WARNING: What You Need To Know About The UPCOMING RECESSION! (How To Prepare) | Raoul Pal

my framework is this is a long-term trend right we've got at least another decade in this at least probably two or three decades but this part of it is going to continue to do very well sure bitcoin over time as it gets more users more adopted it won't go up as much each cycle but there'll be plenty of others and plenty of opportunities so what we should be doing is using this thinking of the money you put in as your retirement money and writing it off um and then just adding if you've got money in a bear market now the problem is is most of us don't in a recession but a friend of mine taught me very early on he said ralph is a key thing i've learned is he who has cash in a recession is king so that's that combination of income and opportunity [Music] rao powell welcome back to the show it's fantastic to be back it's been a while it's been a minute man and circumstances have changed since we last spoke and uh i'm actually really excited to talk to you about things given that you've got bankers predicting global recession economists predicting global recession is there a way for people to really thrive in this time in this you know sort of moment of crazy disruption is there an opportunity or do we all just have to take a shot to the face well it depends what we're talking about look i mean they've made it clear the central banks and the government that they want everybody to take a shot to the face i they want demand to go down and i think that's already happening quite fast right i've heard that i've heard that said i don't understand demand for what stuff so if they raid your if they put up your mortgage rates you spend less in restaurants if you if you finding your food bills at the supermarket are 30 higher than they were you spend less on something else right that's not ever good because it stops the price of goods rising so the price of goods moves either because there's not enough supply which is what we've had a problem with or it's because there's too much or not enough demand so if you've got something with restricted supply so let's think about oil right now because of the russian situation there is not enough oil for the current demand out there so the oil price keeps going up so you and i pay more to drive our cars or to heat or cool our houses so the only way of solving that one because you can't get the russian oil back into the market is to make us buy use less oil so that may if you the price does that automatically because it gets more expensive we do it but if you can also then just lower general demand for things we'll drive our cars less we'll catch less flights all of that stuff and that lowers demand and therefore prices because prices rising inflation is evil for our savings because the dollar in your bank account is worth less than a year's time it's currently worth eight percent less which is quite a lot and so it's it's that it's this weird situation where we have to take the pain we're told we can't buy as much and we're forced into it by rising our mortgage costs and our food costs and all of this stuff and eventually things will slow down people will be put out of jobs a bit that kind of stuff and then the overall demand in the economy comes down and prices come down so i we're all collectively taking the pain for this inflation that was created out of a whole bunch of different things from the pandemic through to supply chain issues through to under investment in commodities through to the shift to green energy um all of these things have created this moment in time which is tricky and you know if we relate it to for example the crypto market so why did crypto stop going up well it was macro economic factors and people like well what's that got to do with crypto well really simple is it's a retail retail-based market and about sometime last year prices started to rise and so people could afford to dollar cost average less so then there's less demand for crypto and the price of crypto falls it's as simple as that okay so uh that all sounds very simple and direct i think that what i wouldn't have understood a year ago obviously now being into this i have a bit more of a frame of reference but i like to think that uh what i'm able to help people with is sort of the 101 of like how all this stuff works it feels like the i always thought of the economy as a thing external to human forces in terms of intentional human forces as i was growing up now i'm beginning to realize that it it is either rightly or foolishly the subject of a lot of human intervention and so i would have thought perhaps naively that the goal would be to let the market determine like if people are willing to pay more for oil gas whatever then the price will rise to what people are willing to pay and it just is what it is and so inflation is going to be a thing that happens occasionally it is if your wages go up to match it if not you're just getting poorer because you can afford to buy less stuff with the with you with your monthly paycheck but why won't the market balance naturally they're obviously you're getting poorer but theoretically it can't just inflate forever because people can't pay so it'll inflate until the amount of poor is like too much and then people stop spending exactly and then it rebalances and that's called demand destruction it's exactly the same process so the fed can engineer it by trying to raise interest rates and it filters through to our mortgages and other stuff or the market kind of clears of its own accord where prices get too much people stop buying stuff prices full back again um so either way tends to work and we're in this weird mess where the federal reserve are doing it the markets are doing it and we're having to take all the pain in the meantime and is it better to engineer this it seems like we at some point crossed a rubicon and said we're going to engineer the economy we're not just going to let it run its course given how well you understand the macro landscape do you think that is wise or would we be better taking a laissez-faire way getting our hands off of it and just letting the market do what the market does um i generally think that the market is better at doing it if you actually see it you know from my perspective somebody closely follows interest rate markets and stuff like that they did all of the tightening anyway before well before the fed people like you hear the expression the fed are behind the curve what it means is the bond market's already priced it like interest rates need to go up to slow down the economy because there's too much inflation and the federal reserve are trying to catch up i actually think the markets do a pretty decent job in the way that you suggest prices rise eventually it gets too expensive we stop doing it now there's different equations that people fear is when it becomes super entrenched in the economy and we all go to our bosses and go i want to pay rise and everybody does that at the same time that pushes up prices further you get more wage rises and that's a you know a wage price spiral that really has only happened in the u.s really once which was um in the late 70s early 80s when all of the baby boomers hit kind of 30 years old at the same time so if you think when you go back to 30 you're kind of settling down with somebody you're probably thinking about buying a house you're buying a car you know you've got a job you're starting to earn some money all of we had the largest group of people in all history turning 30 at the same time and they all did the same thing and bought the same stuff and that really pushed up prices and that was at the same time there was issues with oil supply and other things so we had this double whammy of a demand shock and a supply shock which meant prices went crazy but that's really only happened once okay so we've got uh two mechanisms that are working to adjust the economy you've got people with their hands in maybe it's better to not do it um but nonetheless we've got the market and we've got the fed or human intervention yeah right so uh we're in a really weird moment right now we've got war happening in europe i put that in air quotes maybe i shouldn't but like we have war happening in europe or at least on the cusp of europe um and that's obviously there's an economic fight going on between putin and europe i've heard different things about whether he's winning uh that economic war but certainly given their ability to export natural gas i think is their primary export uh they're able go ahead yeah natural gas and crude oil but europe relies on russian natural gas okay so you've got them able to disrupt the market that way we're just coming out of covid uh we had a ton of stimulus thrown at the economy certainly here in the us i imagine a lot of other countries did that as well uh so you've got that was pushing the inflation narrative if i remember right though you you'd been saying for quite some time i actually don't think we're going to have an inflation problem at least not in the long term what is it that you saw that led you to believe that and i think part of your answer is going to be around bond prices and if you can explain what it means for the bonds to have priced that in because i don't understand what that means okay so my view and it still remains even though it seems pretty unfashionable right now with inflation at eight and a half percent my view remains exactly what you talked about is as prices go up the economy slows down for the exact mechanism and therefore it becomes self-regulating and it becomes that because people are quite in debt and it's a very old population in the u.s and europe and elsewhere so if you raise prices on your retired parents they can't earn more money because they've got a pension and that's it so what happens is they have end up buying less and there's a big cohort of people so that's why i think it automatically over time kind of self-corrects but the other mechanism is the bond market which is a fancy name for saying interest rates the price that you and i and companies and governments can borrow so if it becomes more expensive to borrow so think of your mortgage if you've got a mortgage well then if it comes more expensive to borrow then you spend less right so the so the interest rate market forces demand to come lower now let's say you don't have a mortgage and you're a renter well the person you rent from has a mortgage so they will raise your rent because of it which is why everybody's feeling this pain now feeling a bit poorer and that and that's the issue that's here okay so bonds if i understand them correctly basically somebody's trying to raise money so often this is a government bond and so they're saying hey we want to build a bridge or whatever and so they offer a bond either at the municipal level the state level the national level i assume uh and so you can buy these different bonds the government is guaranteeing them so but my understanding is that basically they're going to give you a return on that money so hey i'm loaning money to the government and in return for that they're going to give me some interest rate so you said that that's though the price of borrowing money but really i'm lending money at least as i understand it yes everybody then if the government can borrow it where is it today let's say two years they can borrow at two and a half percent so if i give i buy us government bonds or i'm getting two and a half percent now that becomes what's known as the risk-free rate because the government can pay you back always but then if i'm a bank and tom comes to me for money i'm going to say well i'm going to look at tom's credit rating etcetera and i'm going to say it's that two and a half percent plus another one percent which is my my extra profit for taking the risk um and so different people will borrow money at different rates so it filters through so just because it's the government it's actually what everything is benchmarked off um and so the riskier you are so if you're just now a 30 year old in your first job and you've only been earning a you know a salary for a year and a half well you might be able to borrow money but it's going to be four percent over that whatever the government borrows it up because you're riskier or if you're a start-up and you don't have enough cash flow well it's going to be higher than that as well so everything's priced off that which is why it's so important it's probably the single most important factor within how economies play out is the price of which money gets lent and borrowed and well okay so there's a couple of interesting things here so one i think it's important to remember and this is something that uh i find that i always get the the hives over when people act like the government makes money the government doesn't make money the government taxes people and gets money from people that are productive and are earning money so it's interesting that you're reminding me that you we are we the people are both the borrowers and the lenders correct so that's very interesting now who sets the bond market interest rate so it's set at two levels one is the what's known as the fed funds rate and that is the money that that is the price of money that the federal reserve will operate with the banking system but that is for very short-term money so it's very risk-free right because if i'm lending to you for a month it's not very risky but if i'm lending to you for 10 years well then it's riskier so you have what's known as um well you have a interest rate curve i.e the further out you go the higher the yield generally is that's not always the case ahead of recessions actually switches around and i'll come into that in a bit so why is it why is the price of money in the future more usually than the price of money now well because potentially there's more inflation in the future there's more uncertainty so i want to make sure i'm being compensated to get my money back and that basically is what the bond market does all day is figure out what's the future economic growth and what's the inflation rate in the future is there is there like a guy doing that or no it's it's it's it's the voting of crowds so there's a guy doing it well there's a group of guys and girls at the federal reserve who set the price of money but then it's really the free market that sets the rest and nobody has a say in it which is why when i talked earlier about the fed was behind the curve we've just talked about the yield curve and the yield curve had already started pricing in lots of fed hikes i the cost of money needed to go up to offset the inflation and the federal reserve hadn't raised the cost of money yet so they're now busy trying to do meet the expectations of the market it's probably too late because we've probably already slowed down the economy anyway so by too late though that doesn't it doesn't sound like it's necessarily a bad thing so we the economy has slowed itself down the market has done what the market is supposed to do so the fed is coming in behind us now are they going to create problems now by adjusting that too late or um i think there is a narrative that says that it's that the fed have to do this but you and i don't borrow at fed funds rates the market's already changed down mortgage costs or whatever so i think the market does its job but there's some belief that it has to be driven by the fed and their fed funds rate um so that is i think more of a red herring i think the free market does its job however they have one more other thing in their in their arsenal and that is the balance sheet printing money or taking money out of the economy and they have been printing money for a long time to offset the pandemic and the extra borrowing that was required i.e when they print money they're buying the bonds of the government so the federal reserve are buying the bonds of the government so it allows the government to borrow more without causing any problems um so right now they're about to start tightening quantitative tightening people hear the terminology and what that basically is a fancy word for we're going to take some money out of the economy and they're going to take money out or they're just not going to put as much in well if they stop quantitative easing which is the first step which they've done that's not putting any money in extra money in when they do quantitative tightening they take money out so there's a big pool of money sitting there and they say listen we're gonna take five percent of that out every year that less money around so what's the mechanism so if they want to put money into this system they buy bonds amongst other things they buy assets but if they want to take money out what database are they updating i don't understand they sell bonds they sell the bonds that's on their balance sheet so they have trillions of dollars of this stuff sitting around where they've stimulated the economy and then what they do is push it back into the economy and the idea is it pushes up wages or all the banks have to buy these bonds now from the government and so then they buy these bonds and they've got less money left to lend and do other activities with do the banks have to buy the bonds um there are mechanisms by which they're essentially forced to buy the bonds now interesting so generally speaking it ends up on the banks balance sheets and that makes money more difficult because they've now put that money into something right so they have a finite amount amount of money to lend the fed more or less forces them to buy some of these bonds that they had originally purchased so now the bank's amount of money to lend has become less which means they're going to scrutinize the people that they lend to more which means that they're going to raise the rates at which they lend them i'm assuming because they can okay man money's [ __ ] weird uh it is it is weird but if you break it down to the human element i'm gonna lend you money when i've got plenty of it and if you're desperately in need of it because you're going through hard times you'll pay anything for it and if you kind of would like to to borrow some money but aren't desperate you'll pay a lower rate it's basically as simple as that you know the transaction between two people is the same thing so if a mate of yours comes to you and you know they're a terrible creditor but he's a friend you're gonna have to set an interest rate that maybe to make sure that you get compensated for the risk you're taking and if you don't have much money because you're feeling a bit tight yourself you're either not going to lend it to him or charge a bit more money because you could have used that money for something else or lending less and i'm certainly going to be more scrutinous of whether i'd lend it to him yeah okay so that makes a lot of sense now you said something earlier you actually said a couple things i'm going to plant the flag in the hope that i remember this you slipped one thing in which was uh that going green is part of the sort of inflationary stress so that's interesting i want to come back to that um but first i want to talk about um debt so you said that we've never been as in debt as we are now or the baby boomers just because of the the size of the population even though they came into a situation where they almost couldn't lose with things like all-time lows housing costs all of that interest rates it was amazing great time they thrive millennials come in it's the exact reverse but even though they were in such an amazing situation they still ended up getting themselves extraordinarily in debt i want to give you a quote from somebody that uh you may know his name is rao powell and he said uh this is such a great quote humans love leverage above all things sex and leverage are the two things that drive humans uh so what what why why are we so fiendish about leverage and what does it do for us that makes it so intoxicating so leverage allows you to borrow future money to use now so at two levels is humans are terrible we just want everything now we don't want to work for it if i can borrow it and buy that rolex watch of my new car right we're trying to meet our future expectations of ourselves always that's what drives humans so that's why they use leverage and it's the same with investments so they do it for purchasing purchasing power to bring that future expectations of themselves have i earned enough money to buy that car no but if i borrow money i can get my future self here it's kind of a trade-off because you're actually in debt and now owe somebody you don't actually own the car you own the ability to use the car until you pay that off it's the same with a house really and the other point is for investments you know people love to borrow money now because then you can make a bigger investment now but the trade-off is is what happens if that goes wrong then before you know you get a margin call or liquidate it and you know that's a feature we see a lot in the crypto markets for example that happens kind of automatically so humans just love this stuff because it brings their future expectations of themselves closer i could be richer i could have more stuff than i deserve now from my income yeah so dicey and you had said in our last interview don't do this on leverage and that was the one thing so i lived uh the i'll call it the lucky side of leverage so i forget what year this was probably 2006 so for everybody that knows the drama that happens in 2008 in 2006 uh my wife which is a whole another thing about women and nesting and all of that she convinces me to spend more than i was really comfortable spending on a house but this was like the height of because this was the future expectation of yourselves now saying we deserve this big house yeah and i'll borrow some money to do it exactly and uh so this was when you could literally just they didn't even like research you they were just giving loans out like crazy and so we got a variable interest mortgage and i thought oh a hundred percent within whatever five years i'm gonna be making way more than i'm making now i'm gonna better myself this is amazing and so i did and as it turns out i ended up making way more money than i had been making and so all was well and we were able to refinance and it was no problem but obviously for the vast majority of the world it was a bloodbath now because i felt like whoa i i bet on myself yay but like i realized only in hindsight how risky it was and so now i don't [ __ ] with leverage at all i don't do anything on leverage like it terrifies the life out of me i'm the same i'm terrified of leverage oh my god and like even michael saylor who i have just a freakish amount of respect for when i look at that he took on leverage to do the the bitcoin buying now his number was very low so we still have a long way to go before michael saylor has to worry about being liquidated but all of that made me want to sit down and figure out what does liquidation look like because i didn't even understand like i understood a variable interest mortgage rate where hey at a certain date the you know the rate of the mortgage goes from whatever five percent to 15 percent and that's going to be a much bigger payment that i could understand but i didn't understand liquidation so as it pertains to a mortgage which may be the easier one to understand and once we understand that we can go to how people get themselves in trouble with crypto but what does liquidation look like if i have the house and my interest rate isn't going up because it's a fixed interest rate how could i ever get in trouble you can get in trouble if you can't pay your interest so let's say the economy slows down and you lose your job now what seemed like a reasonable payment suddenly becomes impossible and then in arrears and then you get the little tap on his shoulder which is like i'd like that house back now because you don't own that house we the bank do this is what people don't understand with leverage you don't own that thing you only own it when you pay it off so that's what happens when you lose your job you then can't afford to pay your mortgage payments now there's a difference between the us and europe for this so the u.s you give the keys back to the bank it's not the end of the world in europe the debt stays with you oh god yeah it's very different so it is a they get the house back and you still owe the debt correct because the house is valued less particularly when what you get what we refer to as negative equity i you buy a house for 300 grand and it's now worth 200 grand you owe the bank 100 grand now it's okay if you can still make the payments and eventually just pay off the mortgage but the moment you can't they're like well you owe us a hundred grand and they take you to court and you carry that and you go to bankruptcy and that's how um housing is rare in the u.s um most other leverage doesn't have the same process most of the leverage get the tap on the shoulder saying i want my money back and uh you end up going to court and you end up going bankrupt but you're never going to lose the house as long as i can make my payments even if the value of the house changes because you get in the bank could actually get into a pretty dicey situation where let's say the house was valued at 300 000 when i initially bought it it drops down to 200 000. if i'm making my payments the amount of collateral could have changed such that they're actually not in a good position but as long as i'm making my payments there's nothing they can do right correct okay now when we get to crypto it's different right because i'm not making any payments so what is it or am i making payments how does leverage work in crypto so leverage works in crypto that you have some bitcoin and you want to borrow some more bitcoin or some us dollars or whatever it is you want to do so you will pledge your bitcoin and your interest payment is collateral as collateral and your interest payments are whatever they are but what happens is if the collateral falls and the exchange or whoever it is or the d5 protocol says oh it doesn't cover the amount you get liquidated immediately there's no negotiation no oh please no nothing just like boom out and you take the loss because they're saying hey you've reached the point at which the what you owe us the value of what you owe us has now been reached and so if i don't take this back now i run the risk of it dropping even lower and now i'm out and i'm not going to let that happen so it's like a house you can repossess instantaneously correct and now you're out of the market you don't get a like if it dipped down even like a penny it's gone and so now if it bounced back up you're still done gone out of the market that's right whoa okay but you're you're never going to end up owing because they're just going to liquidate you right at the moment correct so when you go into the financial markets like the futures markets which is mainly for accredited or sophisticated investors it's not an instant liquidation and that's terrifying because suddenly something like the oil price let's say you've you've bought some oil futures what that is is a is leverage on the future price of oil that's like you would do with bitcoin but oil sometimes can go down 10 a day and before and because you've got leverage before you know it you're losing enormous sums of money they don't liquidate you they call you up and tell you you owe the margin and you can get yourself in a huge mess so leverage is very scary the nice way of playing leverage is options options are something definitely worth people learning about and a lot of people learnt on robin hood because then you're only putting up what you can afford if you say i can afford to lose a thousand dollars on this bet it's basically like the instant liquidation thing and you can only lose the thousand dollars but you don't lose your whole underlying position you just lose the thousand dollars you bet on the price of something going from here to there by whatever date but that's that's an options bet yeah i don't know if i want to derail us trying to really wrap my head around options uh i have tried many times you have an option to buy or sell is that the idea correct you have the right not the obligation um is the official terminology but yeah you have an option to buy and sell now the amount of money that i put up is that taken or did i not actually put it up i only promised to put it you put it up you put it up okay so you can write it there it's locked in the system so boom don't lose anything more than that got it but futures so i remember um i don't remember what platform it was on but this was like a wall street bets thing on reddit and there were people kids that just got in way over their head they ended up owing like you know 75 000 and they killed themselves and i remember thinking what the hell so what are you doing in a futures that can get you in that kind of trouble you have open-ended losses and it's leveraged so you can put a thousand dollars down you can get ten of exposure and if the thing falls 20 overnight you've lost your thousand plus another thousand like that and it's open-ended if it goes down again and you still haven't met your margin call you've lost another thousand before you know it's entirely wiped out and that's the problem because when you've got when you borrow ten times a ten percent fall is wipes out your initial margin the bet you put but in the options market it doesn't because that premium is all you put in you can't lose any more and it can and it has a time so let's say it's three months so even if it falls below and is worth nothing it's still in existence and maybe it comes back again three months later you're okay still so it's it's just a different way of doing risk okay so humans are driven by leverage and sex and um so right now we're so what i want people to understand so the ultimate question we're going to be answering in this interview is how we're going to thrive in this period like what we can do so we know we're going to take a kick to the face but you've got the baron rothschild quote of uh in fact let me read this is the verbatim quote that they think was the original so what everybody knows is by when there's blood in the streets but the original quote supposedly was buy when there's blood in the streets even if the blood is your own so there's this sense of like hey there's going to be a moment where everybody else is going to panic we're living in that moment right now people are freaking out the euphoria that we had six months ago has transitioned into uh a sort of cynical fearful thing and so now people are not necessarily looking for opportunities and that may cause them to miss a tremendous moment but for them to find that moment is going to be incredibly difficult because when i heard that quote my instinct is by what because you can't just go in ignorantly and like you know you're in a strip club and you're you're flipping money around and that's gonna work out for you right you will be in a worse nightmare than you were if you just waited so we have to find the right thing to buy so the question becomes we have to understand i think you tell me because lord knows i do not consider myself a talented investor so it would seem to me that what you have to understand is the macro market what is going on we are as the the chinese proverb goes may you live in interesting times which is not meant in a kind way we are certainly in interesting times right now so we've got whatever potential economic crisis is going on in china they're locking down now again because they have a zero covert policy we've got war going on in europe um we have potentially a global recession headed our way we certainly have inflation maybe it's transitory like you were saying maybe it's entrenched we're not sure maybe there's things we can do to fix it we've certainly got humans in here meddling in the market maybe for better maybe for worse you've predicted that we've got stemmy checks coming because we have this insane debt going on that is that largely relegated to boomers or is there something else paint paint this macro picture for us explain to me the debt angle and why you know that they can't let it implode and who they are and how they stop it from imploding okay so debt at economic level happens four different places one is governments it's called the deficit you hear this terminology it's basically how much the government borrows so the us government from the people and foreign entities or is there another way to borrow yes they'll borrow from people foreign entities corporations anybody who wants that rate of interest that they will give them for it so you have the us government you have the u.s households individuals us you have corporations and you have the financial system those four are combined are about 300 and something percent of gdp ie gdp is the amount of activity in the economy every year in dollar terms and they've borrowed an extraordinary amount this is the most indebted the us has ever been all four of those entities together yes so we as individuals corporations government and the financial market have just gone haywire and we've borrowed 300 percent over our entire yeah it might actually be 400 i'm not sure the exact number right now but the financial system's not as bad as it was so they're not the bad guys this time around they got told off they got to not don't borrow as much money the individuals have not been great but not terrible the government borrowed a lot more and corporations borrowed a lot more so to put it in perspective the us is about 25 percent of the global economy yet they have a hundred percent equivalent of global gdp in debt so this is the most indebted economy in the history of world economics in terms of global debt because it's so big now the u.s is not the only one here europe's got massive debts japan's got massive debts so lots and china's got big debts everyone's got debts because we borrowed for our future selves you know why why get enough tax income for the road system i need to build why not just issue more bonds and build it now because the bet is i'll create more productivity in the future and then gdp grows and it's easier to pay off and that generally works okay like the bet that you took is will my income be able to cover this debt in future in most circumstances it is but what happens is when your debt becomes so large and something happens to your income then you start to say well can i pay this debt so we talked about that part the other part is well everything's backed by collateral as you mentioned before that's the thing that you pledge when you take out debt now if collateral falls too much in value somebody taps on the solder and says that stuff you gave us in exchange for the money doesn't cover the money anymore and then you get this liquidation that we talked about this can't happen on a economic level it can happen to you and i it can happen to us in our crypto accounts it can happen to us in our financial accounts but we can't let it happen systemically because then everything goes so we came very close to the edge in the u.s and europe in 2008 so much so that the banking system seized up entirely because the collateral the house prices went down and then the banks were like oh [ __ ] we don't have enough money against all of this and then people weren't paying because we're going to recession that big doom loop happens in europe it came we got that but there was another one in europe which was the eu crisis this time it wasn't the banks that were in trouble it was the governments italy spain france portugal greece couldn't pay their debts and then the that was the really holy [ __ ] moment is if whole countries that part of europe these are big massive nations can't pay their debts and we're all [ __ ] because then that's the whole banking system gone that's the whole system of government gone that's everything on so they stack stop the system by saying we'll do whatever it takes this was mario draghi's favorite famous term so the basically the eu got together and said we will buy these bonds to stop them falling to price in bankruptcy because against government bonds as we talked about it's the risk-free rate well if it's not risk-free then all of the other debt that's borrowed on top of it would have blown up too so how did they how did they buy that were they printing more euros correct correct that's been the answer since 2008 is to print currency to buy bonds which is known as currency debasement and this many purists in the financial markets it doesn't work that way the mechanism but it's very clear that this is basically monetary debasement what monetary debasement means for anybody doesn't understand is is let's say you're thirsty tom i sell you a bottle of water you want to buy it because you're thirsty so i can charge you five dollars for it then let's say i say well you can't buy one bottle of water no there's only one bottle of water around if i say look i've got 20 bottles of water well it's it's not that panicky to get that one bottle so it might clear it three dollars for that bottle of water now if i've got a million bottles of water what water's worthless right so the more you create of something the less value it has so if there's one picasso it's worth a fortune if picasso had made 5 000 of exactly the same painting they're worth less so we see that with for example one-on-ones of warhol versus warhol's factory where he produced very similar pieces they're worth less than the others we say in nft world as well so scarcity versus abundance so what you do when you print more money means there's more money around so it lowers the value of the money so that's that's debasing currency so this is why they can't let the system go bust because now there's so much leverage that everything goes and we saw this in argentina famous moment in argentina in 2001 i believe it was called el correlito where the argentinians couldn't pay their bills the government so what they did is they had this dual economy the argentinian peso and a dollar-based peso they just took all the dollars from the bank accounts and convert them into pesos so they got the dollars themselves to pay their debts but basically utterly destroyed the peso and destroyed the economy so much so that argentina reverted to barter it was an extraordinary moment in time um so that that's the risk the other time we saw something similar in a more developed country was cyprus cyprus a european country now cyprus they had a financial crisis there was too much debt it was based around property and so what happens is the banks were insolvent like they were in the u.s and like they were in europe but the answer was the ecb said we're not bailing you out so what they did is took any deposit out of the banking system over a hundred thousand euros and took it so it wasn't your money which is this is what got me into crypto in the first place once i realized it's not your money even if it's in a bank it's not your money um so these are the these are the laws of unintended consequences that happen if you allow the collateral to go under if we were less levered like in india the country's very unlevered it's like call it 60 of gdp in debt in a fast-growing economy it's going 10 a year right that's that's like you taking the mortgage out and the mortgage isn't that big and you've got great income right the probability of you not being able to pay that debt is very low so it doesn't matter if indian assets fall a lot and stuff like that because there's nothing systemic there you're not going to destroy the population but when it's the u.s or europe you can't allow it you just simply can't because also part of this is you've got this huge old population of retired people or people trying to retire if you allow the market to clear then their savings pool disappears now it's all right for you and i we've all gone through parts of our career where we've lost a bunch of money and we make it back you know you've started you've created a startup doesn't work you work hard but you can't do that when you're 75 years old what's lost is lost and then you have to halve your income or your spending because you've just lost half your pool of money and you don't know how long you're going to live for so this is why there's so much complexity with old populations lots of debt you just can't allow the system to go under wow yeah that's uh that is really interesting and unnerving at the same time the interconnectedness of all of this and then of course it begs the question what is india doing that we're not doing is it just discipline is it lack of opportunity like how are they at sixty percent when we're at three to four because their banking system didn't really function and they were more restrictive on their lending policies which is a function of their economy being more emerging than developed so people don't want to lend them as much either because they're more risky you're like a startup even though india's obviously a very old thing but you know in in these terms um and so and they ran a bit more inflation than other countries so it's really that and they have a culture of savings what is up my friend tom bill you here and i have a big question to ask you how would you rate your level of personal discipline on a scale of one to ten if your answer is anything less than a 10 i've got something cool for you and let me tell you right now discipline by its very nature means compelling yourself to do difficult things that are stressful boring which is what kills most people or possibly scary or even painful now here is the thing achieving huge goals and stretching to reach your potential requires you to do those challenging stressful things and to stick with them even when it gets boring and it will get boring building your levels of personal discipline is not easy but let me tell you it pays off in fact i will tell you you're never going to achieve anything meaningful unless you develop discipline all right i've just released a class from impact theory university called how to build ironclad discipline that teaches you the process of building yourself up in this area so that you can push yourself to do the hard things that greatness is going to require of you right click the link on the screen register for this class right now and let's get to work i will see you inside this workshop from impact theory university until then my friends be legendary peace out it's because when you're able to borrow because you're the richest dude in the street wins the most money which is the united states and humans have a propensity to borrow to create the image of this future self the future self was the amazing united states of america that dream that we had in the 50s that dream died decades ago and to fund that dream the mismatch between the dream and the reality is dead sometimes debt is not all bad right sometimes it can help accelerate some of the things but if you're doing it to fund a dream that's never going to exist that's the danger all right let's go back then to the so what defined the american dream and what killed it the american dream that came out in the 50s was about the wonder of economic growth technology peace time and abundance and opportunity for everybody everybody could be the president everybody could be rich that mentality is terrifying because it creates a misalignment of present self and future self so everybody feels like they never got there this was the whole book fear and loathing in las vegas by hunters thompson was basically this is that's what vegas is about we don't have gambling in the same way in europe you can go and gamble it's just not a big deal but in america it is because it's about this future expectation of yourself i think driven by the american dream and obviously a frontier style economy and how the us you know gave birth to itself so the american dream was set up and the whole construct was set around it and then two bad things happen one bad thing number one is everybody goes this is [ __ ] amazing i want to have kids right prosperity great time so all of the people who've gone through the work the war or maybe two wars had kids those kids were the baby boomers and they had too many kids they in what way for the planet uh because for the children themselves so what happens is is if two of us go for a job interview we have a 50 50 chance if a thousand of you do you have a one in a thousand chance so what happens is if too many people come into the workforce at the same time they compete with each other for pr for wages and if you look back and inflation-adjust wages for the average median american or the average american particularly the median american over the last 45 years it's not gone up at all so there's been no productivity growth the miracle never happened but in the meantime the price of assets went up why because there's a whole bunch of people at the same age who all want to buy a house at the same time all want to buy into the stock market at the same time to stay for their retirement they pushed up prices so they got poorer because they couldn't they didn't own it all and so the more they tried to buy over time the more it went up and they got this massive gap and that gap between their earnings and the costs of of assets that you secure your future income in kept going up so they borrowed money and when you when you basically adjust by asset prices like house prices versus wages the difference is the debt and then the government started doing the same so it was all driven by the baby boomers but the baby booms had a second shock and a third shock second shock came really in the late mid 80s which was computers computers started competing for jobs with people slowly at first and then faster and then 1996 the w uh 1999 2000 well 1996 the w the world trade organization wto agreed that what a great idea let's all trade without tariffs with each other free markets yeah well the free market actually meant that when china entered the global workforce they would work for a fraction of what you and i would work for and so that meant labor costs never went up and the cost of goods got cheaper because china could produce them cheaply so we just gorged on this stuff because there's cheap goods we borrowed more money because we had this future expectation of ourselves being rich the american dream and we gorged oil more money and we borrowed money to see if we can make money from asset prices so this whole thing was driven by demographics and that came out of world war ii so it's world war ii that drove all of the mess we're in now and that's the same globally was there a baby boom all around the world no the us yes sorry there was a baby boom everywhere the difference was europeans didn't have a second baby boom which is the millennials the us has the millennials and that's helped the us economy outperform europe over time japan didn't have um millennials either so they're all older populations the us had the millennial population so the millennial population it pops up into the workforce you know the millennials you know about four years ago started hitting 30 years old that that big thing this is a big bunch of people the problem is they look into the world their parents are still in the workforce so they need to compete with jobs with their parents there's a whole bunch of them competing with each other they all try and go to university to see if they can get a better job so they drive up the cost of university they don't come out of university they try and buy a house they drive up the cost of how i mean it's just a mess when you have these bulges of population you create all these distortions so these millennial populations were pretty screwed because the their parents had driven up the price of assets so high trying to save enough to retire which never really happened but they look they come out and say right i'm earning money now what do i buy oh the equity market all-time high valuations the bob market all-time low yields property prices are too high to afford i'm [ __ ] you know again all of these are why i got to crypto because i knew that i had a different expected future return because their parents had known this stuff and therefore they themselves could help drive the price up and the adoption as long as they bought it and owned it okay so demographics are destiny that that's something that you hear said a lot which is um terrifying i suppose i don't like anything to be destiny i the idea of the american dream so going back to what you were saying about vegas um that is a fascinating take so what may have somewhat distorted my view of all of this is that the american dream worked for me perfectly right i i'm a gen xer but why is everybody watching your show because they want it to work for them yeah so here's here's where we get into something really weird so what you and i were talking about last time is hey i see this opportunity in crypto which by the way my thesis is still intact in terms of that and so i hope that people aren't panicking um that they didn't take leverage that they were slow and steady wins the race i haven't sold a single satoshi um to give me a sense of where my head is at but raoul the reason that things worked out for me is really twofold one i have an obscene work ethic that makes even myself sometimes uncomfortable uh there's a jordan peterson quote that i think is really insightful which is don't ask why there aren't more women running fortune 500 companies ask why there are any men at all and what he meant by that is it is so grueling that why does anybody do it and since i got into nfts i've been working for the last eight months at this point maybe nine i've been working 120 hour weeks and even i'm like what am i doing like this is crazy so that's number one my work ethic is insane uh number two i believed it could happen now you put those two together it does not necessarily equal a good outcome i am hyper aware of the role luck has played in my life but if you take either one of those away it is a guaranteed failure so if you don't work hard you are [ __ ] if you don't believe you can achieve you won't do the things you need to do to be successful because why would you it doesn't make sense if you don't think it's going to work out and so while there can be no guarantee of success one thing i am really trying to get people to do is believe that it it can happen now i will define it differently as in if you can make something that people want more than they want their money then you can be successful so let's talk about it in financial term financial market terms or macro terms i think there's three things you need to do here one income income rules the world income pays your bills income can pay your mortgage income does everything without income you got nothing income takes hard work it's hard to get up the ladder earn more income secondly is you need to have optionality you need to have things that can pay off a startup or a hobby business on the side can give you optionality because you can build a business and a business has intrinsic value plus it can increase your income that will never happen if you work for a corporation yes you can have a great career and do fine but you'll never have that extra upside that you and i have had by building businesses so that is another thing is is focus on your income work hard look for other opportunities that can leverage that income and opportunity set that you've got for you and then thirdly is if i've got this income look for investment opportunities that can change my life and that doesn't mean being a degenerate gambler it's like simply put if there is a thesis for example in cryptocurrency that you and i share that this is a long-term network adoption of this incredible technology that is exponential in nature and highly volatile you should be looking at the moments of extreme weakness the blood on the streets moment to be buying more not on leverage but just putting your money into it so if you'd have bought a house after the 2008 crisis you'd have done very well if you'd have bought it at the peak you'll have done less well right so timing matters and i looked at this to give you a specific example just writing a whole article about this is i went back with a bit of honesty thinking i'm looking at my eth price and i'm going why didn't i sell it at 3 000 i should have just you know i could have bought it back cheaper and i know that that is a siren song that goes in your head right mental torture and i've been in this space since 2013 so i went back and looked at my entries and exits and what i did in the past and what had happened if i'd just bought and hold and what had happened if i bought and hold and added when it was this far oversold it's very simple so i figured out that if i'd i so what i did is i bought in 2013. 200 per bitcoin it went up to it it went up to a thousand sorry it went up to a thousand in six weeks i was like oh my god but i had a long-term thesis i wrote the first kind of macro strategy paper about the valuation of bitcoin i thought this could be worth a million dollars and let's assume i'm an idiot by 90 it's all worth 100 grand so this is the best bet i've ever seen so i held on and then it fell 82 and i'm like wow but i taken the bet and i put money in was not levered and i could afford to take the bet so i just thought i'm just going to forget about this and just see because this is a longer term thing and you don't normally make money that fast and doesn't normally fall this far so let's just see and then i kind of forgot about it 2014 and then 2015 starts going up again and then by 2017 i'm now mentally scarred from an 82 drop coulda woulda shoulda i then see confusion in the market about either we're gonna fork bitcoin since two different chains the price is two thousand i'm now up tenfold i'm a genius my macro bet has paid off sort of i sell out it goes up to 20 000 and three months later and i don't mind i don't mind because i've made 10 times my money what i did was deviate from my thesis my thesis was this was a 10 year bet and i took the money off the table within five and then i went back and then obviously i bought back in june may something like that 2020 and had a good run and put more money into it than i had originally in my original bet and i worked out that i had as opposed to just holding my original bet i used a theoretical number so i think it was if you put 10 grand into that first bet it would have been worth 1.4 million well by doing the right thing buying reasonably low and selling reasonably high and you know timing the market that was a small fraction it was in fact i think i'd make 20 of what i would have meant if i held on and then i went back and looked at okay well what did i actually do because i massively increased my position in in uh in june i still underperformed by 5x and then i'm like okay what happens if i've done the right thing what i should have done which was my framework which was you buy it when people when it's on sale when there's blood in the streets so i went back and looked at the the bottoms of the bear markets assumed i'm an idiot and i can't catch the bottom of bear market and miss it by 30 percent and just put the same amount in each time that i started with that 1.4 million would have been 30. why sorry not 30 sorry three lord had i rolled my profits in you know had i just doubled down each time or whatever the numbers go exponentially larger and that really stopped me in my tracks it's like here's me doing the right thing you know buying when it's in a bull market selling when it's in a too strong a bull market buying when it's down a bit and i still didn't do as well as just holding it and i if i just added to it i would have done well and my framework is this is a long-term trend right we've got at least another decade in this at least probably two or three decades but this part of it is going to continue to do very well sure bitcoin over time as it gets more users more adopted it won't go up as much each cycle but there'll be plenty of others and plenty of opportunities so what we should be doing is using this thinking of the money you put in as your retirement money and writing it off um and then just adding if you've got money in a bear market now the problem is is most of us don't in a recession but a friend of mine taught me very early on he said rel is a key thing i've learned is he who has cash in a recession is king so that's that combination of income and opportunity you've got income you've got some cash and now everything's on fire sell prices you're the king so what what do we learn about the psychology through all of this because this really feels like a psychology game and i'm i'm really glad that this has happened quickly so for me i've been in crypto for less than two years and i have seen now even in that time sort of multiple like oh it's all over no we're back no it's all over and so watching the whiplash of how people feel act talk even like what where i go from feeling like i am so smart like this is insane to ooh like is this really gonna play out like the level of doubt where to your point i just have to turn off my brain i'm like i'm not gonna think about it i was perfectly willing when it was up i was like if it went to zero i would be fine so i'm like if that's really true then chill you're fine like you know just let it do what it's gonna do and if you were lucky enough like you and i to have bought slightly earlier in the cycle then for goodness sake don't look at your loss of wealth from peak that's stupid that's the american dream fixating on something that doesn't exist think okay fine i'm still i'm still in i'm probably still up don't think oh my net worth's down 50 this is the end of the what no that's not how it works how it works is you need to be in it to win it and you can't be in it to win it if you've got leverage or if you're out of the market and so if if you say to me well you know that's difficult for people sure then put less in it's as simple as that you get to the point where you can sleep at night then you've got the right size bet and once you have made money and it's compounded then don't look at it from the peak to trough so one of the tricks i've learnt with myself in a slightly different thing is wine i i love wine and wine good wine is expensive but it's a lot cheaper if you buy it early when it comes out so i bought and i've just taken a delivery of stuff i bought 15 years ago now what i do is this little mental trick which is i write off everything i pay for wine when i buy it because i don't see the wine for 15 years so why do i care whoa and so mentally it's gone to zero so now i'm able to drink wine which i would never open because i haven't paid for it i kind of like i wrote it off and it's really helpful to use mental tricks on yourself to stop yourself doing things you shouldn't be doing which is selling at the low buying at the high or you know buying a bunch of wine and then not being able to drink it and you actually buy it to drink i don't sell wine but if i if i did i would have just sold all my wine i've never have tasted amazing wines it's it's these mental tricks we have to play it's interesting you mentioned earlier the siren song of you know looking at like oh my god if i had sold at that point like i would be so much farther ahead than i am now it's interesting that you use the siren song so for people that don't know the mythology there were these sirens supposedly that would call to men they would sing this incredible song and the men would want to hear it more so they would sail the ship closer and they would crash and so the sirens were intentionally trying to get you to ruin yourself basically and in this story the solution isn't to develop the willpower in order to resist the siren song his whole thing was tie me to the mast so that i can't move all of you block out the sound so that no matter what i say you don't listen to me and i can enjoy the the sound of it without being able to take action on it so basically you have to find a mental trick in order to deal with it your the lashing you to the the rail is to write off the wine so that you can enjoy it when you get it and then right off the investments i've got in in crypto and then i observe the sentiment i observe the sirens i hear the song but they don't affect me well they obviously do affect you but you you you try not to let it affect you as much you distance yourself from price action because your theory is that it's going to go from here to a lot further over time that keyword is over time and we've all said all of us have said and we know it does this a lot on the way so then if you know that it's a no known why the hell when it happens do people forget it's so funny when when bitcoin and eth crashed last year fell 50 odd 55 from the high i suspect my wife and i'm like god everybody's freaking out you know and she's like wow what's happened i said well it's down 50 she said but you said that's normal and her exact word so just shut the [ __ ] up you should be buying here not freaking out i'm like yeah true you have to remind yourself yeah like this is a two-part process if you want to succeed so going back to answering the fundamental question that we're here to answer how do you thrive in a time like this so one you have to have the understanding of the market the macro trends all of that to know what to buy and then you have to have the psychological resilience that even though you feel it to your point like i feel that we're down and it does not feel good but it hasn't changed my behavior and so because the thesis is still intact yes and so let's look at other opportunities so maybe not everybody likes crypto another thing that is patently obvious is technology is not going away now it's not easy to pick the right technology stocks much like it's difficult to pick the right nfts or tokens unless you really know what you're doing and or you yeah you know that particular company or that project but if the thesis is that technology is going to continue to have this ridiculous adoption whether it's ai ev whether it's robotics whether it's genetic sciences all of these things that are around us space travel well then if it's being sold in a fire sale because everybody's panicking well surely that makes sense because technology has outperformed the market for the last 40 years so you always want to be buying technology so if you're thinking of your 401k europe you know you're in your 30s you look at your 401k and you've still got your income because that's the most important thing of everything you've got your income you should be going okay i should be buying technology stocks and i should be buying crypto because these are long term mega trends now is there so we're living in a very particular moment but one thing i like about ray dalio is his idea of this is another one of those is this like another time is there something that we can learn from historical trends that we could be applying to our investment thesis now so the investment thesis i don't believe so necessarily there's a lot of macro similarities with the past past episodes and everybody makes it very dramatic there tends to be a lot of doom porn and i've been a proponent of that as well you know everything looks like the 1929 crash everything looks like we're going to go to world war ii everything looks like you know it's 2001 all over again yes those things happen but things go on and if you bought tech stocks after 2001 crash you'd be very very wealthy indeed if you think of jeff bezos he launched amazon bright-eyed and bushy-tailed has his ipo it explodes in price everyone's like oh amazing online bookseller it then falls 96 percent right so this is exactly what um i went through in crypto exactly the same and then what happened is well unlike most of his investors he held on and it went up a lot again still didn't make up the high it fell another 80 percent it went up again it then fell 60 and then before you know it this online bookseller was suddenly worth more than all the book selling companies in the world added together and it was still trading at a price earnings ratio of like 800 everyone's like this is crazy this is a bubble but what we didn't realize is he was building a network this network for e-commerce and then the computing power that drives it you know and so over time amazon just did that and these are the things you need to think about in this is where are we in the volatility and is this going to survive those are the two questions and if the long-term trend is there then you should be buying into all of this what are the smartest people buying right now anything are they sitting in cash are they moving on something or there is a lot for us there's a lot of cash so i have my global macro investor roundtable which is a bunch of my subscribers from my kind of very high institutional research service a bunch of the world's most famous hedge funds family offices asset management firms and we all have this little enclave here in the cayman islands with a lot of wine and a lot of discussion and trade ideas and stuff like that and generally people are a lot in cash the real estate developer guys you know the kind of wealthy guys who were in real estate as their primary thing a lot of them had sold quite a lot um then the the hedge fund guys were very concerned about recession but we're looking and so they were buying let's call it cash bonds cash anything to kind of just not be involved in risky assets like stocks and stuff but they were looking for the opportunity for the other side which is what what is that opportunity and that opportunity was technology crypto and commodities commodities have gone up a lot recently but we've got this um it's this greening thing that's going on right we're going to green the world we have the political willpower to do it and it's going to happen faster than the market can take and that means we under invest in mining stuff and we over invest in battery technology wind farm solar farms right and the idea is eventually you accelerate this so much that it becomes the adopted technology and electricity becomes cheaper from doing it the issue is there's not enough copper for the electricity we need to generate so we're about to go into this enormous copper shortage you don't notice it now because the economy is weakening and so less people demanding copper but once we come through the other side of this you're going to have this huge demand for copper and it's a problem but it's part of that green energy transition green energy transition also is going to require a lot of other stuff to build these wind farms these solar farms the hydrogen power that you know and whether we go to atomic energy or whatever it is it's a whole change in how the world works it's very similar to the 1950s when we kind of rebuilt america factories and all of that kind of stuff so that moment in time means that these guys wanted both commodities and technology um because they know this one's probably kind of a good five or ten year cycle and the technology cycle is limitless right now so that's i guess what most people were thinking but everyone was very nervous over this next three-month period about what happens to the economy what could happen to markets so what signals are they looking for i'm assuming everybody going into cash is thinking okay blood is in the streets but i'm not yet sure which way things are going whether i've got the timing right but i imagine there are certain signals that they're looking for so if it's copper and we're looking for that transitionary moment or are they buying it now like what are the um what are the signs that they will look for to go in on something so we talked about income plus opportunity so they've got the cash so you know one of the world's best technology invest investors co2 i think that's 70 cash whoa which is extraordinary because these guys are you know they're aggressive technology investors 70 cash there's a whole bunch of people who are so what they're saying is the future opportunity is going to be big and it's going to be cheaper than it is today now will they time it properly well et cetera doesn't really matter but here's what the smartest people are saying is the future opportunities better than the present opportunity so that's a little scary though because that means prices are going to go down further well we don't know when they had that bet they might have done that four months ago in which case has been a very good bet and they've been looking to deploy if i read their investor letter they say they're now starting to look to deploy stuff into interesting opportunities where things are really cheap which is the thing i said before when the market throws out the baby with the bath water that's when you start finding the things you really like you know in crypto world things like solana great project down 85 percent there's a whole bunch of these big layer ones with network adoption effects already these are not super speculative assets that obviously speculative risky but not super risky they're all down 80 85 87 okay that becomes interesting so i look at the world as not a macro investor i still see a hyper amount of uncertainty and i want everybody if this is your first time watching me i do not consider myself a talented investor i have always um considered myself to be focused on learning how to make money and that's where i've been successful investing money is is a big question mark and i'm exploring that um but i look at the level of uncertainty right now and i am deeply gravely concerned about where we're going uh when i look at what's going on in russia and the ukraine that obviously gives me pause but really more so china potentially going after taiwan if that is um has said that part of his legacy is going to be the reunification of china he's already got hong kong taiwan becomes the obvious next move uh which is you know super nerve-wracking are there big things like that on your mind to like hit the pause button to wait to see how they play out or does that not strike you as a big concern um yes always obviously and you know being a macro guy you're endlessly reassessing the odds of different outcomes all the time and there's multiple outcomes it's not like i go this is the outcome and i'm assessing the odds it's like well could this happen could this happen could this happen is something changing that's what you're doing all the time so we know that there is the global economy is splitting regionally that there's a bunch of let's go back the u.s dollar the u.s economy is 25 of the world economy it's as we said a huge amount of the world debts 100 of gdp in debt the real problem is 80 of all trade transactions on earth are in dollars so the us is 25 of the economy but dictates 87 percent of everything else that happens when the dollar goes up the dollar goes down everybody pays the price if the dollar interest rates go up everybody pays the price and everyone's kind of had enough of it it was known as the global reserve currency but it's too big as a percentage of the global economy in china europe everybody said we need to change this and obviously having control over money is power so the chinese want to create regional power and that will happen virtually no way we can stop it and it's a matter of how you accept it and how and by what manner do you want to go to kinetic warfare with them or do we just continue with cyber warfare and geopolitical struggles which has been the way of you know our relationship with russia our relationship with china for a long time i don't think anybody wants to go to kinetic war just see what happened in the ukraine nobody did anything what they did was we'll sanction you and we'll give you some weapons but there is a war in the heart of europe and nato didn't do anything because they don't because the outcome of getting involved was bigger than getting involved so so let me ask then what is china going to do to force so if the whole world wants there to be a balance that the us making up 87 of global transactions is not something that they're willing to do anymore is it that china starts building a um a consortium of people that are going to denominate in the yuan is that how this plays out we don't know yet obviously they'd like it but it's not ready because they've got what's known as a closed capital account which meaning people can't get money out and in easily so if you think what china did they did something called the one belt one road policy so they basically went around the world and found a bunch of people who were desperate for money and said we'll give you money in exchange for us being able to have some of your natural resources or your access to your ports now that hasn't been the most successful strategy but it's in place and china's footprint across africa um some of europe all over even down to the caribbean um south america is all over the place from this one belt one road so there was trading power that they created they then created leverage on it because if i lend you money you i own you so that's what they did and then they formed a like a i think it was called the east asia or the asian investment bank which was an idea to create like an international monetary fund for a bunch of countries in east asia and asia overall to try and think about separating out these worlds where china's the dominant trade partner for asia so why should the us dollar be used i get that point why should it um so they've started splitting that up then the next phase in what happened i think was when the us and the west essentially froze russian central bank assets they basically said the same as cyprus said which is your money is not your money so if you're china you understand that is now a win click a weak link so if you want taiwan and again i'm not geopolitical guy really but it makes logical sense if you want taiwan what you need to do is distangle yourself from the global system we're already splitting up supply chains to detangle these two groups because they want to separate they're going to get divorced so they're trying to just sort out their financial affairs move apart and then china could then think about this so they need to separate themselves financially economically and then you can have taiwan and then that's how that's how it that's the way it seems to be moving and it hasn't really deviated from that path for a long time do you think it's fair to call this a deglobalization um i think we have a tendency to look at everything through western eyes what it is is a change of the global order system and yeah there's a great book called the fourth turning i think i've recommended it before everybody should read it this is the full turning it's exactly what's happening and that's not like geopolitical doom and gloom it's actually driven by demographics and the changes in the opportunities and the threats that happen over it but what we're doing is we're moving away from an old system into a new system and i don't think it's going to be a one currency system i think we'll just regionalize is that the end of the world no we've been to many times in worlds like this before so people think of it as cataclysmic because it's changed from what we know but really is somebody in indonesia better or worse off if they don't use the us dollar better off you know are they better to borrow and lend money with their main trading partner which would be china better off so it's going to happen and it's just spitting apart now does it end up in two economic zones or three or does somebody try and build an alliance of a globalized currency which is something that's been talked about the bancore idea something that better reflects global trade maybe too i don't know but change is happening and you can fear it you're not gonna stop it yeah that's really interesting uh one way to look at this is is a way that is a media guy i think about this a lot is there's this constant movement in media where there's money to be made in grouping things together and then there's money to be made and decoupling them and then there's money to be made and bringing them back together and then decoupling them and so it'll be interesting to see if we start seeing on a long enough timeline this sort of globalization de-globalization globalization de-globalization well that's don't forget when the when the the brits were the predominant power in the late 1800s early 1900s just before world war one the world was pretty much the most globalized it had ever been well world war one and two got rid of that and then it created another re-globalization which was the rise of the us and now we go to a deglobalization these things are kind of normal now how fractured do we get does europe fracture into you know into different regions does spain fracture into different countries does the us is that on the table oh yeah i mean the catalans want to separate the basques want to separate you know we see this all over those could happen or they may not happen but over geopolitical time spans they will happen because it's always happened you know italy wasn't a country and we forget this we just we look at present state and assume that's the same so these things do move but it sells a lot of newspapers and eyeballs and attention span to worry over it and most of the time you shouldn't most of the time the opportunity is there and we want to worry about the existential crisis it's very human again one of those human traits is go back and read literature over the millennia it's always about we're all gonna die it's just it's a survival instinct within humans it's like we're all gonna die oh my god everything's terrible and yes it is terrible and it can be terrible if you're living in the ukraine now it's absolutely [ __ ] awful but as all of those people who came out of world war ii who end up having kids things do go on things do change over time and so always out of bad times eventually these are good times and it's the same with investing that cycle is pretty common and it's a very human trait so as you you had this big forum you know where um different people are deploying their capital to what are you doing are you waiting for a given opportunity are you um still deploying on a dollar cost averaging basis into crypto what's your strategy right now see i i haven't dollar cost average generally because you know i spent 30 years in financial markets so i i think hubristically that i can time them a bit better so you know i have bought into big sell-offs and i'm kind of cleaning up my portfolio sorting it out getting ready to do that um to try and add as much as i can crypto specifically or into crypto specifically but i've also been buying technology stocks for the same reasons and i don't really care about yeah i i've owned bonds as a trade because bonds once the economy weakens bonds tend to go up in price so people you can trade things like the tlt and they go up when yields fall so you can make some profits from doing that um but generally speaking i've been looking at these two mega themes because i really believe in them and you know meanwhile as as we what we talked about i'm increasing my optionality by building businesses so you know i built an asset management business in the crypto industry so it's um called exponential age asset management and we the first product we launched is a funder funds investing in crypto hedge funds to allow people like you and i to stay in the trade and not spook ourselves out and give it to experts as it gets more complicated so building that business i've built another business co-founded called science magic studios it's not really announced so a lot of people will see this for the first time science magic studios exactly it's called science magic studios it's a token studio that advises it it tokenizes the world's largest cultural economies so that's massive um music stars sports fashion movie tv and book franchises those are the four kind of verticals we look at and as opposed to exactly sorry what do you do exactly so we have so this is a um a jv between myself delphi digital kevin kelly is a co-founder and a very good friend of mine who kind of grew up together who was the ceo of the guardian newspaper group he's he's got another business called science magic inc which is a the kind of nexus between influencers brands and community so when he was building that business i said look what we're missing is tokens so we put this together we've got some of the world's most amazing investors on our cap table and incredible advisors it's a ludicrous group so sciencemagicstudios.xyz and so that team builds the entire strategy and execution for tokenizing entire economies so that's from nfts so if you think about how bulldape yacht club did it so or yuga labs did it more specifically which was you know they started with nfts they start building community they add other communities they build on and then they have a social token around it and experiences um that's the hard way the easy way is if you've already got 100 million fans that's wow that's really interesting i didn't know that you were getting into that um yeah that's why he's talking so much about this i've been working on this for a long time and you know a couple of the the i mean fingers crossed but the first two that we do will be some of the biggest things ever attempted in web 3. um so we'll see what are your thoughts on regulation um you know we know regulation you have to figure out how to do this you know air dropping let the market set the price and it's all about utility it has to be utility and not speculation if it's speculation then it's a security it has to be about creating a kind of digital economy where tokens have utility and scarcity for for that community and if you guys engage with regulators or are you just reading the tea leaves um no i mean we have some of the world's best law firms working with us and stuff like that um so you know there's a lot of these that already exist obviously these token economies um and it's slowly slowly slowly catchy monkey you can't go rushing into because the size of these things i mean one of the projects is has a reach of 1.3 billion people whoa yeah and so are you able to talk about it i'm so curious when when is it supposed to launch without one launch yet we're just finalizing that that this stuff takes time because you have to go small nobody needs to know what you're doing you kind of develop it and then build it out into a much larger ecosystem so we'll see but that's just very early stage we're still hiring the final people on that so that's the investment in myself real vision i'm retooling towards um not entirely towards but putting these macro and crypto worlds together which you and i've talked about in the past because i passionately believe they're all part of the same thing and this is a huge opportunity set so um doing that buying the other stuff and trying to make sure i maintain income because without income you're [ __ ] that is amazing all right perfect place to end and one more thing that we are doing that i think will be super relevant to this conversation we have for a long time like you had a big belief that you know part of the democratization of financial information intelligence that we do at real vision our mission is education and education finance is pretty crappy or you get overcharged by people who are nobodies creating education and as you and i have shown in this conversation there's a lot to get to know you have to understand this stuff you can't just pretend and i want to make sure that people have the opportunity to get confidence in their own investing the thing that even you think about is like am i a good investor can i be a good investor right yes everybody can with the right tools so we have been for a year and a half been building something at real vision which is going to be amazing using the world's most famous investors to help mentor people through all the aspects of investing we have some courses um programming everything for all of this um we're just about to launch it so if you go to realvision.com forward slash waitlist it'll come with stupid cheap prices to start but we're even going to disrupt the pricing of what this is done because a proper course cost a lot of money this is not this is something quite groundbreaking it's amazing man the content you put out is really really extraordinary i know i am super grateful for it super grateful for your time thank you again so much for coming on i educate myself to death uh whenever you and i get a chance to to talk so uh to me i love it as always i really enjoy the conversations nah sam all right everybody speaking of things you will love if you haven't already be sure to subscribe and until next time my friends be a legendary take care peace we saw an opportunity uh to plug into a graphical interface and the idea was give computer simulations to executives to predict the future