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Looming Debt Crises, The Fed, and Crypto with Gabe Bassin and Taylor Pearson
Hey, everybody. It's Eric torbert co-founder partner, Philip global, eight network driven venture firm, and this is metro stories a podcast covering topics. G tech business with world leading experts. Everybody. Welcome to another episode of venture stories by village global. I'm here today. Joined by Taylor Pearson. And gave bassin as welcomes the podcasts. Thank you travels excited to get into it. But first let's start with some issued actions. Can you guys stay a little bit more about what you guys do because focused on where you're most excited right now. Yes, Taylor blogger writer. I do some marketing advisory work at in crypto. And lately, I've been thinking a lot about is sort of transaction costs in cryptos or the internet reduced sort of the marginal cost zero and you had this credentials for white long tail phenomenon which gravies platform aggregate is in these new businesses that terrific system. That means I'm thinking a lot about like what are the or the transaction costs reduced by is crypto protocols for the implications of that yet? Hey, guess I worked on Wall Street for better part of fourteen years, and you know. Since then I've been doing a bunch of different things across many different assets real estate venture capital private equity can crypto recently. I've been doing have been meeting with some accelerators and trying to kind of work on the advisory side kind of across across the sector. But you know, what's what's most exciting is just kind of the unknown of the space attender attended trend towards in the fat. Money's kinda like Mike one of your podcasts can attend tended to trend towards that. But I want to be after mystic that. There's there's lots of ways that this is gonna play out. And so I'm just trying to to be super open-minded about that. Cool. We originally connected because gave you had this Twitter. Go on about inflation. Yuck. You want to start to get into where you're going with that? And then we can get into. Yeah. Yeah. Yeah. For sure I mean, I guess what? I kind of took issue with was that. Oftentimes, people talk about inflation may kind of you it only through kind of this myopic lens of. Of kind of these indices governmental news, whether to CPI, the P C E in my opinion, poorly constructed indices, but no industry is that attempt to kinda show levels of inflation. And then the feds takes cues from those and and in acts accordingly, and so I was just kind of kind of riffing on that that let's to narrow view in terms of inflation in, you know, take a bit of a broader view, you look at, you know, everything that included, but also acid rights isn't asset inflation. And so I was kinda just giving an articulated a few examples of kind of acid inflation across the board. We've seen in the US, of course, obviously globally as well. As Q is not just a simple United States. And so, yeah, I guess that was kind of the main point. And you know, I guess, you know, it wasn't really a statement about keen as Austrian is. Although it could read that way, you know, in actually a got. You people that pay hit me on the m pretty aggressively about about that Newark, they seem to be pretty Ian oriented, and I guess, yeah. I guess I was just trying to take a broader view of of inflation and understand an thinking about things that perspective in the end of the ramifications of that. And that's kind of kind of I kind of left it open ended at the end regarding kind of what what Petra ramifications could be, but, but but also just along those lines is it wasn't complete necessarily because there's a lot of factors that that that push into the inflation thesis, and you know, through the pension funds and all those other things come in. But you know, the the tweet storm couldn't be a hundred a hundred threads so silver Crutcher Isa's is basically that there was all this money printing with Huey and the different. I can't look that whatever the European Central Bank these things were in. So instead of seeing that inflation and consume or asset prices. These indices are constructed were seeing that inflation. Is that money is founded sway into the stock market. Is that accurate? Yeah. I was at a stock market the bond market the real estate market the startup market in an era. That's where you could you could probably chime in a lot about that. But yet a basically across most financial assets, you know, you could argue it hasn't. It hasn't flowed into a lot of hard assets. Like like gold. You can prices gold is near high price of oil is near is the price of a lot of commodities are not. So there's there's not against that there. But yeah, financial assets have, you know, quote, unquote, inflated or appreciated whatever word you want us there. What how does like when you know, the fed, quote, unquote, prince uneasy, how does that money get into? Okay. We're gonna say like, you know, the price of share Apple's inflated because of QE like how does it? How does he get there? Well, you know, the fed they're keeping interest rates low in flows through the frat. And by the way, I'm not in a communist, and I'm not a I'm not like a I don't know the the workings perf. Of this. But you know, they they control interest rates and they're also with quantitative easing. They are buying assets. And they're doing that you mostly the treasury bond market, and in the agencies, it just von's and so near the controlling interest rates, which which men, you know, lower interest rates to banks makes than arguably lend money out to the market market is then, you know, more liquid, and, you know, companies people investors in such can can use that money to to do what they want with it. And arguably all of that is supposed to spur growth and spur inflation in these in a lot of these kind of consumer indices, and we haven't we haven't seen a ton of that. That was kind of the point is that is that the, you know, the big push back on money printing was like I was gonna cause crazy inflation's gonna cause crazy inflation, and we're going to have hyper inflation, you know, whatever the scare tactic is. And there's a lot of kind of Ian, proponents saying, we're look we haven't had it. Look, look, we did it. And look we haven't had that raise inflation. So you guys were wrong. And I guess that was kind of finding my point is that while we have had a lot of inflation in assets. And by the way, this experiment ain't over yet. So you know, let's let's let the next card come out of the deck at multiple cards come out of the deck of blackjack reference because we don't know how this thing's going to end, you know, if you look at the fed balance sheet right now the amount of assets that they own about four trillion dollars news just barely coming in. I can send you a chart you can put on this show notes. And so they're just now doing what's called quantitative tightening. Which is basically kind of you know, kind of contracting the balance sheet, but it's just in its infancy. And so let's just we need to see how this thing plays out because we're still very early. Are there analogues to minds? I think the Bank of Japan and likewise finger non because they've sorted like the Bank of injuring something like this, basically since the nineties these at is there some lesson to be gleaned from what's happening in Japan Japan. Yeah. I mean, I think to the term is, you know, off the nation. They call it just kind of low growth, and if you look at the growth of Japan, it's kind of been yes, they've been doing that for you know. Yeah. The better part of twenty twenty five years, and it's you know, they've got very low interest rate, very low growth and their economy is arguably healthy. And by the way, their their government owns whatever. I don't know the exact percentages they own if visibly taken their economy pride it because the government owns so much of their of their bonds and enact with these two in their case they own a ton of ETF's. So I guess the grim vacations are are slower growth, and they're and they're trying to figure it out to their experiment is still ongoing as well. And so, you know, what we need to see I think you made a point of it the other day. It's like, you know, see. If it's a really car what what happened with with Huey. A success is is for like a successful wind down of the balance sheet, and and kind of have them, you know, have have the fed completely unwind. The fortunately in bonds that they own and then and kind of have no real ramifications or no real crises. That's that would be a huge victory for the Keynesian put until then I think it's too early to call call victory, which is not going to the Bank of Japan. He'd like that around down there balanced keeps growing. Exactly, exactly. And they their growth is new mkx. Yeah. Exactly. I think that's my guess is what what happens, you know, the front seems to be more hell bent on on reducing their balance sheet at the same time. You know, we get a two percent pullback in the market and we start talking chewy five. And so, you know, there's extreme screaming reactivity by the side. And that was only I was only partially serious there. But you know, you know, that end. So we the market hasn't really been tested recently in terms of this. So we'll see we need to see the fed raise rates slowly, see if continue on that pass that seems to be how they gonna continue. But you know, who knows and we need to see the balance sheet kind of come in a bit and see the ramifications of that. I'm there's also this talked about sort of like the fed is gone from being reactive to proactive like if you mentioned a two thousand sixteen or two thousand fifteen or so there was like a five percent on the marketing. Everyone's like, you know. Yeah. Contractor you're about doing quantitative easing again. As soon as I can anything happen, your I talk. What is at a we talked tonight measure a macro gotten Chris Cole on we've spoken about like sort of like his thesis on what's going on here. Yeah. I mean, there's just this light. This hyper, hyper reactivity, no from the fed fed his seemingly super scared of any of any pain in. You know, you know, pretty bring back decrypt, though, there's there's a very very high tide reference with the fed and the. Market's been accustomed to being critical at saved right markets kind of been programmed. Zinc that every that every you know, it's whatever the what's the term BTF d by the fucking dip. I don't know if we can swear on this thing. But that's that's kind of the mentality since two thousand nine, and it's it's the intensity of that mentality has continued to increase in my opinion, and a result of that is, you know, this kind of what they convert fed put where where it's like the federal save us if go down, and I think that's part of it. And I don't wanna be myopic around the fed because I don't think the feds the only contributor we can talk about the pensions and all these things, but that that's that's that's a big kind of reflexive thing in. So what happens when that reflexively ships kind of the question you brought up a guy like Chris Cole? The I don't know if people know who Chris Cole is you guys you guys probably do. But he's a hedge fund manager or any focuses on on volatility strategies. You know, he can he can obviously explain it way his strategy way better than mine, but I could. He just he wants exposure to develop Keleti when it occurs. If you look at any chart of the fall of of the vix is which is the kind of fear metric people look at the vix. You can see that fear has been pretty pretty row for quite some time, and there's actually a term structure. So there's a volatility curve that exists which basically tracks. If you know futures volatility, you know, out to I don't know I met my call it a couple of years, but you know, you can you can trade that curve, and you can you can make bets along that curve. When where do you think volatility is going to be, and that's essentially a gauge of of current volatility in future future volatility or current fear in future fear and the interplay of that an so volatility overall has been extremely compressed, you know, since basically two thousand two thousand eight two thousand nine thousand eight to the essence the bottom of the market. It's just say it's been Peterlee, compressed and. No, some say that's a function of the fed. We've got some outbreaks where the where the ball curve will move involve fear picks up a lot people. Get scared and volatility fix up, but didn't mean reverts right back down. And so there's there's this is this kind of argument that the fed is is kind of part of that is reflexive part of that where people get scared for ten seconds. And and then they kind of come back to come back to earth. You know, I can I can give you just a general kind of just a a list of things. So in two thousand ten we had a Greek crisis in two thousand eleven the US lost its AAA rating. And then we've had situations in Italy, you know, in Spain in Portugal, the pigs remember them in two thousand eleven and there was Cyprus banks shutting down in Cyprus in these things. And there was no Syrian wars. New crane the fiscal cliff in souks acqua station the taper tantrum when they were starting to taper you know, how much Huey was going to go on. And you had the end of Q one the end of Q E to the end of. Three no oil collapsed in two thousand fourteen fifty an forgot the year, China are MVP devaluation than you had Brexit, then you had Trump, and then you had, you know, China again in an independent, but at our, you know, here we are market. Arthur is you know, we have these momentary crises and then the crises which arguably could at the time feel like, oh, this could be it is going to end it like two weeks ago. Turkey was going to end everything. Right. That was kind of the fear. That was a scary thing in now. People aren't talking about Turkey anymore. You know in two weeks later. How do you explain that? I think it's a I think it's a short attention span, you know, in terms of people forgetting or in terms of of lower markets at all time highs. Okay. So yet here comes here we loops back into into the kind of pension feces that pensions to some context the append when I say pension funds. I mean municipal state local government. Pension funds. I don't mean, you know, GM has a pension in three m and whoever has a pension most private private tensions are tiny. But public pensions are are massive. So public pensions have gone from in the last like thirty years of public pension assets have gone from about forty five fifty percent of GDP to about one hundred percent of GDP. So they've balloon in terms of their their size, relative to to uconn. Emmy, so subsists in context Bentsen pension assets have gone from two trillion dollars about seventeen trillion or eighteen trillion. Whatever the numbers, I don't have the exact, but they've gone up a lot the fed for for some context. So we got seventeen trillion let's say the Fed's balance sheet as I said before is four trillion so pension assets. Are what is that for you know, three three three and a half four x the feds the Fed's balance sheet, and the reality is they're the they're the biggest player in the world in. Terms of assets in terms of liquidity. And they are also yet the biggest buyer seller of these assets. So what what we've got with pension funds is what's called a pension gap. So that's the difference between you know, what what assets are held in the pensions, and what they own the future. So again, we can talk about that. I don't wanna get new weeds too much with the basically got eight, you know, pensioners who were police stations in their policemen in firemen in government workers their own a certain thing in the future. They're owed a certain guaranteed payment or whatever into the future. And then they've got assets that are supposed to earn a return to then pay them, those the they're they're whatever pension in perpetuity. And so you've got what's called a pension gap. That occurs between what how much money is currently held, and what's what's owed in the future. And again, there's a rate of return expected on on those assets. And it's it's it's this kind of forced buying Biden's pensions. That are causing flows into all of these assets. My the piece is is that essentially that you've got the pensions who are, you know, basically, they need to make what it's about a seven percent return right now, they need to make seven three seven percent return. So what are they doing to get that seven percent return? You know in a in a one or two percents environment they need to push. And so what are they doing? They're pushing money to different asset classes, they're pushing them. And specifically they're pushing him to credit funds. They're put they're pushing him to levered credit funds or pushing into commercial real estate. And they think that these these types of assets are going to give them the the seven and a half percent return that they that they need in order to pay off pensioners in the future. And so one of these one of these funds do what what are the credit funds do when they received this money will they then go, and they you know, they've got tons of Quito lever to to give the companies S and P five hundred whatever public companies private companies. Let's just say public. Companies that then have tons the they basically you'll give loans or or do or invest in bonds, which then gives gives cash on the balance sheets of these companies. And then these these these companies can do whatever they want. They can buy back stock. They can do emanate. It can do they can invest they can they can they can do whatever. But the point is is that they're liquefied. And so then you death flows into out of the buyback thesis that that that people go people talk about, you know, since two thousand nine I think it's I think the number is there's been about four trillion dollars in in buybacks executed by companies in. I think there's been about twenty trillion in wealth created in that time. So arguably twenty percent forty percent of the world's traded arguably has come from the bid in in share buybacks, all that's up for argument. People can contextualize it different ways. But the point the point is is that the because these pensions are pushing pushing because they need to to return money in the future too. There pensioners they need to get their required return, which is currently again around seven seven a quarter percent. And if they don't get that, the the pension, gap grows and grows and grows in currently the pension gap is around four trillion dollars difference between what they have in. What they owe is about four trillion dollars that also is about the size of of the of the fed balance sheet. So the the pension gap alone is the size of the fed balance sheet that doesn't speak volumes about how big of a player these pensions are I don't know. What does I think what's really interesting to me about this thesis is will one through like the whole fed narrative recall Tabatha, Fred money at garment gas prices. I that seems a lot more widely talked about like insurgents in shoe, you sort of like assume that's priced in like most market participants DOI's after I guess the pension thing when we first talked about it was really interesting to me because no-one I've never heard anyone else. Talk about the most informed. Her sooner not like a running. Hedge fund or anything, but it doesn't seem like that super throughout documented. There's like a real. I can. Yeah. As you take the pension fund efforts like weird incentive problem where you know, if you're managing your own money, and like you can only get five percent safely, you it might take all these crazy risks to reach and get seven percent. But if you're you wanna be pension funds. Minor shading h revived half the hit it whenever that target is number for the pension fund to be to make the return to each Riddick to pay out his liabilities. So you end up getting this all this reaching and doing all this stuff that doesn't not quote unquote, rational actor managing their own money when it was all their own skin game might not use those investment strategies. But there's sort of putting that savvy Senator lined up that is that accurate. Yeah. Yeah. Yeah. You know, you call it forced buying in it yet. They have to put the money to work, and they have to get this return if they do not, then you'll become more underfunded. And again, you know, this this becomes a bit. Of a kind of just a problem. That's that's known. I mean, the thing is it's your point. It's not talked about on CNBC every day. It's not a thing. You can you can read about it the consists in nurse articles. I think and I don't read zero heads that often no offense. But like, I, you know, they they sometimes I think about my friend sent me an article from it. So it's yeah. I agree. It's not front page news. I think part of that is just because again people people folks on the narrative, they wanna focus on and and also it's going on for a while. I mean, these these things have been underfunded, and they've have continually underfunded they've gotten continually more so underfunded. So like, that's that's what's the breaking point. Is there a breaking point, you know? So if you look at cross states, I mean, I think New Jersey New Jersey's like thirty five percent funded there one you've got a state like Colorado, which is like ninety nine percent funded in so Wisconsin's like like ninety nine percent funded. But then you've got a lot of states that are below fifty percents. So you've got its it's it's area state to state. Date, but it just becomes a bigger and bigger burden in. So what ends a just about the social consequences essentially of it. But yet to your point it's something that's not it's not really talked about. And is in my opinion. The biggest factor in in markets in the United States. Why order the social factors Janjic? It the social factors are. I wanna try to like explain it singly, basically. So so these states in these municipalities any navy? They've got budgets, right? They've got budgets. Well, if the budget, you know, they've got a pay into these pension into these pension assets, they've got continually funds these assets because they you know, there's more pensioners who who are are now supposed to get get get a portion of these assets in the future and the liability continues to grow in. So the expense the pension expense for these cities towns states continues to grow, and so what the end up doing is diverting funds with when they have a fixed budget. Let's say you've only got one hundred million dollars. I'm just making something up while you're expected. Let's say you're pension expense was was only five million. So, you know, okay, fine. But you know, now, you've got the same budget in other pension expenses thirty million. Well, you know, where to those at where does that twenty five million come from him? So what you end up seeing is you end up seeing money diverted in kind of taken from these other. Other services. So you see you see you talk about it. You could infrastructure you look at you. You see police forces getting let go you see police. Shrinking see firemen municipal workers going away. I mean, there's probably a lot of a lot of bloating in the initial side anyways. But, but but in all seriousness, I mean, what are the ramifications of having Russ police officers than having less firemen in having were worse infrastructure continuing. I mean, that's something that people talk about all the time the bridges news things. But you know, at some point there's there's ramifications of that is how does having less police officers in the neighborhood effect crime. And so, you know, what I'm gonna talk about social consequences. I just mean that there's it's it's not a zero sum game. But it's it's a bit of as euro some game in the sense that they have this money, and they can spend it on municipal services municipal workers or know or they can they can continue to to proud into into these funds. And there's there's just there's ramifications to that. So here's not Trent. Sure sunrise for retired last three minutes tell Comey this inaccurate accurate. Alike engine, huge amount of money. They have to hit these targets Moore to meet their liability is since basically two thousand eight two thousand nine the only way to do that in market spend to be short while until lady as you said like PTSD to industry Masuma everything keeps going up. So you get to this scenario under the metaphor. We've talked for Mike jumping off of one foot wall a hundred times or one hundred football once the impact of volatility is asymmetric like one percent market dip doesn't really affect anyone that like ninety percent draw down. You know is more than ninety times worse than a one percent drop entering that staff. That's the increase to meet it's like sort of interact. Interesting. Also scary, right. Did you could are we really like is volatility to slower, and it's gonna be lower forever. Mike the fetish don's balance. He didn't pension liabilities. Like this whole thing has been to revive smoothed over or have. We just like taken all this, all agility. Compressed it entered like pushed that Montilla into the future where your should have jumping off a one foot wall hundred times, we're gonna have some hundred foot wall standing, you know, at the end, it's a much going to have that we're gonna have to jump off. Yeah. I agree. I don't wanna at your crazy dystopia path. And I I want to be more optimistic. But, but, but, but yeah, I mean at some point things come home to roost in, you know, I think at some point there's going to be a pension crisis. There's going to be that's going to idolize it's inevitable. I I hate to say that. But I think there's going to be again is it is it going to be tomorrow. No, you know within the next twenty years. I'd say highly likely again, I it's hard to pass time. These things similar to like the social security arguable or the student debt argument, you know, these things they're unsustainable that are essentially fools Aaron's on some unsubtle level. There's consequences to that. And so then that that just comes back to kind of in the kind of printing money. What ends up happening? What what would we what what are options when these things happen in historically relied on the government to save us in in do these things, you know, his, you know, as of now, you know, we've been in this kind of one for awhile environment. You could say two thousand eight was it was one hundred foot wall. Some might say that you know, other people might say, no that was the first kind of shot across the bow of something way bigger. And look and look where we're at now even anything feels good in everything know good, look at the prices look at unemployment and look at, you know, look at jobs, and we could growth to GP's been strong. Look, we just got the tax stimulus in there in the repatriation, you know, make make America, great, whatever, you know, they, you know, everybody's you know, in the US young not everybody. But a lot of people think things are unknown along fine Onarato rebels. We are. But there's a lot below the surface these hundred foot walls. Are you never know when when it's time to to join. Is it gonna take another one? Do you think we're going to have another two thousand eight in the next decade hard question? But it is it gonna take another event like that or something worse for people to say, hey, maybe this isn't working. I mean, again, I just to be clear, I'm not some negative Nellie coming on trying to be like, you know. I just I want. I don't want to come off as you know, like David Stockman of the world who are dislike vending amount. So, but I do think that there is I think a I think it's conventional wisdom that what we saw in two thousand eight is in anomalous event in that would never gonna see the Gannon. It's a once in a generation in whatever whatever it said, I think that's conventional wisdom, and I I actually don't think that's the case. I think we definitely are going to see another crisis. Yeah. And you said next decade or two. Yeah. I think privacy to herb more in that period. I mean, but I again, it's it's impossible to time these things again keep pushing on a string for for for a long period of time. And you know, right now the music's playing, you know, it's kind of that that that kind of better. No, I think it was Chuck prince Chuck prince the city guys like you gotta dance world music plan. And so, you know, that's that's kind of what we're seeing right now. People are dancing. And the dancing, and it's good, and, you know, the music playing in and we'll see at some point the music shelter are often. We'll see who has a seat new doesn't question is like what it implications for crypto. It would mean for crypto in the last thirty minutes what we've been talking about. Yeah. We'll meet your. Here's the thing. I just had this thought like earlier this morning pensions owns zero crypto right now they own zero crypto. So is eighteen trillion dollars or seventeen trillion dollars in assets and they own zero crypto. And so, you know, what you know, again, if you want to be optimistic think about think about that potential buying power think about if they start to see an opportunity in this space. I mean, they're they're the slowest, you know, oldest school investors in the world. So you need not give you the Rideau guys you need the institution of is the hedge funds kinda come about needed venture capital needed private equity and then pension guys come a long way later. But my point is you want to be optimistic essentially what happens if pensions stuff to value see value in drifta. And see value in on my God, this essentially help us in in closing our guy, you know, get hard for me to get there. If I'm being honest hard for me to for for to see the paradigm shift needed to get there. But because of kind of the kind of the old guard that the kind of runs these things, but you know, that's that's a potential tension. Very optimistic way to way to think about it. The more pleasantness Debray is just that. You know, what happens if a pinch? If some of these pensions need to get bailed out state pensions need to get bailed out by the by the federal government. I think Taylor you mentioned this before and you can talk about it further if you want, but just just kind of the bailouts kind of become turtles all the way down. So the this the fed has to come in bailout, the the states potentially because the states can't pay their pension bills or their orders or their the states have to massively cut. So you've got another option states can cut the pensions, and they can say, oh, you thought you were gonna make whatever fifty thousand a year for the next, you know, Mr. policeman. You've you've got you're gonna make fifty thousand a year for the next to you die. We're only going. To pay ten thousand a year now in what are the ramifications of that? And so you could potentially see a situation where the feds have to come in. And either either either there's their benefits are cut or you know, if they want me to make everyone hold on the fed has to come in the navy bailouts some of these pension funds, and maybe they have to print money again and the navy. We lose faith in the Fiat system at some point. I mean, that's kind of you know, the government the fed on much debt to the federal government Naveh mean that's arguably unsustainable. And so that who bails out the fed, you know, at that point. And so again, where where something like bitcoin out just all centered around bitcoin versus crypto because I think there is a differentiation. I mean, that's where something like bitcoin becomes anti-fraud Joel in becomes becomes, you know, a VAT avast a massive store evaluating arguably, it's the story value now. But in that case that's the hundred foot wall where bitcoin could could be could be extremely valuable. And you know, when when Fiat when the US dollar gets gets gets the bunked which again. Hard to get there. Not something people are expecting tomorrow. People talking about Turkey in. Venezuela enemy can never happen style US dollars currency. And yet, it'd, you know, do the is I get it in it is it is the tallest midget. But you know, in that instance, where you people whose faith in the US dollar who man that's like the the sovereign individual Neo feudalism potential situations Ayler, and I don't know. I, you know, that's not that exciting to think about quite frankly that that's not hopeful in my mind. So it almost feels like is this a fair accusation off Austrian economists are like, hey, you know, Keynesians trying to over engineer everything and just let sick to fundamentals, you know, Tim Duncan San Antonio, Spurs style. The fed is like, you know, we're playing chess you're playing checkers like, you know, like is usually on a different you deserve to stand up like the level of of the game or playing. What is that a fair characterization to like, what would need to be true for the Fedor his morality to be like, actually, this is more complicated. We we don't even know what we're doing either. But just let us keep it simple. Or man. The first question. I mean, listen, they've got a very hard job fed. Right. I mean, it's it's not easy to do what they're doing. Or what they're attempting to do. You know, it's at the analogy steering a aircraft carrier in you gotta start turning like two hundred mile before you actually have to turn it, whatever. This thing is it's it's very hard at the same time. I I think that there is a book no control that the fed has. No, you know, and you can and as a result, you know, the market kind of believes that into becomes a reflexive pretend saved essence, you know, with carpet with with all this and look what happened in like, we're back. We're back to all time highs and things are great in the world's in the better place and look at assets and look at wealth. Oh, everything's great. You know, again, I could die. Check that. But, you know, arguably the feds not in control, we just haven't in the US at least see them lose control, you know. And so that's the tricky part is like, okay, if you go to Venezuela. I mean, the feds lost their fed, whatever you wanna call it. I don't even know what it is. They've lost control. Our his last controls Iran's Ross control turkeys, less control. And by the way. Most governments have lost control of their currencies over time. That's why the average Fiat currency has an age of twenty seven years in average currency fails. After twenty seven years, historically, we've got a little bit of a recency bias with with currencies today because the average in the top twenty or forgot the staff of the top twenty currencies. I think have been around on average thirty nine or forty years. So we think there's this recent vice around Fiat currencies especially in the US where that could never fail. You N B, you know, a route of it's based on the belief in the fed and the belief that the fed has control. And and my argument is that there are much bigger factors out there than the fed pension funds being being one of them. You know, you. You just added. No, it needs to be more nuance than so even my inflation tweet, which kinda got your attention here or Taylor's attention. You know that didn't even bring up the tension stuff. You probably wasn't nuance to because the fed is not the sole region refer asset inflation depart of it. But but there's because other well, I want them to hear to his triggering my stadium like your what would it take for ginge to be wrong? Like, there's sort of this alike. Macroeconomic I'm sort of because I figured I if if something went wrong, I think like the GRE like older, you sit didn't print enough money or they did manage it. Well enough. So to been sort of always dislike no matter what happens sort of any party can always say like, oh, why actually we were right by the other people let us put enough money or you're too much money or whatever it is. By like, your like aircraft carrier metaphor makes you think like ride the feds drunk driving, this aircraft carrier. But what seems to be diff? About today, maybe do their craft carriers driving at night and getting less powerful. You know, it's it's hard their enforced out in you know, what the future is going to look like. And so now you're having to like make all these decisions about turning to her mouth ahead when you can only see twenty miles ahead nephews like it's. Yeah. It seems very hard. Yeah. Yeah. And they're enter the again, they're the illusion of control continues to read before said self, you know, as as kind of, you know, markets markets behaves the longer markets, behave approp-, kind of appropriate really or in a relatively positive fashion. Although if you look globally globally markets having been been so great, but in the US, at least, you know, the fed can do no wrong. And you know, I I, you know, I it's a scary thought to think of of of the fed who's in control or or the allusion of it's more the illusion of control kind of being given up on, you know, people people abandoning that. Because I I could argue that they don't really have much control right now. Now. And it's it's it's it's no Lucien. But once you know, the stuff is like what is kind of cargo cults the right term Taylor. But you know, people believing in something so strongly in so it continues to manifest the bit. But once that belief goes it goes into goes quick, I think you've seen historically with the ways governments have dealt with with monetary policy. And you're even seeing it in real time, you know, not in our country, but in this like Turkey and Iran such. I just this is like one hundred foot wall thing like as long as everyone agrees fetish in control. Then like the fed is in control. But as soon as people start disagreeing at you know, jumping off the boat. I don't wanna be the last guy to jump off the boat ride. So you get into this like don't know thank Rhames writer, but you don't want to be the last person to injure mind if they've lost control. So that becomes almost got prisoners to run over like as soon as I someone else starts jumping off the Bill like you get off the boat as quickly as possible. The next person off about enough in the sort of the center wall thing where the effects cascade alway down. Yeah. And I think that that goes back to kind of some of some of the crisco stuff where it's it's called convict city, where it's you know, it keeps getting it gets worse, or you know, it it starts moving at a at an increasing rate the father it goes. And so that's when when you get things like, you know, margin calls four selling, you know, you've got you know, let's to say an example where you've got assets that are that are manned. Managed, and you know, all of a sudden they've got you know, they're not that liquid assets. And you know, they they start to go down in value slightly in. So, you know, investors who are investing in those assets are like us through this. We wanna take our money out from you. And so then the fund manager has to then go sell some of those assets in the in the open market. They're not that liquid necessarily that causes price further price depreciation which causes further underperformance air or report performance in the fun causing more investors to redeem causing more for selling in his lap. Again, like liquidity at those points, and it just yet your point it becomes the classic margin call setup and we're far away from that. I mean, I I can't sit here and say, you know, again, I I don't foresee that happening tomorrow, you know, again the hundred foot while could be right around the corner. Hey, I I don't know. But I know I would say if you're probably Listrik thinker traveling not happening tomorrow because of things generally takes time to evolve, but yeah, margin call scenarios, especially when. There's lots of leverage in the system. There is, you know, especially on the sovereign level. It it can it can move into can move fast. Rivest interesting. I guess was complaining to me if you think about this preclude how neutral works by per vodka was like when like the laser like popular science complexity chaos theory things. Yes. This metaphor of a stand trial. And so you have new a certain systems architecture by you know, one grain of sand. Fall was triggered sue grooms of end of always triggers for grainger's in polish triggers. Eight Granges defying him. You might get cascades all the way down and inside effectively it's impossible to predict like which grain of sand is going to be the one that's had everything off. But you can look at like the structure of how the system is set up and say is this the type of system like are things interconnected in such a way that it would be this is a possible thing that you know, if you have if you have all these survey disconnected enough, yet two hundred Minnie's sand files, or whatever you don't have this big escape if everything is from fall. I think this is. Minders any harm dynamics in two thousand eight right? She just had everything was very leveraged in like very interconnected in ways that was pretty opaque back that that's your fundamental dynamic hasn't changed that everything is still very leveraged. Everything is still very connected and Mike. No one has particularly good visibility into into what that actually looks like. Yeah, I agree with that the guy agree with that. It's hard to think about a situation where things aren't interdependent or connected or whatever. Whatever where do you wanna use? It's hard to think of of a Fanshawe system where that's not the case, quite frankly in men, maybe Eric that's where it comes back to crypto where like the ten -cially Hensley. There could be a decentralized financial system that arises from from all of this, you know, potentially a, you know, again, it's hard. It's hard to see a world without golden Sachs. But like, you know, it's it's at the same time, Goldman Sachs arguably shouldn't be around right now. I mean, they were saved by they were saved by the fed. They say they weren't. But they were they became a Bank holding company them in Morgan Stanley. But Bear Stearns is gone women. Brothers is basically gone Barclays, bought them or whatever. But like, it's maybe maybe there is there's a way for some sort of decentralized financial infrastructure financial system to arise. Maybe concurrently. Kind of. Maybe we're seeing that. You know, the Senate can meet says that's nonsense because when I look at some of the projects that are doing those things on like come on. You know, it just seems seems like more of the same just painted with a different brush of blockchain and crypto. So so again, I want to be open minded I want to be positive. I really really do believe it or not. It's just you know, it's just hard to see that. But I definitely see a potentially for, you know, something like us some some hard money. You know, bitcoin, you know, as the best example of that. Right. Not Friday only example of that right now where that becomes a much much bigger factor in things can you describe a little bit more earlier user looted in a little bit. You said. Who's gonna save save the fed in terms of can you describe a little more the situation with debt overall in expertly US, and how it needs be paid eventually. But how does that actually work in has not gonna play out because it seems essential looming living thing if people don't really know how to understand it? Yeah. I don't I don't either man it's daunting, and it's overwhelming to think about I mean, there's just there's so much. There's so many liabilities. You know, if you want to even consider you consider so that's the that's not explicit debt necessarily on the balance sheet. But like social security system is is a massive future liability in similar to kind of the pension stuff is future future debt. Let's call it. Then you've got know student loan debt. I mean, that's a different conversation. But but yeah, I mean, so many situations seem seem unsustainable in an overwhelming. And you don't know what happens in. So what you know, kind of has happened is we know what they've within the by by printing money, they they kind of can do. You know, what's called inflating their way out on some love. Right. The government. They can they can they can pay back Neil now liabilities in money that just printed. And so even though you know, that same hundred thousand dollars to say debt is still does so says one hundred thousand dollars, but you know, if if they've devalued the dollar so significantly one hundred thousand dollars is nothing, you know, at at some point in the future. So yeah, man. I mean trust me, I am not smart enough to understand. What solution is I will which was on at against? But he is. I mean to me when I start going down these rabbit holes of, you know, government dead in in debt, relative to GDP, which is near the highest. It's ever been a globally too. Not just here. I mean, it's another countries in some countries. It's it's just ridiculous numbers. It's it's like how is this happening? How is this existing? How is this? It should it should have gone on on Thatta go, but it still goes, and it's still going. So, you know, I it's like it's like the music playing. Is keep saying in. It's it's it's hard to reconcile man. I wish I had a more succinct smart answer on that. Presumably there are other people eat who deepen Wall Street were also know worried about the future, whether they have different reasons to be or maybe similar, but are you one of the few or one of the only people was a couple of decades on doing what you do who's advocating or give a Wall Street like advocating for hard sound money, or or is that have you found like a contingent of, you know, people really experienced. They're also advocating for that. No, no. I mean, I it's funny. You say that man because most I'm not saying I have the broadest network, I'm not saying Mr. Wall Street guy because a I don't want to retain hip broadsheet because the Wall Street intimately with be. I just yeah. I I don't know. I feel like a lot of a lot of people, you know, very, very smart guys. They're either they're anywhere. From kind of not caring about about this stuff or not understanding what is crypto or what is whatever. Because you're so busy. Working in their focus on it to kind of actually understanding it a bit. But there's a lot of there's a lot less people in my opinion that really nuance. It really do the work to understand like, I I don't see it being prevalent at all perhaps that changes. And I think that applies to Wall Street. I think it applies to go world I in the country, at least, I don't think, you know, people people don't seem that focused on it. They don't seem to care. You know, people would rather be deep down the Instagram rabbit hole. Deep down the the bitcoin hard money. You know, talking about Ludwig Macy's. You know? I don't think that's a that's an interesting to most people. Did you get into hard money like reading Austrian economics or? Yeah. Yeah. I mean, I did. I did if I learned about it in college, and, you know, have picked it up here and there and just to be clear again, I I'm not hedging myself here. But I'm not some Mr. like safety in this is the only way in this is the only thing that can ever happen in. This is how you know. This is the only way because if you look at history, too, you know? Austerity ended not non-spending and lack of government prevention. Arguably extended the great depression in again, lots of nuance to these situations. But I I'm not I think I think there's a definite solid argument for her money. I think there's definitely an under appreciated argument for it at minimum and potentially it is going to be a solution to some problem or or or some big problems potentially. But I, you know, I wanna be hopeful, man. I want to be hopeful that the that was things kind of rise in that there's some real tech in in in the in the crypto or out of blockchain, whatever whatever world you want to call it. I want there to be both ways to win. You know? That's how I I want to be optimistic and open minded it. You know, it's just the more. I myself the more. I learn the more it's harder to see that your how do you think about the crypto hedge fund landscape in twenty eighteen are you doing any efforts in that landscape? I'm definitely not an expert. In in that space. I mean, I know who the big players are I got opinions. I don't I don't, you know. I don't wanna talk talk. Negatively, you're about about anyone. I think there's different different skill sets in in different different ways to do it. I think I think people's perspectives are changing even in in that in that realm in even the fund manages in selves are changing their minds in and that's it's good at chose open-mindedness in terms of in terms of approach. And I think if you're in this crypto space, you cannot be you cannot be closed minded you have to be open to pot is near the crypto fund managers base. You by definition after these super open minded because you know, if if you're at hardcore, you know, maximalist, well, you're not going to be running a hedge fund most likely unless you can compartmentalize in a big way. So yeah, I mean, I think I think we're I think we'll we'll see them grow. I think there is going to be more more, you know, money had could've coming into the space. But that's not you know, I don't think that's a guarantee that that. Oh. Instinct, everybody says institutions or just wait institutions are on deck institutions are coming in. I think that's happening. Again, I'm not an expert on this flows. I think you should you could have some of the bigger guys on they could talk about that more about I thought a fate accomplis. Crypto are just can all of a sudden become multi multi multibillion dollar fines, and would end whatever leave the industry is so in its infancy, and you know, I think periods like right now where there's a lot of on bling. Let's call it being done in these markets near lots of things down a lot. And you know, what does that mean is that what is that to to to people's psychology both fund managers, but also investors, you know, these indust- these institutional investors that were all excited to invest in two thousand into seventeen geared up into all doing all these things are they going to be as you're up now and are people going to be excited about but the Essex class, and and so that those are those are big questions. I think they're good. It's a bit of a moving target at like to. I'd like to. The excited like electorate to to grow. Because I think it's good it's going, but you know, when you need to see need to see some more successful projects that work and some of them some things where show let's prove there's an economic whatever token economic system that actually makes makes sense and works we have some maximalists start funds Murad is starting to find. And Nick Carter is starting to find your they're saying some combination of hey will actually trade bitcoin in chat try to beat it or end or you at some point many bitcoin is growth will become linear and will invest in inner product inability on top of it. Are you dubious of any? No, I'm actually you actually mentioned some of the some of the guys I respect the most in the industry, those those Nick and end rod number. Rod was starting to fund. But yeah, I mean, so we're still I guess I I should have differentiated. I think that there is no difference between kind of venture investing investing in kind of the. The rails of of the system of investing in the rails of new financial system with bitcoin is going to be the backdrop for it. And you're building payment rails on top of it and exchange, and a gnome coins is something that could that could be overlaid on top of that at any out if you if you go up in layers sure, I think that's more of a venture capital fund in. So maybe I I was more thinking just to literally about a crypto hedge fund on my. But if you look at the venture funds that are focused on kind of infrastructure, and in a project around that I think that that's that's different animal than kind of these news these multi coin, and I don't mean pile vessels early, but just guys guys investing in public liquid coins in a ending. It's I think it's a it's a big difference. Anytime I talked to someone who's been in Wall Street for for decade or two decades. And I asked him about it. Oh, Kwan crypto grant funds around the trading. It incur today. Either say that it's it's dumb or they'll get eaten alive. Live by sort of traditional Wall Street firms that will get it scripted novel the infrastructure. What's your were you there? Yeah. I mean, I I think that there's merit to the statement that over time if this industry takes off like, you know, people were expecting it to or you know, let some many expected still to. Yeah. The machines will come in, and they'll eat away at margins and up until I mean, I think so people still do it may people do what's called exchange arbitrage as I'm sure you've heard of that where they bite on one exchange and selling another exchange like, I mean, you know, interrupt Delic that can exist for so long. I mean that that that that's like, you know, arbitrage one on one, you know, and not so simple because you've got custody always things at the same time. Yeah. I mean machines come in. And if industries real and becomes a trillions of dollars industry. Yeah. People are going to put the resources towards towards quantitative strategies towards turn it putting the machines on it. But right now you've. Got it's it's so in its infancy. It's so unproven people don't know Wall Street doesn't know bid. They've made it they're focused on kind of proven financial assets at the moment and Anna answered some people look into Quan stuff. I'm sure there is I don't know for vaca. But I got to imagine. There's a lot of smart people out there, you know. And so I'm sure they're they're deploying employing it, but yeah, I think it makes it hard from strictly trading perspective. What's differentiate between trading and investing it? We're talking about trading perspective. Yeah. The machines come in. And they make it very difficult trade from an investing standpoint. Whether it's in in public, you know, publicly liquids tokens or or securities where private doesn't really apply to the private side, I suppose, but but yeah, the if that happens for sure margins go down, but the question is is do we have five years if this industry really gets to scale do we have five or whatever years before there's there's you know, the lunch starts getting eaten by the machines that that's the question. That's awesome place to to close guys. Thank you. So. For coming on matassa episode, thanked do you're just as fun. Thanks fairness. 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