Jack Mallers Reveals The Truth About The Michael Saylor Situation

And so my question to Michael was exactly that, which was...

I woke up this morning, gold down, Bitcoin down. We're approaching some type of liquidity crisis because AI's taking the jobs. People are less in abundance financially, and that's going to crash this whole thing down. If BlackRock makes 22 million IBIT, we know that there is hypothecation and fraud and paperness going on over there because there's only 21 million Bitcoin. There is no one that owns 50, 60, 70%. You cannot corner a market. Where's the supply? The supply is distributed within the people. How the heck did Satoshi get away with that? And by the time Wall Street and everyone figured it out, the supply is gone. There already over 20 million Bitcoin issued. It's gone. I find it contradictory that people are like, 'Yeah, Bitcoin's for all. It's decentralized. It's freedom. Except for Larry Fink. Screw that guy.' It's like, well, who elected you the president of Bitcoin? What I consider to be critically important is, and if you don't pay taxes, will someone with a weapon on their hip will show up to your front door and put you in a box with no windows for the rest of your life? I don't know who's going to lose. I'm not going to pretend like I know. Hell, I'm the guy getting shit on Twitter for asking questions. I know one thing, though.

It's a loaded question, huh? What's going on, man? Thanks for having me. My question first and foremost, people split the clips on the internet and I think in bear markets everyone's emotional. I have a keynote on Saturday and one of my slides is consumer sentiment has never been lower in the history of recording the metric. So lower than 2008, lower than the dotcom bubble crash, lower than the 1980s, lowest ever of how people are feeling about their lives and their future. So I think everyone's emotional. I'll just preface before I get in and also say that I want Bitcoin to succeed and everyone that is working on Bitcoin becoming successful I'm a fan of. I told Michael that. I told everyone that. So, I'm a fan of public discourse, being honest. A lot of what I bring to the world is hopefully authenticity. With that being said, my question to Michael, I asked two. One was what's MNAV? What's the definition of MNAV? Because it seems to be an increasingly important metric. There's seemingly multiple different ways to calculate it. It's almost like depending on the company or the person it changes definition and obviously if something is so fluid in definition it's hard to have conversation. And what I consider to be critically important is what is called out of the money securities. I'll give you an example. 21, we raised a convertible bond in our note. So when our stock was at $10, we raised this note and we raised it at what's called an up30, which means a 30% premium it converts to equity. I'm going to slow all this down. So if our stock's at 10, a 30% premium, 30% of 10 is three. So that'd be it converts at $13 a share when our stock's at $10 a share. Does that make sense so far? So we raised an up30. Right now our stock is around five. So that's what we call an out-of-the-money security is the conversion is so far away from 13 because the stock's at five. And so if someone wanted to buy 21, they wouldn't consider that equity because it's so far from converting into equity. Does that make sense? Because the stock's at five. And so you wouldn't factor that in to something like the market cap or the MNAV. That would be classified as debt because it's not converting into equity anytime soon. And so my question to Michael was exactly that, which was, do you agree with classifying out of the money securities as equity, which obviously that would inflate the equity value, which would make an MNAV metric more attractive. It wasn't a bad or good thing. I like if someone asked what's 21's MNAV, I would not include that convert. I would think that that would be not right. And by the way, if someone wanted to buy my business, no banker or no analyst or no one like the buyer of the company also wouldn't include it. So one that was the question which is like can we define this thing and if not that's information for me but I'm just trying to learn and then the other was about dilution which was and what they're both related which is like well when you sell common equity so when you create new shares and sell it at the market obviously the MNAV is really important metric to figure out if it's dilutive or accretive or if it's pro BTC per share. All these metrics which I'm you obviously a fan of. And Michael had made a comment and said even if I sell shares for cash and don't convert it into Bitcoin that's not dilutive. And I was like well you know if I start a company I raise $100,000 for 10% which implies a million dollar valuation. Previously I had 100% of the company. Now I have 90% of the company and this new investor that gave me 100 grand owns 10%. Just by definition, we call that a dilutive transaction because my ownership in the business went down. I got cash for it, but it's still dilution. And if that's not dilution, what would be dilution? Like if you're just exchanging equity for anything, then theoretically there's no such thing as a dilutive, which is also fine. But then again it's hard to have a conversation when there's no definition of MNAV and we also there's no example of a dilutive transaction. Well then what's the point of having when people ask me was that dilutive or accretive or do you think that the MNAV is proper? If there's no definitions to any of these things, then I can't. The context as well is I was on a panel before that. I was on the panel and people were asking me questions and bringing up things and I'm like guys, if we don't know the definition of these things, I can't we can't have a conversation. And then anyway, I was in getting in my Uber and someone texted me and said, 'Michael wants you to come back and ask the questions to him directly.' And that's what happened. So, I don't know if you have any thoughts on any of that, but that's basically where I'm coming from amongst other things. I'm happy to get into digital credit as well, but I'll stop there.

Yeah. And it could be that the market matures and figures it out and everything is great. I just personally I don't know. I mean my I'm vocal about my stance being or my interest I would say in being trying to build businesses that have products and customers. Not that these preferred equities aren't technically products. Really trying to hedge myself here because I really mean no harm. But I like building software that has customers with cash flow and it's been a dream to found Strike and the relationship we have with our customers and the products that we've been able to build and turning that business from an idea to a profitable growing high margin machine. That is, because I come to Bitcoin from an Austrian lens, Austrian economics, which is, in order to make money in the market, you need to produce more value than you're consuming. And so that's more my I wouldn't consider myself necessarily a financial engineer more than an entrepreneur and a product builder and hopefully a value producer for my customers. So who knows how the space evolves and to your point if it's new and these things need time to get definitions and stuff.

I think one of Satoshi Nakamoto's greatest innovations, one of the most impressive feats Satoshi ever accomplished in my opinion or the most underrated is how he was able to distribute Bitcoin fairly to the people. Mind you, gold was able to the United States was able to say those IOUs are no longer backed by gold. Oh, you thought you had something in a vault? It's ours now. They were only able to say that because the level of physical concentration that the gold market had become. And mind you, this is because, Lyn Alden has a great book on this. It's because our ability to communicate outpaced our ability to physically settle value. When the telegraph was invented, I was all of a sudden able to instantly communicate with someone across the world, but I wasn't able to actually settle the physical value. So, I can get on the telegraph and say, I want to send you a bar of gold, but I couldn't physically settle that value. And so, what was the solution? And the solution was everyone deposit your gold to the governments and to the banks and they'll manage the IOUs and build things like Swift to settle. But the problem is that concentrated the physical supply of the actual asset to a point where all the governments could say actually let's just tell them that the gold they deposit is ours and those fiat notes are backed by full faith and credit in the government and our military. And if you don't pay taxes, someone with a weapon on their hip will show up to your front door and put you in a box with no windows for the rest of your life. That was able to happen because the physical commodity was so concentrated in their hands. Now, what's the difference with Bitcoin? We're sitting here debating if one company that owns 4% not 40% is like existential, everyone's freaking out. Where is Bitcoin? Where is the supply held? There is no one that owns 50, 60, 70%. You cannot corner a market. If a company that owns 4% or even 10% comes out and says we have all the Bitcoin like we don't care about your opinion whatsoever. Where's the supply? The supply is distributed within the people. How the heck did Satoshi get away with that? Through proof of work. Somehow was able to say because what's the fair way to distribute a brand new currency? Well, I'll give a bunch to my family. Well, my buddies I play pickleball with should get a little bit. What's the fair way? It's hard. Well, do we give everyone an equal amount? Well, that's highly inflationary if you do it all at once. The fair way was proof of work. Everyone has access to energy. I'm going to create this algorithm. It's going to optimize for 10 minutes on average and over time, that's the most fair way I can think of distributing the coins. And by the time Wall Street and everyone figured it out, the supply is gone. There's already over 20 million Bitcoin issued. It's gone. And where is it? It's with the people. So, I don't think that there is a risk of, and the other thing about gold is physically holding it. Like if I wanted to be like, 'Man, not your not your whatever, not your minerals, not your gold. I need to withdraw it and self-custody it.' How the heck would I self-custody $10 million of gold in my house? With Bitcoin, it's free to hold, easy to hold, free to receive, free to store. I could put it in my brain, and the people have it. So, I just don't think it's apples to apples that comparison. I don't buy that these paper markets have an ability to manipulate in the same way that they would physical commodities because all the physical commodity it's all sitting in Fort Knox, right?

Right? And the president of the United States talks about auditing it all the time, but auditing Fort Knox takes 18 to 24 months. It takes about two seconds. I mean, 21 has proof of reserves. You could go look on whatever blockchain explorer and see if our Bitcoin is sitting there. And so I just don't agree with the premise that those are comparable markets and that Bitcoin is susceptible to that level of market manipulation. Not to say that people can't try, but I think the market is far too free and far too distributed. And people have tried. I think SBF is serving a lifetime sentence for trying, right?

Yeah, exactly. I mean, I agree with you there. And I think, you know, another thing about maybe not necessarily the parallels or how I'm trying to frame this, but we are starting to see banks start to come into the Bitcoin space. We obviously got the ETFs launched and now, Morgan Stanley, all the big ones, you could just go down the list. They're all allowing you to borrow against that. Borrow against your Bitcoin holdings in an ETF or whatever it is now. And they're starting to really try to tell their clients they should allocate a 1 to 5% allocation in their overall portfolio. So, how do you see that market coming in and developing with the TradFi world? And just essentially almost borrowing against a paper note as well.

Well, I think borrowing against Bitcoin, it's the most successful product I've ever launched. We have the product at Strike. We think it's the best product in the market and it's the most successful thing we've ever launched. And it's pretty obvious as to why. You have something that's the best performing asset in human history. And it is the cornerstone of everyone's savings for our customers. I mean, every customer story of ours is the same. Sure, you start allocating 1% of your net worth to Bitcoin when you first got into it. And then somehow someway that's quickly become 90% of your net worth, whether your conviction grew or the price grew. If something goes up 10,000%, either you are getting like a LeBron James salary or that's going to dominate your net worth, right? And so you have wealth that you don't want to sell because it appreciates so much and there's tax consequences to selling it. But it is how you are saving. And so how do you get liquidity and how do you live your life with this newfound savings account that has changed your life without departing and paying taxes and being able to reliably safely borrow against it? Different credit products like we have a line of credit which is more like a HELOC, we have fixed-term loans coming out with all new products as well. So that's been massively successful. I think it will continue to be massively successful. I mean, I estimate the Bitcoin-backed lending market to be anywhere between 20 to 30 billion in size against a $1 to 2 trillion asset. Tiny. I think that'll only grow. And it makes sense that Morgan Stanley. I mean, Bitcoin is for everyone. I find it contradictory that people are like, 'Yeah, Bitcoin's for all. It's decentralized. It's freedom.' Except for Larry Fink. Screw that guy. It's like, well, who elected you the president of Bitcoin? That's kind of the whole point. Yes, it's for enemies at war to settle trade through the Strait of Hormuz. It's for your neighbor that cheers for the opposing football club. It's for everyone. That's the whole point. And so, is it for BlackRock and Morgan Stanley? Yeah, it is. And if they have good products, then customers will use them. And if I have better products, customers will use mine. I don't see a problem with that. And I think that the Bitcoin-backed lending market is good. It also, by the way, it takes sellers off the market, too. If you need to raise liquidity, then you don't have to sell. So anyway. And in regards to your question kind of implied that they're borrowing against paper. What did you mean by that? I mean the ETFs I think are I mean I don't know how I mean obviously it's SEC regulated right they have to go through all this but it is also a new industry when it comes to the SEC trying to track and figure out everything that comes down through just tracking Bitcoin and actually buying it. Obviously BlackRock has a couple custodians Coinbase being one of them and a lot of these ETFs they don't custody their own Bitcoin except for maybe Fidelity. So, it just is there seems to be a lot of almost like a trail to try to be able to find and prove that this ETF is actually holding Bitcoin. And then, they're working on the 9 to 5 schedule instead of the whole 24/7. So, it's just I think I don't know. I feel like there is some sort of way that it can get a little hairy when it comes down to breaking it all.

Yeah. So I would say what I'm a fan of and what I offer customers and what I think is the most pristine version of the product is you buy physical Bitcoin. We let you even DCA for no fees, withdraw to cold storage for no fees. If you're like, 'Hey, I want 10 grand of liquidity against this physical property that I own or a million dollars liquidity or a billion dollars.' You deposit it. I say, 'Cool. I'm going to put it right here.' And we even offering and rolling out a new product on an ad hoc basis of like we'll segregate your collateral so you could see it sitting right there. Wake up every day like you're cuddling your baby like refresh the Oh, there it is. We have quarterly proof of reserves now for a lending product and you get the cash and that's it. And it's the most beautiful product in the world because I'll give a loan to anyone in the world where regulators allow me to. I don't need to know your eye color, where you went to school, who your parents were, what your credit score is. I don't care, right? It's perfect. And obviously the rates that we offer are substantially lower than the expected appreciation of the asset or another way to say that how much they are expected to debase the thing you're borrowing. So that to me is the gold standard. That's what's been successful for us. That's what I use personally. That's how I live. As far as ETFs, yeah, I mean listen, I think that BlackRock wants, the fact that they want in-kind redemptions, for example. I think that's a great thing that people can literally withdraw physical Bitcoin in exchange for the security the IBIT security. I think that the way that the market is acting as any free market if you want to continue to compete and win customers you have to innovate. You have to respond. There's some measly tiny little ETF that applied for in-kind redemptions and IBIT customers saying hey I want that. I want to make sure my Bitcoin is there. I want the ability to withdraw physical Bitcoin. And so then you see Larry Fink compete. And so I think yeah, would I in the years to come would I want to use an ETF product that goes out of their way to reduce transparency has no filing and working on or feature of redemptions that are physical and in-kind? I wouldn't use it. So, I'm not gonna sit here on the podcast and say, 'Oh, because it's BlackRock and because it's Coinbase and because it's Morgan Stanley, I fully trust it.' Absolutely not. And by the way again the really cool thing I'll just bring it back to the earlier conversation we had is if BlackRock makes 22 million IBIT or it's not one to one Bitcoin but 22 million Bitcoin worth of IBIT we know that there is hypothecation and fraud and paperness going on over there because there's only 21 million bitcoin. And again what we can see where the bitcoin is on chain there's transparency there's auditability in this protocol. And so we relatively know how much Bitcoin's at Coinbase. So we relatively know the size and scale of these products as well. And so we relatively know the ability of like if Morgan Stanley is issuing a bunch of loans that greatly exceed any form of collateral that is not like what is on the blockchain, then we know they're swimming naked and that's their risk to manage. So again, I think like there's no gold blockchain. There's no nothing I can go look on the internet and be like, 'Oh, there's the gold in Fort Knox. Okay, now let me do the math on how the United States has been settling trade with China.' There's none of that. And so this is just I don't think it's an apples to oranges with this asset class. I really don't have I think it's a bit fear-mongering to say like, 'Oh, well, what happened in 1971?' It's like, yeah, it's like a analog rock. So, I don't know, maybe I'm an optimist, but...

Yeah. I mean, so I think Bitcoin is one of, if not the only free market, truly free market we have left in the world. I think it's the only functioning smoke alarm for liquidity we have left in the world. Really, the simple way to say it is it's the only thing that can tell you the truth. Because with central intervention and central planning, you're distorting market opinion. You're interfering with it, right? And the best way to understand that is the consumer sentiment piece. You've got the S&P 500 at all-time highs and the way people are feeling at all-time lows. There lies a very simple contradiction. The S&P 500 is no longer a reflection of what I'm calling the truth. Why? Because so much central interference. There's so much passive investing through 401ks and the market doesn't operate on weekends and they get to select which companies are in and out and when Nvidia is doing better than another company then they're kind of dialing how much Nvidia is representative in the S&P 500. Right? Equal weighted S&P 500 is different than the S&P 500. So you've used central planning, central authority, government, large corporations to distort the free market signal of what the truth is. And Bitcoin is the only thing we have left that tells us with no central interference, no central planning, no government, it's truly global. Everyone can voice their opinion, not through tweeting, but through time, energy, effort, labor, which is capital. And so Bitcoin trading down, Bitcoin and consumer sentiment look the same. It looks like Bitcoin is the monetary expression of the truth. So what is Bitcoin telling me? There's not enough filthy fiat in the filthy financial system to support everything that's going on. Oh, you want to go to endless wars? You want to increase your deficit spending? The United States is talking about increasing their defense budget. So, you want to increase your deficit spending, increase your debt, increase your ability to go to endless wars, and increase this AI race that's become both a strategic initiative and a national security threat. And what Bitcoin is telling us very simply is there is not enough fiat liquidity in the system to support all this. We are going to enter a recession slash depression slash severe austerity or you have to print the money. Which is I mean that's the story of the whole thing right. In 2000 the dot bubble blew up and they kicked it to the housing market. 2008 the housing market blew up they kicked it to the sovereign debt market. In 2020 COVID sovereign debt market blew up and they kicked it to the currency. And the only thing left is the currency. If you want to get out of this, you got to debase the currency. You hear people talk about secular inflation, persistent inflation. That's another way of just persistent debasement of the currency, devaluing the debt they owe. So, I look at the Bitcoin market and I'm not upset. It's telling me the truth. I'm not. It's like fiat is like wearing drunk goggles. It distorts your perception of reality. The S&P 500 is not telling me the truth. I woke up this morning, gold down, Bitcoin down. We're approaching some type of liquidity crisis. I don't know what it is, but there's just clearly not enough liquidity to support all this debt, all this war, all this spending, whether it's in the Middle East in conflict or whether it's AI companies trying to build out physical centers to support new form intelligence. And you can see the stress in the system everywhere. Like you have these AI companies that are trading at the most insane valuations ever, right? Like the multiples on these businesses are absolutely insane. And in order to justify these multiples, they have to talk about their growth story. So 6 months ago, they're saying, well, the multiple is reasonable for us to trade 100 times sales because our software is going to be doing all of the labor in the market. Like you won't need lawyers anymore. You won't need accountants anymore. You won't need customer support agents anymore. And then everyone goes, 'Well, wait a second. You're going to take everyone's jobs?' If you take everyone's jobs, the whole system is built on debt. So, everyone's going to default on their mortgage, default on their car note, default on their student loans. All of these bank balance sheets that are writing these loans at par as if everyone's going to be able to pay them back. There's going to be a delinquency crisis, which is what we're seeing. Credit card delinquency, mortgage delinquency, everything up because AI's taking the jobs. People are less in abundance financially. And that's going to crash this whole thing down. And so then the AI companies say, 'Whoa, whoa, whoa, whoa, whoa, whoa. We're not going to take everyone's jobs. Everyone's going to still have jobs. Everyone's going to be able to afford all these loans.' They took out the white collar worker, the person with the socioeconomic status in Manhattan that has a $250,000 salary with a law degree and a nice condo. Like, they're good. They're not going to default on anything. And you say, 'Okay, well then your valuation has to come down because you're not going to be able to grow into this valuation.' You're like, 'No, no, no.' Because if the valuation comes down, then you know 96% of American GDP growth in the last four quarters is AI and tech. And so if the valuations come down and they can't keep raising the capital and plowing into the economy, well then it crashes this way. So it's like, okay, you've told me two things, they contradict each other. One's not true. Either you are going to be one of the most valuable companies in the world. You do deserve the multiple, but you're going to take everyone's job. Everyone's going to default on their loans because this whole system is built on credit and debt and these bank balance sheets are going to be functionally insolvent and they're going to have to print the money to make up for the fact that all these people that took out all these loans no longer have jobs and aren't productive because a Claude subscription and Claude tokens can do what they do and the system collapses this way. Or everyone keeps the jobs. AI isn't as valuable as it's being marketed. It shouldn't continue to get plows and plows and plows of trillions of dollars of buildout and GDP drastically reduces in growth and we're not producing enough growth to grow our way out of the debt. But it's like as a Bitcoiner, I'm chilling. You guys tell me which one. You guys tell me. So I see the stress everywhere. Bitcoin's just telling us the truth. And until they print once they print the money, it's a story as old as time. Bitcoin's the most fixed asset. So when there's an abundance of new fiat competing for a fixed amount of thing, the scarcest thing goes up the most. Super simple. But until then, we're just watching stress in my opinion.

Yeah. I mean it goes back to the conversation we were having about some of the Bitcoin Treasury stuff. Yeah. I guess in theory it sounds good, but do I get it? No, I don't get it. I just don't understand. Like I said, either these companies can grow into these valuations because they're displacing and replacing the labor market, which is fine, but then the entire economy built on lending humans money that they can pay back by being productive collapses. And the bank balance sheets are functionally insolvent and there's a massive run on the bank because the bank doesn't have your money. They have your money that they lent out and these loans are treated at par. And if the loans are not at par anymore, then the bank doesn't have your money. All your money's gone. Everyone's money is gone. Okay? Or the opposite is true, which is no, everyone's going to be able to pay their mortgage and stuff and no problem. AI is being oversold and overhyped a bit. Okay, great. Well, then the consistent GDP growth, what Kevin Warsh is saying, this whole story of like how AI is going to save us all, well, that's just a lie. So, the point is let's simple it down like way easier. There's been a misallocation of capital. There's $40 trillion of debt. That money's gone. The only reason you borrow, borrowing money is the closest thing to time travel I think we have because you are pulling forward time and energy, effort, labor. What is money? Money is you wake up, you bust your ass, you work hard, you don't go to the beach, you don't hit snooze and continue to sleep. You get up, you contribute, right? Look at all of us here in the studio. We're working. In return for that, you get money. So borrowing from your future is pulling forward that effort, that labor, that time, that energy and spending it today. Now the assumption is that you can pull forward that effort and labor from the future. Spend it today and enter your future with more than you otherwise would have, right? Take on debt, produce value, pay off the debt, have an excess. That's the point. But governments are the greatest misallocators of human effort, labor, time, energy, and capital in the history of our species. The $40 trillion is gone. There's no growth to show for it. They pulled forward all of our in our kids, in our family, and our neighbors. They pulled forward all of our time, energy, effort, labor, work, and they lost it. It's gone. So the very simple question is who's going to realize that loss straight up. There is no like AI can save that. That human effort is gone. Misallocated. This is why you take money out of the hands of the government because no entity or central group or central planner should have the authority to misallocate human effort to that degree. That is an affront to dignity as a man. That is fucked. And so that's the question. There is no AI saves it. Sure. Can GDP outgrow the debt? Yeah. But in real terms, like the S&P 500, it's up in dollars, down in gold, down in Bitcoin. So, who's losing? Bond holders, like real rates could be negative. Yeah, the 10-year is going to pay you 4 and a half%, but inflation is going to be 10%. Okay, they're losing. People that are lending to the government at a loss are the ones financing our way out of this and paying back the human time, energy, effort, labor, and capital that needs to make us whole again. That's fine. Or are they going to debase the currency? Then everyone holding the fiat is the ones that are realizing the loss. But someone has to lose. Money is not something that you can mark up in a balance sheet, mark up in a Excel sheet. It is human effort, labor. That's the whole point of money. The whole point of money is just wanting things isn't enough. If you could just wake up and want a Ferrari, we wouldn't need money and capital allocation and structuring ourselves and supply chains, we would have everything we want. The whole point of money is the difference between what we want and the proof of work of what we can actually get. There's a difference there. So, I don't know. I mean, as a Bitcoiner, it's pretty simple, bro. It's I don't know who's going to lose. I'm not going to pretend like I know. Hell, I'm the guy getting shit on Twitter for asking questions. I know one thing, though. By owning Bitcoin, it's not going to be me. That's how I feel in this kind of declarative. I don't know who's going to lose. Is it going to be bond holders? Is it going to be the banks? Is it going to be the currency holders? Who's going to have to foot the bill for governments pulling forward all of our effort and losing it? I don't know. But by stacking sats and putting them in cold storage, it's not going to be my time and energy.

Dude, it's like being drunk. Like fiat looking at the world through fiat is like being wasted. It's like when you get pulled over and the cops are like, 'How many fingers am I holding up?' It's like, 'What is the S&P grown or not?' You're like, uh, yeah, in dollars. Yeah. In gold, in Bitcoin, in anything that you can't print. No. So, like the money that you operate with really defines your reality. Real wages have been negative for 50 years, meaning people are working harder and getting less consistently. But of course, you have people standing next to you in the coffee shop like, 'I just got a promotion. I was making 80K, now I'm making 85.' Yeah, but you're getting less food, less housing, less vacations. You're affording less family. Babe, should we have another kid? We can't afford it. Congrats on the promotion, though. You're drunk. You're wasted. How many fingers am I holding up? Uh, you're arrested. Jail. DUI.

Nothing stops the train. Like I said earlier, somebody has to lose. Say that again. There is a loss. Someone has to realize the loss. So I'm not there's no I'm a realist, authentic, truly myself. There's no hype story I got. Now with that being said, I think Bitcoin will play an important part. I've got an exciting story for Bitcoiners. Here's I'll actually use the gold market as a way to articulate this. So China is, ultimately what the United States is trying to solve is they want balanced trade. You're hearing Trump say this. We need to reduce our deficit, balance out the trade. China ran a record trade surplus in the last fiscal year. They ran a trillion dollar trade surplus. And when China runs a trillion dollar trade surplus, they basically think of it like they get a bunch of US store credits. You don't take that surplus and invest it into your own. You don't want to strengthen your own currency which weakens your own export market. So you get a bunch of dollars which are US store credits. And what can I get with these store credits where I can get US treasuries, I can get real estate, I can get equities like I could buy Nvidia and stuff. And so what you see is an inflated an artificially strong currency because it's the world reserve currency and artificially strong assets because you are seeing the world's surplus recycled back into the United States which is kind of the whole point. You have these like twin deficits. Anyways, China has started to, and this is after the 2008, this isn't anything new, taking these store credits and buying gold and importing physical gold because they're saying the IOU that the bonds, we don't trust it anymore, after the sanctioning of Russia or after just the pure devaluation and bailout in 2008. Like we're less willing to enter the US store and just spend on lending to you guys. Sure, we'll buy a little bit of Nvidia stock and stuff like that, but they started importing a lot of gold. If the amount of gold they imported last year, if gold was at $20,000 an ounce instead of what it's at now, which is like $4,000 an ounce, balanced trade because all of the money that they made in the surplus would have had to go towards allocating more expensive gold. Does that make sense? Because the reason that that's important is it's a really fancy way of saying dollar devaluation. What's the difference? Gold went from $4,000 an ounce to $20,000 an ounce. The dollar went down a lot. Same thing. What's the meme? What's the difference? Same thing. And so, what I think one way that the United States can get out of this is devalue the currency against hard assets. So, if I'm the United States, yeah, let's go audit Fort Knox, see how much is in there, let's get a lot of Bitcoin, and let's reprice these things. Let gold go to $20,000 an ounce. Reprice it on our balance sheet. Boom. Problem solved. Like, here's another way to say it. I can solve the United States problems in 10 seconds. Don't be the world reserve currency. The world reserve currency means your job is to export the thing that everyone has perpetual demand for. You have to run deficits. There's no such thing as running a surplus as the world reserve currency, at least sustainably. You got to run deficits. You got to let So if you want to solve your problem, you don't want an artificially strong currency. You need the currency to weaken. You need your asset prices to be repriced against hard money. Don't be the world reserve currency. Now, that's not politically favorable. I don't know if I ran that campaign on a presidential track, I don't know if I'd get elected, but that's the truth. So, how does Bitcoin play into this whole United States and debt and stuff? Think of it that way. China based on the surplus China ran and the gold they imported. If gold got way more expensive, trade was balanced. The only reason trade was not balanced is because the dollar is too strong. Meaning assets are too weak priced against this piece of paper. So the way to solve it is let the hard assets go up a lot in dollar terms which is another way of saying severely debase the currency.

Yes. I mean, so, when I say weaken the currency and people will pull up like a DXY chart, like dollar index chart, and they're like, 'Oh, well, you know,' and it's like, 'Well, I don't mean weaken the currency by like buying euros.' The question is, weaken it against what, right? So, okay, China does productive things. By the way, I'm not like a fan of the CCP by any means, but they run a surplus. So, they're producing things that the world wants. The world is importing it. They're exporting and they have a surplus. To base these pieces of paper against what is the question. And Bitcoin, they're buying so much gold in my opinion just because Bitcoin is not big enough. If you run a trillion dollar trade surplus as China, that's like Bitcoin's market cap right now. It's just not, it doesn't have the skeletal frame yet to absorb that sovereign bid. It will. It just gonna take a second. But the point is you need a neutral reserve asset that debases this because ultimately what does the United States need? The United States needs a weaker dollar specifically against the Chinese yuan. The United States wants to reshore a lot of production of like let's stop importing everything. Like there's a topic about the rare earths. I don't know if I'm veering way off here, but we need rare earths to produce military equipment to produce anything. And we have no ability to actually do it ourselves. We're wholly reliant on China. And so there's a theory that China either allows us or disallows us to go to war because if they don't want us in war, they won't give us the materials to build the things that kill people. And that's that. And the United States has made it very clear, we need to fix that problem. The only way to fix that problem is to make your currency weaker so that labor is cheaper. Why is the iPhone made in China and not in Manhattan? Well, because rent in Manhattan is $5,000 a month. If I had to pay an employee to make an iPhone in Manhattan, I'd be paying them like a million dollar a year. It's much cheaper in Sichuan, China, right? And so, how do you weaken the dollar against a Chinese yuan? Is it just a game of money printing? Well, not. If you go through gold, like the price of gold in China has gone up so much that if you proxy the dollar's value through gold, the dollar has gotten significantly weaker against the Chinese currency. Does that make sense? And so the question is devalue it against what? And so does China participate? I mean not whether knowingly or not the world has been collateralized on sovereign paper on debt since whatever this fiat era started this fiat experiment and whether it's China everyone is rotating out of that. Gold is right now like central banks have been net buyers of gold and net sellers of treasuries for years a long time this isn't like a recent phenomena. And Gold recently passed the US dollar as like the top reserve balance on central bank balance sheets. And so the world is recollateralizing on a neutral money as opposed to government debt. And so I don't know if that's China participating or not, but this is how I see the world unfolding is these currencies are going to get severely weaker. Weaker in what? Depends on what you're measuring, right? Like weaker in eggs, weaker in housing, weaker particularly weaker in Bitcoin, gold. I don't know if that made sense.

Yeah, I'm bullish with no pressure.

I'm bullish with like Bitcoin can take as long as it needs to take. Bitcoin doesn't operate on my time. Part of the journey of becoming a Bitcoiner is a sense of ego death. It's not about me. It's not about the risks that I've signed up for in my life. 6 months, 12 months, 18 months, three months. Yeah. I think that the currency has to get lower. Hopefully, this podcast has made that abundantly clear. I think the dollar's got to go down. Which means Bitcoin's got to go up. I think it will start performing when they start adding more liquidity. Bitcoin will tell you exactly when they start printing a lot of money to solve for this liquidity crisis. By the way, Bitcoin going down is very simple. People, someone out there needs to raise cash. Whether that's to buy a house, whether that's because they got liquidated, whether that's because they need to fund the SpaceX IPO. There's investors that invest in these big AI companies and they don't have the money. Well, they're all IPOing. The wires are due. Well, I got to start selling stuff. Again, this is all liquidity crunch. There's not enough liquidity out there. And so things like Bitcoin going down, think of it as people are raising cash. And so when people don't need to raise cash anymore and can instead save cash, that means we're going from tight liquidity to abundance in liquidity. And so I think that has to happen or we'll go through something violently worse than the Great Depression, some severe levels of austerity. Bitcoin will win inevitably in that route, too. But I just don't think politicians and central planners will let that happen. They tend to print the money. So, am I bullish? Yes. Do I need Bitcoin to go up soon though? No. I think like I you know I think Bitcoin is telling us the truth. The consumer sentiment is in pain. There's not enough liquidity. Everyone's needing to raise cash whether it's for their credit card bill because they're late on their mortgage because they've missed rent or because they committed a bunch of money to an AI company and they don't have it and it's IPOing. All of the above or because there's war. What if I'm speculating but what if Iran was accepting a bunch of Bitcoin in the Strait of Hormuz and then all of a sudden Trump says ah screw the ceasefire war well you got to turn sats to weapons that's sell pressure that's raising cash debt war spending delinquency there's not enough filthy fiat to support this debt-ridden system. So, I think they have to print. I'm very bullish. How much money they have to print? I mean, Warsh is in a pickle. What do you do? It's hilarious, dude. I mean, listen. The last time they cut rates so aggressively was like, COVID, right? Rates were zero. But they were cutting rates when oil was negative $40. Remember that? Yeah. You would have gotten paid to just take a barrel of oil and put it in your kitchen. You would have gotten paid to do that. Now oil's at $100 a barrel. You're going to cut rates into that? People say, 'Oh, yeah, the Fed's done this before.' No, they haven't. They've never cut rates into an energy shock into 20% of the oil market supply being taken offline into the most aggressive depletion of the strategic petroleum reserve in the United States history. They've never cut rates into that. It's like, oh, then surely they'll hike rates. Hike rates real. Like the United States already can't afford its interest payments. They're spending over a trillion dollars a year on interest alone. So it's like yeah I like again Bitcoin Bitcoin will go up but will there be pain? Central planners don't print the money beforehand. Trump's not going to come out and say listen whichever way I walk I'm fucked. So I'm going to print the money just to save us all some time. No, politicians let something fail, collapse, like Silicon Valley Bank. And then they come out and say, 'I'm here to save you.' And by doing that, I've launched the ABCD EFG funding program. And it's like that's the political cover they need to print the money. So there's always pain. Someone's going to blow up. Something's going to happen. The AI IPOs will flop. Consumer delinquencies will get too high. The war spending will be too much and there will be some ABCDE EFG funding program that is politically pitched to save you. What would you do without it? And Bitcoin will go to 500K.

Thanks, dude.