle was thought to be a mistake. The economy wasn't in trouble. There wasn't any kind of a slowdown. The Fed needlessly cut rates, inspired a boom in asset prices. You had an 85% rise in the NASDAQ in 1999, leading to the tech bubble peak in early 2000. In 1999, leading to the tech bubble peak in early 2000.
Speaker 4:The thing you have to keep in mind is, if we're going to have a problem with the debt, the Fed can't buy it. The Fed can buy it, but they'll just accelerate the decline in bonds because they will create more inflation and they'll wipe out the bond market even faster. The only time you can have quantitative easing in the Fed buying bonds is when everybody perceives there is not a problem and there is not inflation, like we have from 2009 to 2020, and then they can get away with it. But if you are in an environment where they are concerned about levels of debt or you're concerned about inflation and the Fed were to try and step in, they're just going to make it much worse.
Speaker 4:So there is not a problem as long as interest rates stay below with the deficit in debt. It only becomes a problem when interest rates go up. Now interest rates could also go up because the dollar gets debased. We could argue about what that means against hard assets or against other fiat currency, but nevertheless, the last point I'll leave you I know, michael, you want to end this is you've never bankrupted a country by having their bonds in a bull market, and that's what we've seen since April, and we're not going to fix the deficit problem until we have much higher income. Love it, yeah.
Speaker 1:And I want to do another space like this at some point. I mean this has been a phenomenal conversation. Hopefully, again, I want to do another space like this at some point. I mean this has been a phenomenal conversation. Hopefully everybody enjoyed it. Please, everybody, show support, follow Brady S here. Whether you agree or disagree, let's get some good conversation and not be as emotional to each other and just kind of listen to each other more and more. Peter Schiff, I appreciate you. Jim Bianco, laura Safar, jan and, of course, david Kansky of Quantified Funds for sponsoring this space Ticker BTGD, the return stack Bitcoin gold ETF. Thank everybody for joining. Thank you.
