#947 Nic Carter On Destroying All Bitcoin Energy Critics

Nic Carter is a Co-Founder at Coin Metrics and is a Partner at Castle Island Ventures. In this conversation we talk about all the misinformation around Bitcoin mining and present the true story around energy consumption. We also discuss the recent letter to the EPA and the what the champions of ESG get wrong in their argument. ======================= Since 2018 Copper has been at the forefront of institutional digital asset development. From award winning custody solutions, to creating the first truly off-exchange settlement function, Copper pioneers technology, products, and services, in lock-step with a rapidly changing world. No other infrastructure provider covers as many assets, across as many exchanges, with the speed and security that Copper can offer. To learn how Copper helps the world’s largest institutional investors secure their digital assets, head over to copper.co Copper - the unfair advantage. ======================= Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin. Visit http://compassmining.io to start mining bitcoin today! ======================= Bullish is a powerful new digital asset exchange built for institutions that delivers the innovations of DeFi in a regulated environment. The Bullish Hybrid Order Book pairs the high-performance of a traditional Central Limit Order Book with automated market making. Powered by deep Bullish Liquidity Pools, backed by the multi-billion dollar Bullish Treasury. So, you can trade with certainty and at scale across variable market conditions. Learn more at Bullish.com or follow @Bullish on Twitter. Because the future belongs to the bullish. *Not investment advice. Digital assets and cryptocurrencies are high risk products. Consult your professional advisor before dealing in them. Bullish’s services are available in select locations only and not to U. S persons. Visit https://bullish.com/legal for important information and risk warnings =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Nick Carter is a co-founder of Coinmetrics and a general partner at Castle Island Ventures. In this conversation, Nick and I spent a lot of time talking about Bitcoin mining, ESG, the recent letter to the EPA, and what exactly is the true story around Bitcoin mining energy consumption. I really enjoyed this conversation with Nick, and I hope you enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. Today's episode is brought to you by Copper. Since 2018, Copper has been at the forefront of institutional digital asset development. From award-winning custody solutions to creating

• 0:46Anthony Pompliano?

  the first truly off-exchange settlement function, Copper pioneers technology, products, and services in lockstep with a rapidly changing world. No other infrastructure provider covers as many assets across as many exchanges with the speed and security that Copper can offer. To learn how Copper helps the world's largest institutional investors secure their digital assets, head over to copper.co. Again, Copper, the unfair advantage. Check them out at copper.co today. This episode is sponsored by Compass Mining, the world's largest marketplace for mining hardware and hosting. With Compass, everyone can mine Bitcoin. Their team makes it easy to start mining wherever you want, at home or in one of their 23 hosting facilities

• 1:29Anthony Pompliano?

  around the world. Through the Compass marketplace, retail miners can access mining hardware with similar prices and purchase plans as the world's largest mining companies. Simple and low-cost hosting agreements, coupled with best-in-class customer service, are the reasons why Compass is the simplest and most popular way to mine Bitcoin. Make sure to check out all of their new Compass Score online resources, developed to help you make an informed decision on your next mining purchase. With a growing number of listings on our marketplace, the Compass Score allows customers to easily compare and contrast, highlighting the standout listings in real time and identifying the best listings available. Start mining your own Bitcoin today by visiting Compass Mining.

• 2:10Anthony Pompliano?

  Again, visit compassmining.io to start minting your own Bitcoin today. This episode is brought to you by Bullish. Bullish is a powerful new digital asset exchange built for institutions that delivers the innovations of DeFi in a regulated environment. The Bullish hybrid order book pairs the high performance of a traditional central limit order book with the automated market making powered by deep Bullish liquidity pools backed by the multi-billion dollar Bullish treasury. So you can trade with certainty and at scale across variable market conditions. You can learn more at bullish.com or follow Bullish on Twitter because the future belongs to the Bullish. Now, this is not investment advice. Digital assets and cryptocurrencies are high risk products. Consult your professional advisor before dealing in them.

• 2:54Anthony Pompliano?

  Bullish's services are available in select locations only and not to U.S. persons. Visit bullish.com/legal for important information and risk warnings. Go check them out at bullish.com or follow at Bullish on Twitter.

• 3:07Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:30Anthony Pompliano?

  Mr. Nick Carter, how are you, my friend? There were some politicians that wrote a letter to the EPA and a letter was kind of ridiculous, it seemed like. Just give us a summary of like, what was this letter to the EPA? What is the significance of them actually writing it?

• 3:43Speaker 02

  Yeah, so Representative Huffman was the primary author of the letter. And then there were, I believe, 22 other signatories all in the House, I think. And the letter was short. It was two pages. I think it came out on Earth Day, so I think that was strategic. But basically, it was a letter to the EPA accusing Bitcoin miners of basically creating all kinds of different pollution. Uh, so implying the miners themselves were polluting and talking about noise pollution, talking about toxic e-waste, you know, as if Bitcoin mining facilities are just generating tons and tons of, you know, e-sludge, you know?

• 4:26Anthony Pompliano?

  Are they serious when they write this stuff? Like, do they really think that they're creating noise pollution?

• 4:33Speaker 02

  Well, honestly, I think Bitcoin mining facilities, that's probably the one valid critique you could have, which is they're noisy.

• 4:41Anthony Pompliano?

  Okay.

• 4:41Speaker 02

  And so as a Bitcoin miner, you probably shouldn't put a mining facility in a residential area.

• 4:46Anthony Pompliano?

  But does anybody do that? Like, I don't think I know of a single large-scale facility that's in a residential area or where anybody living their normal life would hear the miners. Are you aware of any?

• 4:55Speaker 02

  There's probably, there's a handful of bad apples, I would say, in the Bitcoin mining space, but the vast, vast majority, you know, obviously Bitcoin doesn't care where it's mined.

• 5:03Anthony Pompliano?

  Yep.

• 5:03Speaker 02

  So it's typically in very rural industrial areas where it doesn't matter. The rest of the critiques were not really salient.

• 5:10Anthony Pompliano?

  Okay.

• 5:11Speaker 02

  They were grounded in myth-making, I think. But yeah, I think, you know, it's hard to know whether the letter was sincere. It certainly wasn't very well researched. I think it was mostly posturing, basically saying, uh, here's a way to score easy political wins. We can beat up on this industry that nobody cares about, nobody's going to defend, and, uh, you know, it can be a nice little Earth Day, uh, you know, letter to the EPA.

• 5:34Anthony Pompliano?

  Okay. I got a couple of questions. You can answer or not answer, depending on how you feel today. Uh, first is, who's funding this stuff? Is there, like, altcoin stuff? Michael Saylor, a couple of people have talked about this, like, are there competitive, and I'll put that in air quotes, projects and founders or teams, maybe even research areas, whatever, that are actually pushing this? Or like, the politicians going and doing this themselves?

• 5:57Speaker 02

  So, I don't know if Huffman specifically, or any of the co-signatories of the letter, including AOC, she was, she signed it, um, are funded by altcoins or any, any D that might have an animus against Bitcoin. However, there is an explicit campaign, uh, funded by Ripple, basically, to demonize proof of work. And so, you know, sometimes certain altcoin promoters or other blockchains prove a stake, they will sort of throw proof work under the bus a little bit in their public messaging, right? But in the case of Ripple, it's an explicit campaign against Bitcoin, or the co-founder of Ripple, Chris Larson, I would say specifically.

• 6:42Speaker 02

  And so that is an actual well-funded campaign with money going to environmental groups to agitate against Bitcoin, try and get Bitcoin to change the code, so to speak, which is probably not happening.

• 6:57Anthony Pompliano?

  So one of the things that I had Chris come on and I was very honest with him. Look, we disagree on a lot of stuff, right? But I think that one thing that we can agree on is like, these technologies, at the end, we believe they can change the world for the better. Now, which ones, how we get there, all this, we pretty much disagree on almost everything else, other than like, hey, we're both intellectually interested in like, making the world better, whatever that ends up meaning. When I talked to him, my read was like, he definitely understands how Bitcoin works. Like, he, I think in the change the code campaign, they were talking about like, there's like 10 people or something, I forget what number they used, that like, if you go to these 10 people, you can basically change the code. It's like, I asked him, I was

• 7:41Anthony Pompliano?

  like, well, who are the 10 people? Right? And he was like, well, it's not exactly that way and all this stuff. And so like, some of it feels like, if you just say things to the folks who may not be as up to speed or educated, they just parrot the same talking points. And so like, you score points with the uninformed by simply saying things, they read the headline and like, that's it. But also, there's this like fallback. And every Bitcoin critic that is intelligent, ends up doing the same thing. Oh, I own some Bitcoin. Like, this is like the classic fallback, right? There's people who are venture capitalists, who will just rail on Bitcoin. And like, oh, but I own some, right? Chris, same thing, like railing on it, but I own some. At what point is there like a threshold?

• 8:25Anthony Pompliano?

  Like, do you have to have a certain percentage of your portfolio? Like, how do you think about this?

• 8:29Speaker 02

  They clearly don't own enough.

• 8:31Anthony Pompliano?

  If you own $5, like you own some Bitcoin, like, does that give you the right to then attack Bitcoin, but then fall back and hide behind like, I own some Bitcoin?

• 8:36Speaker 02

  Well, you should be critical of anything in your portfolio, right? You should take a skeptical eye to your assets, whether that's Bitcoin or Apple. But the question is whether the critiques are warranted or not. In the case of Ripple, you know, there's a clear, he's clearly very conflicted. So it's hard to decompose the part of the critique that's genuine from the part that is motivated by his much larger investment.

• 9:01Anthony Pompliano?

  So the letter to the EPA, we're not, I don't think you're saying it, I'm definitely not saying that Ripple even played a part in it, right? As much as-

• 9:08Speaker 02

  We certainly have no proof of that.

• 9:10Anthony Pompliano?

  Yes, okay. So I just want to make sure that that's clear and fair to the Ripple folks. But that letter specifically had a number of different claims. One, let's say the noise pollution. Yes, if it was in a residential area, that would be fair. Probably not majority. There was a, I don't know, response letter? A bolted takedown? I don't know, I don't know what you would call it. But like, the Bitcoin community came together and a bunch of people wrote a letter that was like, hey, hold on a second, let's talk about facts. And it was signed by, I don't know, 30, 40, 50 people. And it was sent to the EPA. I think you were part of either crafting the letter, reviewing the letter, whatever. Like, talk about the response.

• 9:47Speaker 02

  Yeah, so I was involved in drafting the response. It was mainly spearheaded by, you know, Darren Feinstein at Core Scientific and Michael Saylor and, you know, a bunch of other folks. It was written under the Bitcoin Mining Council, sort of Aegis, but it was, there were signatories from all over the place. Tom Jessup, the head of F D A Asset Fidelity, signed it. Jack Dorsey signed it. You know, so you'd, partners at Benchmark signed it. So it was actually all over the place. It wasn't just Bitcoin miners. It was signed by, you know, influential, large stakeholders in the Bitcoin ecosystem. And the purpose of the letter was just to look at specific claims that Huffman had made in his letter to the EPA

• 10:31Speaker 02

  and add context and in, you know, cases where there were falsehoods, you know, directly contradict those. And, you know, I don't think that we should be, you know, too-

• 10:44Speaker 02

  I think we should really take these things seriously when our elected members of Congress are spreading, you know, really questionable claims. I mean, very questionable claims, in particular about the e-waste, but also just mischaracterizing Bitcoin and implying that data centers are pollutants, which they're not, right? Because that was the whole premise of the letter.

• 11:03Anthony Pompliano?

  Let's break this down, because I think many people at home are like, what are these guys talking about? There are power generation facilities, obviously, they generate power, hence the name. That power is then absorbed by or used, data centers, computational resources, et cetera. The breakdown of where bad environmental stuff happens is almost always, almost exclusively at the power generation, not at the data center level, the computational resources, et cetera. So for example, if you have, I don't know, what would you say is the nastiest power generation available in America?

• 11:36Speaker 02

  Coal.

• 11:37Anthony Pompliano?

  Coal, okay. So you have a coal facility, whether it's Facebook's data center, it's a Bitcoin miner, or it's like Joe Blow with a small business that's providing hosting services to people, the waste or the pollutant at that level, at the data center or the computational resources, is near zero. It's really the coal, the power generation. And that could be used for data centers, that could be used for Bitcoin mining, or that could be used to power your home. Like, that's the problem that they're all identifying. So why are they attacking Bitcoin mining? I've never seen them say like, oh, Facebook's data centers, or Microsoft's data centers. They always seem to go after the Bitcoin mining stuff.

• 12:13Speaker 02

  Yeah, and I mean, to be clear, like, the big tech data centers, I think have actually done a pretty admirable job of sort of decarbonizing, like, they'll definitely buy offsets, they'll buy RECs, they'll do power purchase agreements. So even if the electricity they're ingesting is non-renewable, they'll find ways to mitigate their footprint. So, and that could be a model Bitcoin miners follow. But yeah, you know, the odd thing is that we have a bunch of members of Congress asking the Environmental Protection Agency...

• 12:44Speaker 02

  To regulate the contents, the type of computation occurring within data centers. And they're going upstream, right? You know, they're not saying, okay, you know, EPA, look at all of the power generation, how it occurs in the US and, you know, assess it. Because they already do that, right? Like, it's already all, every power plant in this country is, you know, regulated, right?

• 13:07Anthony Pompliano?

  Yes.

• 13:07Speaker 02

  Obviously. But they're asking the EPA to go much, much further and go follow the electricity to the data center, look at the kind of computational work the data center's performing.

• 13:20Anthony Pompliano?

  And discriminate based on that.

• 13:21Speaker 02

  And discriminate.

• 13:22Anthony Pompliano?

  Yes.

• 13:22Speaker 02

  So it's like, you think about net neutrality for the internet, you know, the analogy would be power neutrality. Like, at this point, we're asking the regulator for pollution in the country to look into data centers and determine what's valid and what's invalid computation, which seems way outside of their mandate.

• 13:41Anthony Pompliano?

  To me, it feels like when you're fighting this kind of FUD, you can do one of two things. You can stay kind of gentlemanly, right? And you can basically say, we do not agree with that. We believe A, B, C, D, whatever. You could also go to the other extreme, which is like get into the mud and do all the online, you know, debates and all that type of stuff. But there's this like middle ground, which is just like, we could just take their talk track and flip it on them. And what we can say is like, 22 politicians just asked the EPA to discriminate against the most financially vulnerable in our society. That's what they did, right? Like, if Bitcoin, it really can protect your purchasing power, it can serve all these great things, and can be a solution to the most financially

• 14:22Anthony Pompliano?

  vulnerable in our society. But if you're asking the EPA basically to attack that technology, it's an attack on those people.

• 14:30Speaker 02

  Yeah. And the global community of Bitcoin users, which is hundreds of millions of people worldwide. In emerging markets, in places with high inflation, you know, and we have high inflation here.

• 14:42Anthony Pompliano?

  They just asked the EPA to attack all of the Ukrainian refugees that are trying to get out of the country as Russia attacks them.

• 14:49Speaker 02

  Right.

• 14:49Anthony Pompliano?

  It's a pro-Russian argument. It would serve if they could get rid of Bitcoin. They basically could argue that it's a pro-Russian stance to then go ahead and not allow Ukrainian refugees to leave the country with their wealth.

• 15:01Speaker 02

  And then that's what this comes down to ultimately is there's no acknowledgement that Bitcoin has utility. Because when you talk about, okay, well, what about looking at any other industry that consumes the same energy? It's, you know, the response is always, well, it has utility. Netflix has utility. You know, Snapchat has utility. And there's never an acknowledgement that Bitcoin has utility. Even though, day by day, week by week, we're getting many more examples of this. I mean, especially in conflict zones where people are fleeing, you know, millions of refugees. And, you know, a significant percentage of these people are able to leave with their financial assets intact.

• 15:41Speaker 02

  You know, this is, we're getting these case studies. We're, you know, we're seeing Bitcoinization, crypto-dollarization happen. You know, we're seeing this inaction, and there's just no acknowledgement of that.

• 15:53Anthony Pompliano?

  Yeah, it, as much as I like to joke around and flip it on its head and basically like say something bombastic where people are like, oh shit. Like, yeah, we probably don't want them saying that about us as a politician. It does feel like there's plenty of other politicians, though, that are pro-Bitcoin, and they don't need to do that, right? These pro-Bitcoin politicians seem to understand the game. They seem to understand exactly how to position things so that, they say, look, that is one side of the argument. Ours is another. This doesn't seem to be a partisan issue. It doesn't seem like it's all Republicans on one side, all Democrats on the other.

• 16:26Speaker 02

  Definitely not. Look at the Ohio Senate race.

• 16:30Anthony Pompliano?

  Okay, tell us about that.

• 16:32Speaker 02

  The primaries yesterday, the Republican primary.

• 16:36Speaker 02

  J D Vance won on the Republican side. He is a, he's, you know, pro crypto. The Democratic, his Democratic opponent is also pro crypto. J D Vance's primary opponent, Josh Mandel, is also a Bitcoiner. So literally, whatever the outcome is in Ohio Senate, you're going to get a pro Bitcoin, pro crypto candidate. So even though it tends to skew right in terms of, you know, you look at the members of Congress that are pro crypto. I think you'll find, and we've been in communication with a bunch of members of Congress regarding this letter to the EPA, you'll find there's people definitely on both sides of the spectrum that disagree with Huffman's characterization,

• 17:20Speaker 02

  with agitation, you know, it's well established and there definitely are reasonable voices on both sides.

• 17:25Anthony Pompliano?

  Yeah. How much of this is just posturing versus like they actually have concerns?

• 17:30Speaker 02

  I think, I mean, yeah, like, look at the scale of Bitcoin. It's small, right? And if you want to solve the climate crisis, right? If you really believe there's a climate crisis and you want to solve it, you're not going to solve it by attacking 0.1% of electricity consumption. You're just not going to. And so I think that that is the wrong use of your sort of resources and energy. You should be, you know, turning off coal, converting it to gas. You should be promoting renewables, spending this much effort disproportionately on an industry which you can't regulate away. You can't eliminate Bitcoin mining. All you can do is push it out of the borders of your country. It doesn't make sense. And so I do think it's completely wrong headed, even if you're the most ardent environmentalist in the world.

• 18:12Anthony Pompliano?

  Yeah.

• 18:13Speaker 02

  To try and strip out this, you know, small category of computation. It just doesn't make sense.

• 18:19Anthony Pompliano?

  It also seems to follow a similar trend or simultaneously be playing out where Elon Musk and Tesla obviously have ushered in electric vehicles, right? And they're the leader. There's other companies that are now participating as well, but they definitely created this kind of EV revolution. But it feels like a lot of politicians either like don't want to say his name, don't want to talk about Tesla. They they just, for whatever reason, it seems like we want to talk about EVs, we want to talk about renewals, but like, oh, not this Tesla thing. And it's kind of similar like a Bitcoin, right? Which is just, how much of that is posturing versus are you actually trying to solve the problem? Because if you're trying to solve the problem, you want everyone driving a Tesla, right? You want as many EVs on the road as possible. You want as many people adopting this technology as possible.

• 19:02Anthony Pompliano?

  But it doesn't feel like that's really what's happening. Or maybe it's just anecdotal and the overwhelming majority actually, you know, aren't part of that group. I don't know.

• 19:11Speaker 02

  Yeah, it's really odd because you're you're seeing people that are now decrying Elon's pending takeover of Twitter. And they drive Tesla, so they help finance the acquisition. You know, and I maybe they didn't expect that that would occur. But yeah, it's weird. You can't just work to, you know, decarbonizing the planet. That's not sufficient. You have to do it in the sort of correct cultural and political context, right? So Elon doesn't adhere to that. And even though he's probably the individual that's the single largest contributor to declining carbon emissions or decarbonization or the climate transition, whatever you want to call it, he doesn't get the credit for it that he deserves.

• 19:53Speaker 02

  Because he's not, you know, part of these like political elite cultural circles. He's not saying the right things.

• 20:00Anthony Pompliano?

  So I think you, I, many other people, and we'll just put the overarching tech community. We see Elon as an entrepreneur, an innovator, a problem solver, like all these things. He's done space, he's got the EVs, a number of other companies. I saw Marc Andreessen tweeting about nonstop now, the current thing. And he's like,

• 20:21Speaker 02

  He's on a tear.

• 20:21Anthony Pompliano?

  I mean, we missed him, man.

• 20:24Speaker 02

  I'm glad he's back.

• 20:25Anthony Pompliano?

  Yeah, he just, he's just got his own way about it and it's amazing. But one of the things that he recently said that I found really interesting, he was like, there's like a vibe shift. Like, oh, hold on a second, like, like you can just tell something shifting in sentiment and society, whatever. And in some way, it's that the world's richest man and the world's best entrepreneur is basically saying, I'm not going to conform. And usually that person would be the first to conform. They'd be the first to, you know, share all the talking points or whatever. And it's like, how important is he, not just from like a building a company standpoint, but like, He almost feels like he's rallying a generation of people being like, we are not going to conform if as long as we got the meme master, you know, the meme lord on our side, like,

• 21:08Anthony Pompliano?

  we can continue to push forward here. Is that like your general read?

• 21:11Speaker 02

  Yeah, I feel a vibe shift or energy shift, whatever you want to call it. I it's it's very observable, right? I mean, you have this incredibly successful industrialist that's working on the most important of humanity's problems, space travel, electric vehicles, internet, you know, giving everyone on earth internet, transportation with Boring Company, you know, Neuralink, right? Like, these are literally the most important problems. And he is completely fixated on and has turned all of his attention to discourse, right? Like, media, like, our ability to communicate with each other in an unfettered way. So of

• 21:54Speaker 02

  all the problems that he's working on, which is like half a dozen enormous structural problems, the most important to him right now, where he's deploying all his wealth, is the ability to communicate freely online. And having an individual like Elon, who it's not that many people have leverage over him, right? I mean, that's what wealth gives you, right? It gives you freedom. Not always, though, right? He has this freedom because he also doesn't really care what people say about him. You know, he's not trying to adhere, he's not trying to get invited to Davis every year or whatever, you know, the World Economic Forum, right? You know, he's truly his own man. And so that is a very strong sign to people, like, yeah, it's okay to like genuinely believe in free speech. Like, that's all right,

• 22:38Speaker 02

  you know? And like, the the view that the state, you know, should be, you know, chipping away at your ability to to communicate freely online, like, it's okay to push back at that. And I think that is just the number one thing that's happened. And it's made people feel, you know, relieved in a way, because prior to this, it had been just a decade of like chipping away and chipping away and, you know, rebranding free speech as as violence or whatever. And and Elon's resurgence here has really given a lot of people confidence. So I mean, look, I don't know what product decision is going to make it Twitter, it might be terrible. But I think it's very important just as a, you know, catalytic moment.

• 23:20Anthony Pompliano?

  Yeah. Disinformation Governance Board, obviously, everyone immediately jumps to like Ministry of Truth.

• 23:29Anthony Pompliano?

  This has nothing to do with business, but has everything to do with business. Right. It's the way that I kind of think about it of it overlays into, we've obviously seen the Florida governor go after, you know, Disney and like all these kind of more micro decisions. But it feels like this was the first macro type situation where I saw a bunch of Bitcoiners in my Twitter feed being like, told you, told you. Right. And it just overlays like there's a technology conversation here, but then there's like almost like an ethos and some of it's free speech. Some of it's just like disinformation stuff. Some of it's just like the approach to should the government tell you what to do? Or should you be able to live your life? Like, what was the significance or importance of the disinformation governance?

• 24:10Speaker 02

  Yeah, it's a mess, man. And like, look at where they're in, look at how they've structured it. It's part of the Department of Homeland Security, which was created after nine 11. It's like a sort of security agency, right? With enforcement capabilities, right? I mean, that's it. And that's an agency.

• 24:27Anthony Pompliano?

  Serious.

• 24:27Speaker 02

  That's a department with teeth. So they're taking the speech control module and they're putting it under the, you know, that's like effectively like a branch of the military, frankly. And so, you know, that's also concerning. They could have made it sort of like a somewhat benign civilian agency that, you know, issues recommendations. But no, like this isn't, you know, they'll have enforcement capability. So God only knows what the plan is there. But I mean, look, does the government have like a privileged, you know, view, a stance on what's true? Are they epistemically privileged, right? Does the government, I mean, you know, like there's, how many things can we point to?

• 25:10Speaker 02

  Which were derided as conspiracies or disinformation when they came out and then were later proved to be true.

• 25:17Anthony Pompliano?

  Yeah.

• 25:17Speaker 02

  I mean, the lab leak hypothesis, right? China's sort of covering it up. They're not, they're interfering in the investigation. So we don't know. But it certainly seems a lot more plausible now.

• 25:27Anthony Pompliano?

  Just mask. Mask, I think was the easiest one, right? They're like, hey, they don't work. Now they work, whatever.

• 25:31Speaker 02

  Right. I mean, it, yeah, it's just like arbitrary, right? Like the efficacy of masks, like the various non pharmaceutical. Interventions like do they work, do they not work? You know, like all of these things where it's like science is like, you know, capital S science, right?

• 25:46Anthony Pompliano?

  Current thing.

• 25:47Speaker 02

  The science, right? So like, these things are malleable, like we all know that they evolve. Our, our, uh, understanding evolves, the information we have on, on hand changes all the time. So, you know, these things that are called conspiracies, oftentimes that maps to things that are just true, but they're just not convenient, right?

• 26:06Anthony Pompliano?

  Yeah.

• 26:06Speaker 02

  Inconvenient truths. And so, you know, I, I think like the last two years have given us an enormous amount of, of precedent for thinking, oh, look, maybe the government doesn't have this like privileged.

• 26:17Anthony Pompliano?

  Yeah.

• 26:17Speaker 02

  Uh, access to the truth, like maybe it is more of an emergent thing. So, you know, how can you even, how can you legislate, you know, what's true?

• 26:25Anthony Pompliano?

  Well, the, the whole idea of like truth to me, in the, in the way that it's being discussed, means that, uh, there is one single answer and that answer is, uh, finite and like immutable. Right? In the sense of, uh, this thing is true and it can never change. We can never have a different opinion about it. And for many of the things that people are trying to label truth on, they're just moving targets. Like, take the medical stuff, take any of the science-based stuff, like, one thing can be true and then not be true later and then be true again, right? Like, like that is fully possible.

• 27:00Speaker 02

  And there's just things that are matters of opinion, right?

• 27:02Anthony Pompliano?

  Correct.

• 27:03Speaker 02

  Like, uh, we, we don't have like facts around every single possible debate. Like not every, every debate is factive. In fact, most debates are values-based. They're not factive, right? So look at, uh, I mean, just look at inflation, right? Like when, when inflation started to pick up, everybody said it was transitory. Every mainstream economist said that, every single one. I mean, maybe Larry Summers didn't. And so would it have been disinformation to say, oh, inflation is actually going to be enduring here? Was that disinformation?

• 27:32Anthony Pompliano?

  Well, it depends who you ask.

• 27:34Speaker 02

  Is it disinformation to look at the owner's equivalent rent component of, of CPI and say, huh, 4%, well, actually, if you look at the rents near me, they're up 30% year over year. Uh, and owner's equivalent rents based on this like really weird methodology that doesn't make any sense. And so CPI is understating the true level of inflation. Is that a conspiracy? Or is it just an alternative perspective? Is that disinformation?

• 27:58Anthony Pompliano?

  What do you think?

• 27:59Speaker 02

  Uh, yeah, I think my sympathies are pretty clear on that topic. You know, I, but.

• 28:03Anthony Pompliano?

  Well, do you think, but like, this is a good example and, uh, take inflation. Is it incompetence? Is it, uh, it's just hard and like no one would get it right? Or is it like scandalous, cover up conspiracy? Let's manipulate it so low so that people don't freak out? Like, if you had to pick one of the three buckets, like where would you put that situation?

• 28:24Speaker 02

  I would say it, um, is partially because there's a monoculture in the Federal Reserve. All these, most of them have never had jobs outside of the Federal Reserve or outside of government or academia, right? Uh, it's also because the lived experience, um, of Federal Reserve governors and the people sort of in charge of monetary policy, they don't really, they weren't really around professionally the last time we had an inflationary period. Um, it's also because there's a strong motivation. So there's a number of reasons. I don't know which one is the dominant one. There's a strong motivation to ignore the monetarist perspective, uh, and to try and

• 29:04Speaker 02

  belittle the idea that, um, monetary issuance can cause inflation because there's such a big agenda right now in Washington to finance these very expansionary programs through monetary issuance, right? Uh, and, and you know, that is, that's how we're able to run sustained deficits, uh, you know, and, and that's how we've been able to do it. So, uh, you know, there's this, there's this, uh, motivated reasoning going on, uh, you know, with our monetary elites, uh, to ignore the, uh, monetary theories of inflation. Uh, and, and also there's new, there's new theories coming out that, um, you know, dithering at the top administrative level in terms of who would be running the Fed, things like

• 29:47Speaker 02

  that, that also caused inaction at the Fed. But, uh, it's, you know, I think it's undeniable now that, uh, the Fed waited way too long. They sort of wanted inflation a little bit and then they waited way too long to act when it was clear that it was out of control. I think they also didn't act because they thought it'd be temporary supply side factors and they ignored the demand side factors, the fact that printing trends of dollars and spending it into the economy directly obviously causes demand for, you know, to increase.

• 30:17Anthony Pompliano?

  Shocking.

• 30:18Speaker 02

  Yeah, I think like mixture of like the intellectual stagnation at the Federal Reserve and then also incentives.

• 30:24Anthony Pompliano?

  Yeah. If you look today, we're recording this, the Fed, the market is pricing a 50 basis point rate hike. One, do you think that's going to happen? Two, do you think they'll be able to continue to hike through the end of the year and get to, I think the market's pricing in like 2.75 to 3%? And then three is, do you think we'll actually have a rate cut at any point this year?

• 30:46Speaker 02

  Yeah, I mean, if you look at the history of interest rates recently, it's like they come out, it's like a staircase down. So they can never regain the prior high, right? So they can, because the economy gets more and more financialized and more and more indebted, every time you try and hike after cutting, you can't get high enough again, right? So that's going to be, that's going to be exactly what happens here. We're never going to be able to hike back to where we were, you know, just as recently as 2018. And yeah, I don't think we're going to be able to hike, you know, 300 bips from here. The solvency is an issue. The government needs to pay its bills, right? The government has a significant amount of indebtedness. I think the debt to GDP ratio is 125.

• 31:29Anthony Pompliano?

  Yeah.

• 31:30Speaker 02

  It's very high.

• 31:31Anthony Pompliano?

  Yeah.

• 31:32Speaker 02

  The corporate sector is highly indebted. You know, households have delevered somewhat, but they're still, you know, saddled with debt. So there's just enormous amounts of debt and leverage that have built up in society. As you hike interest rates rapidly, you make everything insolvent. And, you know, we don't have the ability to, to do what we did in the seventies and, you know.

• 31:55Anthony Pompliano?

  Was it 18% or something?

• 31:56Speaker 02

  Yeah, yeah. Up to 20% kind of thing. That happened at a debt to GDP ratio of 30. It's impossible for us to do that now.

• 32:06Anthony Pompliano?

  Yeah. So do you think that they'll cut rates before the end of the year? Or do you think that it's like we'll hike to, I don't know, 75 or 100 basis points and then just stay flat?

• 32:14Speaker 02

  So Zoltan Pozar, who is the chief, I think, interest rate strategist at Credit Suisse, basically the most listened to man, maybe, in macro right now? I don't know. That's a stretch to say. He wrote a note last Friday. He always publishes them on Friday nights.

• 32:32Anthony Pompliano?

  Friday night, yeah.

• 32:33Speaker 02

  What's the deal with that?

• 32:35Anthony Pompliano?

  My guess is that he writes them on like Thursday or Friday morning and then the compliance and by the time they get out there Friday night, or he's just weird.

• 32:42Speaker 02

  It's like, that's what he enjoys doing on Friday night.

• 32:45Anthony Pompliano?

  Yeah, I don't know.

• 32:45Speaker 02

  Just like writing apocalyptic, you know, like letters.

• 32:50Anthony Pompliano?

  Writing off for the weekend.

• 32:51Speaker 02

  He says Q1 2023, that QE will resume. Another strategist I really respect, Luke Roman, says could happen as early as Q4 2022. I think, yeah, the markets are naive and if you look at the history of projections around interest rates, right? They're always way more aggressive than what actually happens, right? They're always way more optimistic in terms of the Fed's ability to hike. Yeah, I don't think we'll be able to hike that significantly. I mean, things are already, they're breaking already.

• 33:22Anthony Pompliano?

  Yeah.

• 33:23Speaker 02

  Things are breaking.

• 33:24Anthony Pompliano?

  This is my whole theory is that if we get a 1.4% contraction on Q1 annualized GDP and they only hike 25 basis points, we'll never make it to 300 basis points, right to your point.

• 33:36Speaker 02

  Very unlikely.

• 33:37Anthony Pompliano?

  Yeah, I just, I can't see that happening. And I even called it a financial Armageddon if we got there, right? It's just everything would break. But the one variable here is the midterm elections. And so if we continue to push further and further into like a recessionary period, I think the pressure would be immense to start to actually stimulate the economy going into the election. And so that's the thing that pulls forward the interest rate cuts from maybe being like a Q1 2023 thing. I think you got to do it before you get into November. And so maybe that's like a, I don't know, September thing, right? And it's just pure politics. It's just, hey, how do we stimulate the economy in any form or fashion to tell a story of like, things are improving?

• 34:20Anthony Pompliano?

  So that we don't get absolutely wiped clean in the election.

• 34:23Speaker 02

  And, you know, people represent the Fed as an independent agency. People think of central banks as independent. They're never independent.

• 34:31Anthony Pompliano?

  Yeah.

• 34:31Speaker 02

  They always exist in a political context, always. And, you know, the pressure is going to be immense. You're right. The pressure is going to be immense. And, you know, if it's a choice between getting slaughtered in the midterms, or doing this inflationary move, yeah, you're going to see the hikes stopping. So yeah, I'm on your side. I'm on the side of sooner rather than later. And less hikes rather than more.

• 34:58Anthony Pompliano?

  Yeah, I think that's right. Where can we send people to find you on the internet? I dropped your Twitter account in the chat here, but anywhere else you want to send folks?

• 35:05Speaker 02

  Yeah, nickcarter.info also. And if you want to read the letter that we wrote to the EPA, Bitcoin Mining Council website, I think, hosted the letter and Michael Saylor tweeted it. You know, it's funny, it's a two-page letter from Huffman, and then our response was eight pages. Because it's like, you know, Brandalini's law. It's an order of magnitude more work to rebut something than it is just to make the claims. And it's exactly the case here.

• 35:34Anthony Pompliano?

  Yes.

• 35:34Speaker 02

  Two-page, very brief letter, full of misrepresentations, took us eight pages to rebut it.

• 35:40Anthony Pompliano?

  Before I let you go, pull this Twitter account one more time, Matt. You are the most financially illiterate psychopath that we've ever brought on this show.

• 35:47Speaker 02

  Don't listen to anything I just said.

• 35:50Anthony Pompliano?

  And I can't wait to have you come back. Thank you so much for coming on. Have a good day. All right, we'll talk soon.

• 35:59Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.