NOT A DRILL! Balaji Bets the Dollar will Hyperinflate to Zero

Balaji Srinivasan is back on Bankless with alarming takes. According to Balaji, in the next 90 days, the Dollar will hyperinflate—and the Bitcoin price will skyrocket to $1 Million. He’s backed up these claims with a million dollar bet. With these dire predictions and a track record of strong takes, we needed to hear him out. Who should we bring on next to counter these claims? ------ 🚀 JOIN BANKLESS PREMIUM: https://www.bankless.com/join ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://bankless.cc/kraken 🦄UNISWAP | ON-CHAIN MARKETPLACE https://bankless.cc/uniswap 👻 PHANTOM | FRIENDLY MULTICHAIN WALLET https://bankless.cc/phantom-waitlist 🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask 🚁 EARNIFI | CLAIM YOUR UNCLAIMED AIRDROPS https://bankless.cc/earnifi ——— Timestamps: 0:00 Intro 7:50 Weeks when Decades Happen 9:30 $1 Million Bitcoin Bet 16:20 Balaji’s Track Record 19:00 Pandemic https://twitter.com/balajis/status/1222921758375927808 23:15 Hyperinflation https://twitter.com/balajis/status/1636797265317867520 27:50 US Banking Failure https://twitter.com/balajis/status/1636822077775941633 32:50 The Banks are Insolvent https://pbs.twimg.com/media/FrXKYKcakAAdJwe?format=jpg&name=medium https://twitter.com/balajis/status/1637671174271565825 35:38 More Failure, More Funding https://archive.is/0Jww3#selection-731.0-731.286 40:30 FDIC and the Fed https://www.telegraph.co.uk/news/worldnews/europe/eu/10874230/Jean-Claude-Juncker-profile-When-it-becomes-serious-you-have-to-lie.html https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm 44:18 Bank Runs https://qz.com/the-feds-discount-window-is-lending-to-banks-at-2008-le-1850237214 https://twitter.com/balajis/status/1637859435149398016 https://www.straitstimes.com/business/banking/wall-street-giants-move-to-rescue-first-republic-bank https://www.federalreserve.gov/newsevents/pressreleases/other20230315a.htm 52:25 Escaping to Gold https://twitter.com/spectatorindex/status/1637544100663803904 57:50 Exporting Inflation https://www.theguardian.com/lifeandstyle/2011/jul/17/bread-food-arab-spring https://www.wsj.com/graphics/red-economy-blue-economy/ https://howmuch.net/articles/rise-and-fall-dollar 1:04:30 Bitcoin in Wartime https://pbs.twimg.com/media/FrrfQuaaUAEFYev?format=jpg&name=medium https://pbs.twimg.com/media/FrrfQuaaUAEFYev?format=jpg&name=medium 1:10:45 Capital Allocation https://twitter.com/balajis/status/1488988253411708931 1:13:30 The Only Real Banks https://twitter.com/koeppelmann/status/1637898298005626881 1:20:49 Why Now? https://twitter.com/balajis/status/1637329482687324161 https://twitter.com/balajis/status/1637868839890472960 https://twitter.com/0xfoobar/status/1637855829750628353 https://www.google.com/search? q=sivb&oq=sivb&aqs=chrome..69i57j0i10i131i433i512l2j0i10i512l2j69i64l3.1066j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=sivb&oq=sivb&aqs=chrome..69i57j0i10i131i433i512l2j0i10i512l2j69i64l3.1066j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=usd+btc&oq=usd+btc&aqs=chrome..69i57j0i512l4j69i64l3.1207j1j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=usd+btc&oq=usd+btc&aqs=chrome..69i57j0i512l4j69i64l3.1207j1j7&sourceid=chrome&ie=UTF-8 1:28:15 Do This Now https://twitter.com/MaxCRoser/status/1355652800588505089 1:34:52 A Year From Now https://www.youtube.com/watch?v=PHe0bXAIuk0 ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures

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

• 0:04Ryan Sean Adams?

  Bankless Nation, we have Balaji Srinivasan on. He's talking about his prediction that within 90 days, the US dollar would hyperinflate, and one Bitcoin would be worth $1 million. This is both a prediction he made and a bet that he has made after that prediction on Twitter. He's been saying some alarming things over the past few days, I would say, about the US banking system. And maybe the most alarming is, some of his early predictions have sort of been right. There's more murmurings of bank closures that have passed, both the United States and now in Europe. We just had Credit Suisse, with First Republic Bank, that just kind of go to zero. We have central bank communications talking about coordinated efforts between them all

• 0:49Ryan Sean Adams?

  to inject liquidity in this market. The prospect of like, unlimited coverage for all depositors and for all of these underwater assets is now in play too. And so, I worry about some of the things coming to pass, because his predictions, David, are quite dire. He is sending out an alarm, he says, the bit signal, he says, people to get their money outside of the US banking system and into Bitcoin specifically, into crypto systems, and outside of the areas where the Fed has root level access. So we brought him on to make this case, to hear the evidence for his claims, and to see how alarmed we should really be. One thing I'll say before I get your response on this, David, is, we do intend to bring

• 1:33Ryan Sean Adams?

  on a counterpoint as well. So Balaji has given his case for why we're all, basically, the US dollar is doomed, it's going to hyperinflate, and that's going to happen in relatively short period of time. We also want to get on somebody to make the opposite claim, so that this is balanced, and so that listeners can listen to the evidence Balaji comes up with, and listen to the counterpoint, and make their own decision on this. But, I gotta say, we needed to hear him out on this, because he's been right about many things in the past. He's been right overall about crypto and kind of the direction, and now he's setting off this alarm bell. It certainly gave me cause for concern, and the reason for this conversation. So, David, what are your thoughts going to this episode?

• 2:17Ryan Sean Adams?

  What should people keep in mind?

• 2:20David Hoffman?

  Yeah, I think the Balaji is just sounding the alarm that Bitcoin is going to a million dollars. He's made that bet. And many, many people are like, well, he owns a bunch of Bitcoin. This is a rational thing for him to do. It's a million dollar marketing expense. That's not what Balaji is here to say. He is saying the net effect of Bitcoin reaching $1 million is as a result of the complete destruction, perhaps, of the United States banking system and the dollar system at large. His big claim is that, you know, all of Alameda Research and FTX's insolvency, where they tried to prop up their accounts with some finagling of their accounting, he is saying that that is perhaps true of the entire banking system,

• 3:02David Hoffman?

  where there is just not a there there anymore. And so, his idea that Bitcoin is going to a million dollars is actually a much bigger topic, which is more or less the complete and utter destruction of our banking system. A few comments on the actual form factor podcasting logistics for this episode. Balaji, we've been talking to Balaji about doing an episode, and he randomly just hit us up and said, all right, let's do this right now. And so, we kind of ape into this interview. Balaji gave us a ton of links to share, and we are doing our best to share them in Riverside, which is our podcasting recording software. Recording this one was logistically challenging. Like I said, Ryan said, I'm also in the Dominican

• 3:44David Hoffman?

  Republic. My internet is an issue. But I think the message will become loud and clear. And really, going back to the content, I think the takeaway for our bankless listeners, regardless of how true Balaji is, I think there's a spectrum here. Either Balaji is like 100% right, or he's only 5% right. But either way, the patterns and things that unfold over the next perhaps 90 days of time as a result to banking crises, and inflation, and liquidity, at least I think Balaji is giving us a mental model, a map, to test what events happen in one week, one month, three months. And we can test them against Balaji's thesis and his theories and what he's presented here today. So I think that's really the call to action for bankless listeners to understand is, see what, see the model

• 4:29David Hoffman?

  that Balaji is putting forth, and as more announcements happen, as more perhaps bank failures happen, or doesn't happen, you'll be able to test it against what Balaji has presented here today.

• 4:41Ryan Sean Adams?

  Yeah, absolutely. And I don't think, David, you and I are in a place to say that he's right or he's wrong, but certainly his argument warrants consideration. So that's why we are putting this in front of you today. Guys, we're going to get right to the episode with Bology, but before we do, we want to thank the sponsors that made this episode possible, including Kraken, which is the best way to get your fiat into crypto and our number one recommended exchange for 2023.

• 5:07David Hoffman?

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• 5:51David Hoffman?

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• 6:34David Hoffman?

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• 7:18David Hoffman?

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• 7:56Ryan Sean Adams?

  Bankless Nation, we have Balaji Srivastavaan here on Bankless again today, talking about something very specific, which is a very bold call that Balaji made last week. Balaji, welcome back to Bankless.

• 8:10Speaker 02

  Hey, welcome. Thanks. Or I guess, thank you. You're supposed to say welcome, I'm supposed to thank you. So

• 8:15Ryan Sean Adams?

  Well, I'm supposed to, yeah, yeah. You've got your own podcast now, by the way, which is fantastic. So you've probably been playing the role of host more often. So yeah, tell folks about that before we get in.

• 8:27Speaker 02

  It's funny, because, you know, I launched a blog right before COVID. I launched a podcast right before this. So it's a little bit of deja vu, you know, where I was just like a month into kind of this new sort of content project, and then things started getting intense on the internet. Or not just on the internet, but like the world. Yeah, the podcast is called The Network State Podcast. It is about what sort of comes after the 20th Century Order, you know? And I actually think that there's, you know, the book, thenetworkstate.com, there's a bunch of stuff in there, which I think will potentially be actually fairly relevant to what's going to transpire. And I kind of thought it might, you know, play

• 9:09Speaker 02

  out over a decade or something like that, you know, like that saying by, you heard the saying by Lenin, there's a, there's decades where nothing happens, and there's weeks where decades happen, right? Like during Corona, at the beginning of Corona, the Remote work went like 30, 40, 50 points vertical. It did like a decade of adoption in like a few weeks. All these kinds of things went like vertical or horizontal or, you know, down, you know, right?

• 9:31David Hoffman?

  You're here because I think this is, you're claiming this is one of those two weeks where a decade's happened and all of a sudden you have been inundated with intention about this crazy, crazy bet that you've made where you think that Bitcoin, our beloved asset, is going to become worth $1 million inside of the next 90 days, which when you take that take into account, people will call that a bold call. And so this has made the internet all pivot their attention to this claim, which is a crazy, crazy claim that I think people aren't, aren't totally understanding or willing to accept. So, so Balaji, maybe you can kind of walk us through your thought process here, like, how is Bitcoin going to become worth $1 million in the next three months?

• 10:11Speaker 02

  So here's the thing is, I don't think I've ever made a price prediction or something like that, just not what I do. I'm not a price guy. I'm not a chart guy. That's, you know, if you look at, I've been in the, for what's worth, I've been in the public eye for 10 years, you know? I have tens of thousands of tweets. I have hundreds of pages of writing, whatever, hours of podcasts, including some with you guys, right? Essays and so on and so forth. And there's enough context there where people, I think, you know, know that I'm not like a, I'm not a money motivated person. I'm an ideological person. In our talks, you know, and so on, I've never been like, oh, price, blah, blah. Let me just back up for a second, okay? 10 days ish ago, 10, 12 days ago, Silicon Valley Bank and Silvergate and then Silicon

• 10:55Speaker 02

  Valley Bank like basically just collapsed overnight. There's no warning, right? Just boom, done. And then this gigantic, you know, this $200 billion bank with 40,000 tech companies. People who had done basically nothing, you know, they're just going about their business, suddenly found that their checking accounts, the money was gone, right? Like, And then they were being blamed as if, you know, wanting their checking account back was like a bailout or something like that, as if they had done something risky. And this is this whole frantic kind of thing over the weekend, and some people were acting tactically, and they were trying to figure out, you know, how to like, you know, fix the situation or whatever. Um, but I was like, how could this possibly have happened?

• 11:40Speaker 02

  You know, and I started like, looking at all of the numbers that I could find online. And just to summarize what I found, and I'll show you a zillion references on this because it's actually kind of crazy. Um, the central bank, meaning the Fed, the banks and the bank regulators have all known for at least the past year that hundreds of banks in the US are insolvent, meaning Uncle Sam Bankman-Fried, they don't have assets on hand on a mark-to-market basis to match their liabilities. You know, Uncle Sam Bankman-Fried is the best way of understanding this because Sam

• 12:20Speaker 02

  Bankman-Fried, whether he lied to himself, or he lied to others, or whatever complicated thing, remember he had this balance sheet that was this crazy balance sheet, which, you know, like in his head, it added up to more than what people were asking for, you know, their money out, right? And until the stress test actually came and people actually withdrew their money, neither he nor they knew how much money he actually had, because he wasn't just holding it on like a one-for-one basis. He was doing these crazy conversions, exposing everybody to market risk and so on and so forth, right? Essentially, he took people's trust, he took their deposits, he invested them in these, you know, shitcoins and they, you know, or spent it on something, whatever the heck

• 13:02Speaker 02

  he did, marked it as if it was still there. And, um, and then, but when they actually came for it, there was a huge hole, right? We now know that story. Okay. That is basically what has happened. And the funny thing is, you know, Amjad Masad and I, in the, uh, the fall of 2022, we were like, you know, that's kind of what fiat banking is also, because of fractional reserve and so on, if everybody actually asked for their money at the same time, they wouldn't be able to get it back. But the situation we've got now is so much worse than even fractional reserve. And what that is, is that the banks all did something very much like Sam Bankman-Fried. They took your deposits and they bought long-dated treasuries and other long-dated government

• 13:46Speaker 02

  bonds in 2021, essentially on the guidance of the federal government, or especially the Fed, really, that they were going to keep interest rates low for a long time. And then the Fed raised rates in 2022 in this sort of surprise, super-high hike, crushed the portfolios of every single entity that had trusted them, and stuck the banks with this giant surprise of this massive devaluation of bonds. And you can see, and I've found all these links where the bankers are basically panicking about this over 2022, and do you know what they come up with? They basically come up with an accounting trick, okay, called hold-to-maturity, I call

• 14:27Speaker 02

  it hide-to-maturity, where just like Sam Bankman-Fried, they book it as having not depreciated. "Oh, it's still worth what we paid for it." Phew, we're good, right? And this time bomb just grew larger and larger and larger and larger across the entire industry, with everybody obviously knowing about it. And again, whether they were lying to themselves or they're lying to others, what they didn't do is they didn't notify you, the depositor, that the money was gone. For not just SVB, but for like millions of depositors across the country and every bank that has US treasuries and long-dated government bonds. This is one of those things, you know what they're saying, like if you have a problem, if you owe the bank a billion dollars, you know, you have a problem, if you owe the bank

• 15:11Speaker 02

  a billion dollars, the bank has a problem, right? If you have one bank failure, that's a bank's problem. If you have hundreds of bank failures, that's a central bank's problem. Backing up for a second, what is a proposed action that people should take? Get your coins, get whatever you can into crypto, okay? I mean, I recommend Bitcoin at this point. It is going to be the lifeboat for, you know, for a number of different reasons. Of course, if you have other cryptocurrencies, whatever, you know, obviously you guys are Ethereum guys, I'm not, you know. Let's just say that all of the crypto tribalism is going to rise to like an ideological level that we've never seen in a year or two years or whenever this crisis is over. But in this crisis, there'll be three kinds of zones, fiat-only zones, where like, you know, crypto is banned or seized and only the government can have it.

• 15:56Speaker 02

  Because it's used to back the currency. Bitcoin only zones like maximalist zones. And then like, you know, crypto free zones where you can use whatever cryptocurrency you want. Okay. And one of the reasons is a lot of fiat banks are about to die. They all trusted the Fed at the same time. The centralization at the Fed, buying the same asset at the same time, getting it devalued by the same vendor, namely the Fed, in the same way, then all going bust at once. That's basically what's happening.

• 16:22Ryan Sean Adams?

  So Balaji, I just want to put kind of the timeline together and ask how you have been piecing this together. Right. So we had Silver, Silvergate Bank and Silicon Valley Bank. That that happens the weekend of the 11th and 12th. Let's call it, right? You put up the bit signal on March 16th. So that was Thursday after that weekend. And the bit bit signal is basically like you telling people that Bitcoin was going to go up. You said this, how do you ring the fire alarm on the internet? How do you show it's not a false alarm? I'm putting up the bit signal. $1 million in Bitcoin to alert us to the stealth financial crisis. $1,000 per tweet for the best 1,000. Reply with your charts, graphs, stats and memes.

• 17:06Ryan Sean Adams?

  So you're clearly propagating a message. One question I have for you is to some of the doubters, maybe like, let's just address this at the beginning. So this is previous to the bet. So some of the people are saying, some people are saying Balaji, that this tweet and also the bet itself is kind of like a promotion, basically advertising for your bags, which are crypto centric bags. How do you respond to that critique?

• 17:32Speaker 02

  The thing is, if I didn't hold crypto, they would say, oh, you don't actually have skin in the game. You're just doing it for attention and so on and so forth. Right? All I can say on that is hold dollars then. Okay. If you don't believe me, hold dollars and then see what happens. Right? If you don't believe me, buy, buy short dated treasuries like three months and just say Balaji is crazy. And, you know, whatever. Fine. Go ahead. But this is like, if you look at the full context of everything I've said, it's impossible to prove, quote, motivation or whatever. Okay. But if you look at all the tweets and everything I've ever said.

• 18:12Speaker 02

  This is something where this is like the crisis that Bitcoin was built for. Like Bitcoin was born out of crisis, the 2008 crisis, and this is the 2023 banking crisis.

• 18:22David Hoffman?

  And I remember, Balaji, that you were very, very early to the COVID crisis. And so I remember you were sounding the COVID alarm in January, February, and then COVID hit in March. And so you have a track record of doing this, at least once before that I can remember, and it being contrarian at the time. And while this is very different from COVID, I will have to say that you do have a good, you have one very strong mark of sounding an alarm in a prior crisis, at least a couple of months ahead of time. So this is not, this is not a new activity for you.

• 18:55Speaker 02

  Yeah. It's not, it's not fun. It's not fun, right? Because everybody thinks you're crazy, or you're doing it for attention. Because essentially, both the virus, well, first, let me talk about COVID for a second. Let me come back to that. People are saying it was a paranoid conspiracy theory to say that coronavirus whatever spread out of China. Obviously, you're racist, blah, blah, blah. But obviously, public health people have been thinking about pandemics for a while. And at the time, that was a good way of sort of framing that this was not like a threat that a crazy person was coming up with, but that public health people were. And I had sort of a mental model of the world, right? Like, imagine there's like a bunch of rubber bands between countries like Taiwan-China, right? Or India-Pakistan, or Bitcoin, Ethereum, right? There's, there's these various rubber bands between groups, right?

• 19:40Speaker 02

  Stress tensions and so on. Then we have like a shock to the system, where someone goes from zero to one, or one to zero. A lot of those, you know, rubber bands update and the system moves into a new confirmation. Okay? And so that's kind of how I was thinking about this. Like, I had like, you know, this sort of chessboard in my head. And I was like, okay, if this hits, how does that move this, this, this, this, this, and this? Right? Do you see what I'm saying? Okay.

• 20:04Ryan Sean Adams?

  And by the way, for, for listeners, this was a January 30th, 2020 tweet timestamp is what we're talking about. So well before the general US public became aware.

• 20:15Speaker 02

  Six weeks, yeah.

• 20:15Ryan Sean Adams?

  Six, I guess, six weeks or so.

• 20:16Speaker 02

  And, and I'll show you how, if you just scroll down a little bit, you'll see how I did it, right? So first is, I've been following, I was following the raw data. I had some background in, you know, like, before I got into crypto, I was actually, you know, basically doing computational genomics and statistics, and especially microbial genomics, right? So I had some background in the space. So I had some lenses with which I could read some of the technical literature. Viruses are exponential. And the thing about this, at the time, by the way, that's funny. It's like, you know, total confirmed cases outside was like less than a thousand or whatever, right? So it's like, look, it's so low. I'm like, yeah, you know, but is it like somebody knows viruses knows tech, it's about like

• 20:55Speaker 02

  rate of growth, you know? And this is like a pretty high rate of growth. Um, and the thing about this, by the way, and one thing I'll just back up for a second and say, as of January 2023, three years later, people believed two things about COVID. First, a novel virus out of China infected more than 700 million people worldwide, killing about 1% of them, and seriously sickening another tens of millions of people, causing significant upheaval by all kinds of governments and a huge tech shock. Right? On the other hand, they also think, yeah, it wasn't that big a deal. Life went on. Both of those things, I would say the combination of both those two facts is actually what I'd say the conventional

• 21:36Speaker 02

  wisdom is as of January 2023. Would you agree with that roughly? But the thing about that is, while I agree, life went on, and it certainly it wasn't like the end of life on earth or anything. And we're lucky that it wasn't like the Spanish flu or something. That was certainly not like if you had said, if I'd said in January, 700 million people will get infected, 7 million will die, but life will go on. Nobody would, that would be the weirdest projection ever. Okay. It would sound terrifying and preposterous. But then also, and this is important, the concept of normality of some kind being restored on the other side would have also seemed preposterous. That is a very non-obvious

• 22:19Speaker 02

  frame of mind, which is a frame of mind I'm in kind of now. Okay. We're basically in, and I'll get into details, we're basically in the fiat crisis. Okay, we're in the crisis where like all the centralization of fiat, all the opacity of fiat, all of the, you know, all the things that Satoshi talked about, all of that is now blowing up on people in a very tangible way and really it's kind of remarkable. And so now the thing is, we're going to have a wrenching transition to the crypto economy, where just like remote work kind of went like vertical because people just had to, right? A lot of fiat systems are going to break, potentially, over the next weeks and months and maybe years. And we're going to have to switch over to crypto systems. And

• 23:04Speaker 02

  it'll be a big pain, a huge pain, of which the single most important is the transition to Bitcoin as a global reserve currency. But there will be normality of some kind on the other side.

• 23:16Ryan Sean Adams?

  So Balaji, one difference between kind of the fire alarm you pulled around COVID and the fire alarm, the fiat crisis fire alarm that you're pulling now, is you are actually talking about numbers in a timeline, right? So you've got 90 days as a number, you've got a prediction or a bet now, as it's turned into, of $1 million in Bitcoin. And that is a fairly short duration timeline. So you must think that this is going to happen like all at once, using that phraseology. So suddenly now this is the all at once moment. And I'm wondering why you think that? Like, why? I mean, this is almost like hyper Bitcoinization or the inflation away of all fiat is sort of a long-term crypto prediction anyway.

• 24:00Ryan Sean Adams?

  That's what happens to fiat over 70 to 100-year time periods when, you know, nation-states go on the decline and a new monetary policy regime. But you're saying this is going to happen in 90 days, this is going to happen in fast motion. And by the way, it's happening now. And here's your tweet warning about it. So can you tell us why? Like, why do you feel confident enough to put numbers around this and timelines?

• 24:23Speaker 02

  So, you know, the exact state of the world in 90 days, I don't know, but I think it's going to be quite different than today. And the main thing I wanted to get people's... See, this is not really a bet on the price of Bitcoin, it's a bet on the devaluation of the dollar. This is the honky cruise hyperinflation table. First of all, hyperinflation is much more common than people think. And second, when it happens, it's much more rapid than people think. People basically lose faith in a currency and they go to a competing reserve currency. Okay. Now, historically, that has been something where they escaped their local currency for the US dollar. But until now, you see, the big difference versus 2008 is today, the US dollar is no longer too big to fail.

• 25:07Speaker 02

  There are two competitors to the dollar. There's a renminbi and there's bitcoin. And as I'll get to, what is currently happening is all, you know how people have said that the US is going to monetize the debt? You probably heard that before, right? Yeah. So everybody knew it was going to happen, but not exactly how. And it's happening now. When I was digging into the SVB situation, I was trying to be like, how could a $200 billion bank be insolvent? Take a look at this graph. This is not my graph. This is from FDIC. This is unrealized gains, losses on securities. Do you see the 2008, 2009 over on the left-hand side? Okay. And now look at the yawning losses that are there in 2022. Okay.

• 25:48Ryan Sean Adams?

  Right, this, I mean, this looks like similar to, I guess, the Sam Bankman-Fried FTX analogy of like, you have a balance sheet with a lot of trash on it and you have a market downturn and they've all lost like 80 to 90% of their value. And now what's propping up your assets? That's sort of what this graph looks like to me.

• 26:06Speaker 02

  And this is across not just one bank, it's all the mix. One way of thinking about it is, you know, sometimes people are in debt and then there's a balloon payment at the end and then they're done. They just can't pay it, right? They just don't have the money. This is, this is kind of like that. That's like, you know, the, one of the things that the financial system is set up to be opaque, right? It's set up to, like in 2008, you know, if, if, if the mortgage crisis was happening on Twitter, people would say, tell me you don't know what a CDO is without telling me you don't know what a CDO is. And the whole point is that nobody knows what a CDO is, including the guy who's selling it and the guy who's buying it. They've all fooled themselves in thinking they're so smart. And actually, the thing underlying is a house that sucks because nobody's paying the mortgage.

• 26:47Speaker 02

  And no amount of financial engineering can, can do anything other than hide that eventual mark to market on the thing with the guy who's paying zero money. Do you see what I'm saying? Right? And in the same way, what's happened today is all of this financial engineering has led to a house of cards where the money is gone, right? Underneath it, like the banks literally don't have, if you came to them, this gigantic hole on the right-hand side, if people came to them and actually asked for their dollars out, the banks would not be able to liquidate their assets to get their dollars out. Okay, and so for the whole year, they hid this, you know, with the right decoder lens from where we are now, three, four months later, you can see, huh, wait, it's not one

• 27:30Speaker 02

  bank, it's not SVB, it's a lot of banks, right? And but look at the thing at the end, right? It's like, you know, 423 billion during the first six months of the year grew larger, right? This time bomb was growing and the bank regulators were aware of it. And they weren't notifying you, the depositors, they were just thinking they could kick the can again somehow.

• 27:51Ryan Sean Adams?

  We all know as part of a fractional reserve system, if there is a run on the bank, there's not enough dollars in the bank account to meet the demands of that run on the bank. But this is somehow worse because we have these securities propping up the assets of the bank and of depositors' funds that have just lost massive amounts of value. And so if you mark them to market, we are much further underwater than just the typical fractional reserve banking system.

• 28:18Speaker 02

  You know, one of the things I learned in kind of tweeting about this is just like Bankman Fried had these weird self-deception tricks or taboos or whatever within the company that stop people from asking the right questions. All of these bankers, um, basically do not think of the Fed as an actor, right? And so they think of them as a referee and, um, so first let me explain what the reality of the situation is, and then let me explain what they think it is and why they're, they haven't told you about it. The reality of the situation is, while it's complicated, the Federal Reserve effectively gave guidance to banks to buy certain assets that it then massively depreciated all at once and crushed every single bank that trusted the Fed,

• 29:02Speaker 02

  their balance sheets all at once. And that's responsible for this huge devaluation here. And the thing is, though, that like a lot of finance guys, they think that it's like weird to blame the Fed. Okay, why do they think it's weird to blame the Fed? They think of the Fed as like a referee. You know how people used to say, oh, you can't blame the media. If you're a bad guy, the media will call you out. You should be ashamed of yourself.

• 29:28Ryan Sean Adams?

  Like as in a referee, as in neutral, kind of an arbiter of laws?

• 29:31Speaker 02

  Yes, as in neutral, right? Just like people used to think the media was like a neutral referee of just like the political system or whatever. It just calls balls and strikes. We have, you know, we don't have any opinions on anything, right? I mean, that's ludicrous today, right? You know, they're constantly attacking people. People thought that the Fed was like a neutral referee of the system and it's just like deliberation to figure out what the right rate to set is and beyond politics and so on and so forth, right? If you're a fund manager, you simultaneously think, okay, the Fed is all important. Powell is more powerful than the president. You know, we listen to everything the Fed says. Our algorithms trigger on their every word. Oh, they're so, so important. But then if somebody says, oh, this bank got decimated

• 30:16Speaker 02

  because the Fed hiked rates, they'll say, lol, what a loser. You know, look, you can't take everything the Fed says at their word. It's your responsibility to hedge. You know, it's not the Fed's, you know, the Fed just puts out guidance. You, you know, you just got to make your own book and so on and so forth. Okay. Now, well, think about that, right? That's two different things. It's first, the Fed is all powerful. And second, the Fed is never to be held responsible. See what I'm saying? Okay. And the reason that if you are a fund manager, you can't control the Fed, you just have to react to it. It's almost as if they're like setting the laws of the video game that you're playing. And so you can't be a wimp. You just have to win within the laws of the video game. Do you see what I'm saying? Okay. And people are like, you know what? Yeah, maybe. Once in a while, they'll complain about a call by the ref, but fundamentally, they think of the Fed as legitimate.

• 31:00Speaker 02

  How could they think any other way? You know what? You're not going to have somebody setting interest rates? Well, that would mean we can't help people. We can't have full employment. That would be terrible, right? Or where you're saying they should just publish an interest rate and stick to it? No, no, no. They need to have a data-dependent policy path, where they go and assimilate all the information from the world on the state of affairs, and they update the interest rate. But what that's like, by the way, and this is like a really fundamental root and branch critique, imagine steering a car by mail. Okay, you've got your car, all right? You drop a postcard out the window. Okay, you wait like, you know, a week for it to come back, and then you turn left or right. What's going to happen? You're going to crash, right?

• 31:41Speaker 02

  Because the time constant of steering is seconds, and this is like weeks, right? That's like what the Fed is, where it's getting in data that's this lagging data. Oh, inflation is up. That's a result of so many millions of people doing all these things. Okay, now let's change interest rates or whatever, and they're changing like a single parameter, okay? And it's a highly political process. So TLDR is, a lot of this stuff is actually intentionally meant to be complicated, but the simple version is the Fed bankrupted the banks, okay? It bankrupted its own banks.

• 32:11Ryan Sean Adams?

  At year end 2021, only four community banks had tangible equity capital ratios below 5%. That number increased to 333 at June 30 of 2022, indicating less ability to sustain economic shocks. Okay, there's some finance bro language there. Can you help us parse through what that actually means?

• 32:31Speaker 02

  Yeah, it basically means there are 333 banks where the money is gone.

• 32:37David Hoffman?

  And so I want to take a moment and like summarize everything here and everything. The reason why you're saying Uncle Sam Bankman-Fried is that, okay, so FTX insolvent did some funny accounting tricks to maintain pseudo-solvency, public solvency. And basically, Balaji, you're saying that that is now true for the entire banking, commercial banking system of the United States of America.

• 33:02Speaker 02

  And even more than that, because it's also true for all of these foreign banks. It's even bigger than that. Every foreign bank that bought US treasuries. And by the way, when I was saying this, people are like, "Oh, Balaji, you're so crazy, blah, blah, blah." But did you see what they just did with the swap lines? Okay, look at this.

• 33:19Ryan Sean Adams?

  So what are we looking at here? Breaking market news from the US Federal Reserve. This says, "The Fed and the central banks of the US, sorry, the United Kingdom, Canada, Japan, and European Central Bank and Switzerland announce a coordinated action to improve liquidity provision through the standing US dollar liquidity swap lines." Doing that on the weekend, it seems like the central bankers always do like really important things on the weekend, like when they're in crisis mode. And I guess that happened on a Sunday, Sunday the 19th. So what does this mean? What is this, these words around "improve liquidity provision through standing US dollar liquidity swap lines"? What is that?

• 33:58Speaker 02

  Again, the thing I want to, I want to stress over and over again is they will mock you and attack you for not knowing every piece of their lingo, because it's like, it's what camouflage is to like a venomous snake.

• 34:12Speaker 02

  Okay, the whole point is to sneak up on you, bite you, okay? And one way of thinking about it, by the camouflage of a snake, it's a good analogy, because the snake didn't design its camouflage, it was just evolutionary, okay? The finance guys, because the thing is, see, in our sector of the world, if you're investing, if you're doing, at least in the tech sector, if you're putting money into companies, it's so-called primary investment, and they're going and building a product and selling it, right? That's something where both parties, all parties can win, the customer, the company, the investor, and so on, okay? Finance is a fundamentally zero-sum world, often, where one party's gonna lose, okay? And they have evolved a bunch of camouflage tricks

• 34:54Speaker 02

  to hide what they're doing from themselves and from others. And the whole point, I mean, there's this saying in finance, "How are you gonna screw me?" Right? Everything is hidden in the fine print, and then it's like, "Ha, you signed that, but you didn't think of that." You know, the whole point is it's like adversarial, all right? And just to show you how like insane that gets, all right, you know, one of the things I...

• 35:19Speaker 02

  I found that the whole, you remember how people are like, oh, you know, you tech guys, you should have known that the bank was insolvent, it was in a public statement and so on and so forth. Remember how they were saying stuff like that, right? Well, it is something where the insolvency was intentionally hidden in a footnote. Evidence of deception, okay? Now, by the way, it wasn't just SVB that was deceiving. What happened was the Fed surprised the banks, okay, by giving them a bunch of assets and then or selling them a bunch of assets that they then surprised devalued. The panicking banks then decided to surprise the depositors by hiding their gigantic unrealized losses. And that is a time bomb that is about to blow up the entire Fed-centered economy.

• 36:04Speaker 02

  Okay? They're blanking out the stuff that they used to show to show their giant losses. And they just buried it in a footnote, okay? The fact that they were insolvent.

• 36:13Ryan Sean Adams?

  What are we looking at here? This is a SVB document?

• 36:16Speaker 02

  This is SVB's financials, okay? So, so the point is, look, you know, the EU makes every company put some stupid cookie disclosure on their website. But the regulator is allowing a $200 billion bank to bury its insolvency in a footnote.

• 36:36Speaker 02

  Okay? And let me explain, that's what I mean by like a poisonous snake's camouflage, right? The thing is, you paid for, you know, with your tax and so on, you paid for regulators to give you a high-trust banking system. What the hell are you paying the regulators for if they are literally covering up the insolvency of the bank? We're talking about something where 40,000 companies and all of their employees were banking at an insolvent bank and not notified about it by the regulator that they were paying to protect them. You see what I'm saying?

• 37:04Ryan Sean Adams?

  What are you alleging is the incentive here? Apology says-

• 37:07Speaker 02

  What am I alleging incentive?

• 37:07Ryan Sean Adams?

  Yeah, yeah, like, like the poisonous snake has an incentive, either, you know, defense or attack or something like this. What is the incentive of central banks and regulators? Why would they want to, to hide this within the system?

• 37:19Speaker 02

  Exactly. Well, so here's the thing. If the entire system is going bust, okay, and you have been handed a flaming bag of dog poop, which, you know, the only, the defense I can make is while certainly the mismanagement over the last few years has been historical- The debts of the US have been building up for a long time. So there's always incentive to kick the can, okay? Now the can can't be kicked. So they are just trying to hide it for as long as they can. Suddenly it blew up with SVB. If all the banks go bust, the regulator has a problem. So if they're going to go bust, the regulator needs to find a scapegoat. And the scapegoat is either the tech guy or the Trump guy or both. Or the people who are getting their money out or whatever.

• 37:59Speaker 02

  If it was discovered that the bank regulators in the central bank had caused a crisis and covered up the crisis, would that look good for them? No. So this chaos that's about to unfold, essentially what I was able to discover was that the devaluation of the dollar, the monetization of the debt that Dalio talked about, whether intentionally or emergently, they're doing it now. They're not calling it that. They're calling it bailouts of banks. But this is actually the, you know, messy devaluation of the dollar, where all the debts they couldn't print are printed at once. And if they thought that, and if they said that, because they've got this flaming bag of dog poop, how do they stick it with somebody without getting blamed? Right?

• 38:41Speaker 02

  If they just came up front and said, "We're not going to be able to make our bond payments. The US can't pay its debts. Therefore, we're just going to print monopoly money, wee, and your purchasing power goes away." Right? Then there would be a tension on what they were doing. And by the way, this is just the most extreme version of something that's always happened. Okay? Where often regulators cause a problem and then, you know, they, it blows up in public. And then what happens is more failure, more funding. Okay? Like every crisis powers them up because, let's say, for example, there's some drug company and it's got an issue. Right? A bad drug. Drug company goes to zero. FDA is brought in and they're spanked in Congress. "Oh, you did such a bad job." And you know what it ends with?

• 39:25Speaker 02

  Okay, how much budget do you need to make sure this doesn't happen again?

• 39:29Ryan Sean Adams?

  Even failure mode is success in that.

• 39:32Speaker 02

  More failure, more funding. Because people can't conceive an alternative to FDA.

• 39:39Speaker 02

  So it's failures, every, you know, it has an incentive to either cause or turn something into a crisis, because then it's a big deal, right? And, and again, this is something where, is it conscious? Sometimes it's like, oh, they'll exaggerate and they'll say, oh, you crypto guys are criminals. Like what Gensler is doing, that's conscious, right? He's making you guys out to be criminals so he can get more budget and power. But sometimes it's like, just the, you know, the emergent incentives where it's like, oh, if this thing blows up, well, we get more budget and, you know, like, well, I guess now we have the authority to go and regulate that thing that we screwed up. And the way of thinking about it that's outside the FDA or outside the Fed is, do you have an alternate regulator?

• 40:24Speaker 02

  Right? Don't you want a regulator which will tell you in a trustworthy way that your deposits are still there? Right? That's a blockchain.

• 40:33Ryan Sean Adams?

  Apology, before we get to kind of blockchain, because some of this has happened so fast for people, right? So like, I was just saying, like, it was a week and a half ago, and we first started seeing like Silvergate go under, and then the crisis with a Silicon Valley bank, and then just last weekend, so not, not the previous weekend, but one before, it seemed like, you know, the, the Fed, the US government, FDIC, came out and said, look, all depositors' funds are going to be made whole, we're going to, basically implicitly, we're going to stop the banking crisis here, no more bank runs. And then last week, we started to see, oh, okay, well, maybe this has spread to Europe and Credit Suisse, but it's just one bank, right? And it's like, you hear rumors, and you hear rumblings, and you hear all of these things.

• 41:17Ryan Sean Adams?

  And I think at every stage, the general public is like, okay, well, I don't understand finance, and I'm not surprised that bankers did banker things, and there's a few rogue actor bankers here and banks, and the Fed is taking care of that, FDIC is taking care of that, this is not going to spread any further. I think that's the, the feeling, the general feeling of, of the public right now. Why do you think this is more severe? Why, why do you think they can't just, just issue and say, all depositors' funds are going to be secured, FDIC will, will cover them, don't worry?

• 41:50Speaker 02

  So let me show you something. Ready? Put this up on screen. Jean-Claude Juncker, when it becomes serious, you have to lie. You know who this guy is?

• 41:57Ryan Sean Adams?

  I've never heard that name.

• 41:58Speaker 02

  Former head of the Eurozone.

• 42:01Speaker 02

  Okay, this is Central Banker and what he's basically saying is when the system is actually melting down, you have to give public statements saying everything's all right while you frantically, you know, what this is the equivalent of, okay, remember FTX is fine, assets are fine. Right, yes. Like, that is literally what is happening now. The series, the fact that the Federal Reserve has put out multiple statements over the last few weeks that are like, um, we're still solvent, it's still there, you know, etc., etc., like, everything is on fire and we're all gonna die. It's the closer translation of that. I mean, so the whole point is for them to spend whatever trust they have and hope you don't exit the system. So, March 12, 2023, they said, we're

• 42:45Speaker 02

  only gonna print 25 billion and it won't be necessary to draw on the funds. In four days, it was up to 2 trillion. And really, it's gonna be infinity, okay? So, I mean, it's funny, but it's also bananas, right? So, this is a new era, okay? This is the final era where they have found they can't hike rates anymore. They are going to, they, all people are looking for their money in the banks. And so, rather than those people coming up with, oh my god, the money is gone, they're printing tons of money to give it to these banks. And if, and the banks are taking it. And if you look at, um, the, the way they're doing it is this, is swap lines in the BTFP program. And Arthur Hayes has some good, if you, if you wanna know all the technical details of exactly how they're doing this shit, Arthur Hayes is the 150 IQ

• 43:28Speaker 02

  guy who can talk to you about it, okay? As I said, it's set up to be complicated and whatnot. And like, oh no, they're not actually printing money. Ha ha, you're so naive. But you know, the 50 IQ, 100 IQ, 150 IQ guy, right? Basically, gigantic amounts of new money is rushing in to, uh, because they believe there's gonna be a ton of bank runs, right? Um, and the reason is those, those bonds that they had in their portfolios that were marked down, um, well, the Fed said, you know what, we're gonna give you money. That will make them seem as if they're worth what they were worth. So if you lost 15 cents of the dollar, we're going to pretend that's like 100 cents on the dollar. It's just like the mortgage treasuries, they bond these, bought these assets at par, right? And again, it's all this obfuscation to cover for the fact that basically what Dalio talked about,

• 44:13Speaker 02

  the giant print that monetizes the debt, the digital devaluation of the dollar is here. This is like the final banking crisis.

• 44:19Ryan Sean Adams?

  So Balaji, here's the part that I think some people don't understand though, is like, so if the Fed intervenes and provides all of this confidence to the market and they, they play the act and they seem super confident, there's no problem here. Of course, all of the assets are backed. This is the, the US banking system, they're always backed in a very serious tone. And the market actually buys that. It might be a self fulfilling prophecy in that it stops the bank run. Now, one thing I, I read in Arthur Hayes article though, is that that won't stop the arbitrage opportunity of things like, like money markets, where if you have deposits in a bank and you're only receiving like, you know, a fraction of a percent of interest, you're going to want to go chase the higher interest payment on your dollars somewhere else.

• 45:04Ryan Sean Adams?

  And so you, there might be a bleed out of the banking system into like money market ETFs. And depositors aren't stupid over the long run. And of course they're not going to let the bank essentially make money on them. And so they're going to withdraw. Where's the withdrawal coming from? I suppose if, if the confidence is still there.

• 45:25Speaker 02

  What they are counting on is amidst all this chaos that you wire money from one bank to another. You wire money to all the big banks. Only if you turn into Bitcoin are you outside the system. What's happening is all of the small banks, all the tech banks, all the think different banks are getting wrecked. And the big guys are coming in as saviors with printed money from the Fed and ability from the Fed to just scoop up all the small banks. And the end state is in a panic, people are like, let me wire money to the saviors. Thank you, government, right? Which is both arsonist and firefighter. Okay? So they set all these small banks on fire by destroying all of their balance sheets by giving them this directive to buy these bonds that they devalued. Again, whether intentional or emergent behavior doesn't actually matter.

• 46:10Speaker 02

  You can describe it as if it was intentional, even if it's emergent, you know, like an ant colony. Every individual ant isn't like, you know, sketching out a blueprint, but they're responding to local incentives. Okay? So the, the net effect of this, right now, without the bit signal, is all these small banks go to zero. Your bank goes to zero. And you, in a panic, wire your money to a big bank. And that's a trap. Now you're like, I'm, I'm with the federal government now. I'm in the too big to fail bank. Woo! Crisis over. Thank you, Fed. Fed's a hero. They saved the day. Right? And now you're in some like, you know, 5%, you know, money market thing, or, or you're,

• 46:55Speaker 02

  you've locked it up in treasuries, or you're locked up just in a big bank. And here's the thing. Now, at the end, when all the small banks are dead, all the community banks are dead, all of the tech banks are dead, all of the crypto banks are dead. Okay? And you've got only the big banks at the end of the banking crisis. Do you know the other thing that they chose to kind of like, you know, despite all of this, you know, it's a very busy time for the Federal Reserve, but they managed to get out this press release. Did you see this?

• 47:21Ryan Sean Adams?

  This is a press release saying, "Federal Press, Federal Reserve announces July launch for the FedNow service," right? Which is their...

• 47:28Speaker 02

  Yeah, that's their CBDC. Okay? So, again, I'm not saying, I don't know exactly, it's very hard to say how intentional versus how emergent it is. But the plan, if you're described as a plan, looks something like this. Um, the, the US has debts it can't pay. Saddle all of the banks with these giant, um, you know, these, these giant unpaid, like uh, these giant liabilities. Have tons of them go bust. Come in swooping as a hero, printing the money so people are like, "Thank you, Fed. You got me my money back." And then also have them all centralized at the big banks in the process. And then amidst all the chaos, you've got like four banks in the US and like one bank in Canada, or whatever the number is in each place.

• 48:13Speaker 02

  And now you just roll out a CBDC, and now the banks that were too big to fail are too big to escape.

• 48:20Speaker 02

  Okay, because they won't allow interconvertibility into crypto. And all of the crazy China-style tracking can be applied. Moreover, everybody's probably going to be much poorer in 90 days after, I mean, to an extent that might be, you know, hard to describe, okay? But like if the the West actually does effectively default on the dollar. Um, and you know, all of this stuff which people have thought is worth a billion goes to zero, which is happening overnight, right? You saw, you know, First Republic, like Equity Zero, like you're taking a lot of billion-dollar hits very fast, right? A lot of people are much poorer than they thought, and that has huge ripple effects, right? House payments, all kinds of payments don't go through. Huge ripple effects with the economy that we're just going to see.

• 49:05Speaker 02

  So in an environment of all the small banks are dead, all the money is at big banks. Um, people are scared. The the CBDC has rolled out. And now you're locked in to a China-style system of massive centralization. And you, you know, it's too big to escape. Okay. And then they can do those things, you know, the things that are like incentives, like, oh, spend your money today or lose it. Have you seen stuff like that? For sure. Right? All the tracking and so on. Now, again, remember the 50 IQ, 100 IQ, 150 IQ thing? If we don't have a lens into all of the actors that set up the bomb like this, okay? But basically, we do know what the exit is.

• 49:47Speaker 02

  Amidst all of this chaos, with all of these wires flying around all of these banks, you can do something they didn't expect you to do. You know what that is? Yeah, you're saying buy crypto, buy Bitcoin. Buy Bitcoin. And the reason I say Bitcoin is, look, obviously, you know, I like you guys and I like it. But if there's one thing, you know, if you have some relative or you have some, you know, friend who doesn't know, they'll say, what kind of Bitcoin should I buy? Right? You know, you know, they, it just has name recognition. And in an emergency, people are, you're not asking people to do portfolio optimization. Do I think on the other side of this, I think Bitcoin is gold, and I think Ethereum is the financial system. I think that's probably right, because Ethereum can scale with, you know, lots of transactions. But, um, but I think also there's going to be jurisdictions that are so tired of finance

• 50:33Speaker 02

  that they will be like Bitcoin maximalist jurisdictions. And they will just not want, I mean, If everything goes to zero and Bitcoin is the only thing that doesn't go to zero, you'll have like a lot of people become essentially overnight converted to Bitcoin maximalism. And that's why I remember a year or two ago, I said Bitcoin maximalism is the most important ideology in the world that nobody knows about. Do you guys remember saying something like that? Right? Like, you guys, you're gonna see what I mean. Okay? Because Bitcoin has the advantage of being, I mean, it's obviously complicated with the cryptography and so on. But now it's relatively simple. Okay? And in a time of crisis, people need something simple that they can all rally behind. That's why the bit signal, that one thing goes vertical, everybody in the space values it. We get to the lifeboat. Okay?

• 51:18Speaker 02

  And the thing about it, and here's the important thing. The big difference with Bitcoin, as opposed to every single other action within the fiat system, is it's the thing that the Fed is not directly or indirectly a system administrator over.

• 51:31Speaker 02

  Okay, who has root? You see what I'm saying? Like, any entry in the Bank of Japan, if the Fed wants, they can get the Bank of Japan to just delete that, freeze that account, stop it, seize it, etc. They've got root over this. You know, like in The Matrix, right? The guy's got the root system administrator, they've got root. So that entire US financial system, they have root access. Any stock, they can freeze. They did to the truckers, you know, the Canadian truckers. They did to the Russians, right? Anything where you are on their server and they have root, okay? They can monkey with it. And so from their perspective, you know what? Yeah, this is a huge mess with the money flying around and whatnot. But at the end of the day, it's all just gonna end up back at banks that they control. And so who cares? You know, it'll be like a time of chaos. But then we'll roll out the Fed now and we'll make sure that never happens again.

• 52:16Speaker 02

  We'll have total control over everything. Okay? I don't know exactly what they're thinking, but that's the result. Unless you get to Bitcoin.

• 52:24Ryan Sean Adams?

  So your theory...

• 52:25Speaker 02

  That is something they don't control.

• 52:26Ryan Sean Adams?

  Balaji, to walk this through, your theory is all of the banks are underwater by a lot. And the bankers are lying about it effectively. And

• 52:36Speaker 02

  As Jean-Claude Juncker said, when it gets very serious, you have to lie. As bankers lied in 2008.

• 52:41Ryan Sean Adams?

  And you think that

• 52:42Speaker 02

  The reason is because people are forgotten how much they lied.

• 52:45Ryan Sean Adams?

  And bank runs are going to continue and they're going to be faster than ever because we are in this new digital era. And so we've seen First Republic, SVB, just like kind of dropped to zero overnight. And you think that anywhere that someone flees with their money, if you go from small regional community bank to larger US bank, it doesn't matter because you're still effectively inside of the Fed's system. You're in their prison and so they're content to let you move from, you know, some small community bank to JP Morgan, to a money market. They don't really care because they have root access on all of these systems. And you're saying you're making the case that the dollar, as a result of all of this money printing,

• 53:30Ryan Sean Adams?

  that is happening through this new form of quantitative easing, which is not called quantitative easing. It's something else. But during the bank run, all of this money gets printed effectively. And that sends the dollar on a hyperinflation kind of track against all commodities, maybe. But more specifically Bitcoin, because people are going to flee the banking system. And they're going to park their assets into the only non-root access Fed asset class that we have, which is crypto. And predominantly Bitcoin, because that has kind of the mind space for this narrative use case anyway. Is this the summary of the thesis?

• 54:09Speaker 02

  Yes, there's one thing I'd add, though, which is, it's pretty good. One thing I've had is I expect wage and price controls and so on. So prices on anything that the Fed has, like bread or whatever, they won't allow the price of bread to go to some crazy level. They'll impose price controls on it. So instead you just get shortages or the price of, this is what happened to Soviet Union. The price was low, but the good just wasn't there. Okay. So you, you know, anything that, anything where they can kind of hide the scarcity of it. Right. And blame it on the store or whatever. Remember they were trying to say, oh, my God, you greedy corporations for raising prices. Remember they were doing that? Okay. The only signal, the one honest signal in the world that they can't fully fake is basically

• 54:53Speaker 02

  the desire to exit from the system. That's literally what this is. Can enough people get to the Bitcoin exit in time before they close the exits? So you are predicting they will close the exits then to Bitcoin as well? Because they shut down Silvergate. They shut down, you know, so Silvergate, SVB, First Republic, um, gosh, what's the signature? Signature was murdered. It wasn't even, right? So it's like fog of war, as Nick Carter talked about, right? Fog of war, banks are dying, boom, kill this one, right? And these, some of these banks died by bank runs that the Fed itself caused. Some of them were just pulled from licenses, but you just have it happen all at the same time. So it's chaos and people can't figure it out when they're outside.

• 55:36Speaker 02

  Okay. You know, if they're bailing out all of the US banks and all of the foreign banks who are connected to the Federal Reserve system at the same time, it's clearly a banking crisis, right? Hopefully, I mean, that people are no longer denying that. That's a banking crisis. And what is the effect of that banking crisis? Well, there's basically two possible outcomes. The first is everybody trusts the banks and at the end of the day, they wire it to the banks. What's the name of this podcast?

• 56:07Speaker 02

  You know it, Bankless. Bankless. And the literal nature of that, I think, is going to actually surprise even us. Okay. Because a lot of fiat banks will either go to zero or will become like Venus flytraps. And if you are, if you put, now, you may need some fiat to pay the bills. I recognize that. Okay. Because who knows exactly when and how all this stuff comes about? All right. I totally recognize that. But having at least some of your, like a good chunk of your net worth, whatever that means to you, in Bitcoin, held locally, you will

• 56:48Speaker 02

  have the strongest technological and social defense on it worldwide. Because both matter. And you know why the social defense matters?

• 56:57Ryan Sean Adams?

  What do you mean by social defense, by the way?

• 56:59Speaker 02

  Yeah, that's very important. So technological defense is encryption, right? Social defense is, is your jurisdiction going to allow you to hold Bitcoin?

• 57:07Ryan Sean Adams?

  Right. So there was in the 1930s, an executive order 6102, which was effectively a gold ban on US citizens' private ownership, right? That's what you mean by, you know, social guarantees. The holders of gold were called things like hoarders, for example, that it was just socially uncooperative and socially unproductive and like evil, maybe, for people to hoard away and store their wealth, to exit the system, if you will, and to have gold bars around your house.

• 57:39Ryan Sean Adams?

  You know, we don't have to talk about the US if you don't want to, but could you imagine this sort of scenario playing out in jurisdictions across the world?

• 57:48Speaker 02

  Well, let's just say this, okay? In the event, so right now, what we're on pace for is before the fire alarm, before ringing the fire alarm, we were on pace for dollar holders becoming bag holders, okay? A stealth digital dollar devaluation masked as bailouts? Whether, again, whether it's intentional or emergent, doesn't matter. But essentially, you would get all this printed money in your fright, you'd run to the big banks, you'd wire all the money there, you'd be locked in and centralized, and it'd be this CBDC issued with this currency that was worthless against bread or whatever. Or the prices were kept low, but the bread wasn't there. So either it's hyper, you know, serious inflation or shortages.

• 58:33Speaker 02

  And by the way, one thing to keep in mind, this is a very important thing. People are like, well, come on, dude, like 2008, it was bad, but it was the end of the world, blah, blah, right? Well, the thing is, people know that the American taxpayer bailed out the banks, right? But what they don't know is actually the world bailed out America. You know why? The US exported its inflation. Okay, and so the thing is, when you can, if you can, there's two ways of robbing somebody. The first way of robbing them is gun to their face, they know they're being robbed and so on. Okay, the second way, which is much more effective, is silent robbery, where you're even telling them, you're doing them a favor or something like this, Egyptians have tasted the bread of liberty, right? People literally set themselves on fire because food prices were so high.

• 59:17Speaker 02

  Okay, you know who it was the end of the world for? All of those previously stable countries in like Libya, Tunisia, and so on, that were just basically set on fire by inflation. Okay, in the early 2000s, the Arab Spring wasn't just some, that was just absolute pandemonium and chaos caused by essentially, okay, those people get to pay for the financial crisis. But it was so complicated and the, it was so indirect that everybody can deny that that's actually what happened. Okay.

• 59:49Speaker 02

  Because think about how many transactions are, it's not on a blockchain, you can't look at it, you can't prove that that happened exactly in that way, you can point at some correlational numbers and so on, but you can look at food prices spike after this printing, okay? And you can ask, okay, where did the inflation go? It got shunted. And before 2008, okay, this is the key chart, before 2008, Republicans and Democrats were roughly equal. Okay, the real GDP, they're roughly equally matched. Afterwards, what happens?

• 1:00:18Ryan Sean Adams?

  There's a shift.

• 1:00:18Speaker 02

  Somehow, all the Democrats become much richer on average than all the Republican districts. So Republicans were taxed by inflation to pay for the financial crisis. So, cantaloupe effect is, who gets the printed money first wins? In 2008, the Democrats effectively taxed the Republicans and the foreign dollar holders to pay for the bailout. That's fundamentally what happened. Okay? And the foreign dollar holders, they got, you know, either directly or indirectly, they had riots and chaos in the Arab Spring, and the domestic ones were impoverished. So it is not that 2008 just was okay, it's that it was shunted, the cost of that was

• 1:01:02Speaker 02

  shunted to the invisible. Does that make sense? Right? Basically, in a sense, the most powerless person is the one without a voice, who cannot complain or understand what is happening to them.

• 1:01:15David Hoffman?

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• 1:01:56David Hoffman?

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• 1:02:41David Hoffman?

  and also manage your NFT sale listings from inside the wallet. Phantom is, of course, a multi-chain wallet, but it makes chain management easy, displaying your transactions in a human-readable format with automatic warnings for malicious transactions or phishing websites. Phantom has already saved over 20,000 users from getting scammed or hacked. So get on the Phantom waitlist and be one of the first to access the multi-chain beta. There's a link in the show notes, or you can go to phantom.app waitlist to get access in late February. Hey Bankless Nation! If you're listening to this, it's because you're on the free Bankless RSS feed. Did you know that there's an ad-free version of Bankless that comes with the Bankless Premium subscription? No ads, just straight to the content. But that's just one of many things that a premium subscription gets you.

• 1:03:23David Hoffman?

  There's also the Token Report, a monthly bullish, bearish, neutral report on the hottest tokens of the month. And the regular updates from the Token Report go into the Token Bible, your first stop shop for every token worth investigating in crypto. Bankless Premium also gets you a 30% discount to the Permissionless Conference, which means it basically just pays for itself. There's also the Airdrop Guide to make sure you don't miss a drop in 2023. But really, the best part about Bankless Premium is hanging out with me, Ryan, and the rest of the Bankless team in the Inner Circle Discord, only for Premium members. Want the alpha? Check out Ben the Analyst's DGEN pit, where you can ask him questions about the Token Report. Got a question? I've got my own Q&A room for any questions that you might have.

• 1:04:04David Hoffman?

  At Bankless, we have huge things planned for 2023, including a new website with login with your Ethereum address capabilities, and we're super excited to ship what we are calling Bankless 2.0 soon TM. So if you want extra help exploring the frontier, subscribe to Bankless Premium. It's under 50 cents a day and provides a wealth of knowledge and support on your journey west. I'll see you in the Discord.

• 1:04:25Ryan Sean Adams?

  We're looking at the visualizing the purchasing power of the dollar of the last century. So we're looking at a steep decline down from 1917 until 2019.

• 1:04:38Speaker 02

  This is silent theft.

• 1:04:41Speaker 02

  Okay? It is framed as if it's good for you to take away all of your money because, oh, a little bit of inflation is good. Okay? And fundamentally, by the way, this is where Bitcoin rejects this foundational concept. That's to say, the traditional macroeconomics view is, yeah, hyperinflation is bad, but deflation is also bad. We wouldn't want prices to go down. We want a little mild inflation, 2% target or whatever each year, right? And whereas the Bitcoin view is, hyperinflation is of course a catastrophe, but inflation is also just a slow motion catastrophe. Deflation and even hyperdeflation are good if they're caused by technology. Meaning, for example, with Moore's Law, the price of a transistor...

• 1:05:27Speaker 02

  I mean, it's not exactly this transistor density doubles every 18 months. That's a technical difference, but let's just say the price of computing drops in half every 18 months as an approximate version, right? That's hyper deflation. The cost of something is dropping rapidly. And the traditional macro theory would say when deflation happens, people hoard, they don't buy because of price, right? Except with hyper deflation of computers, even though they keep getting cheaper very fast, we buy a lot of them. It's a crucial part of the modern world, right? So the macroeconomic theory that hyper deflation is bad, I didn't even think hyper deflation exists, by the way, but the macroeconomic theory of deflation and hyper deflation being bad is not actually with the reality. The reality is when you use technology to reduce the cost of something that's actually good. Okay?

• 1:06:10Speaker 02

  This fundamental thing is that, you know, one thing about it is American Keynesianism is bad, just like Soviet economics was bad. It's just slightly less bad, but we don't realize that it's actually also bad. Do you see what I'm saying? It's also fake and what have you. It's, go ahead.

• 1:06:29David Hoffman?

  It's a lesser of two evils, right? And the way that I think that what you're saying, Balaji, is like the Bitcoin meme between Ethereum and why you're saying like, oh, I like you guys is because like, obviously me and Ryan are known to be Ethereum leaning, but I've always been of the mindset that it's Bitcoin during times of war and Ethereum during times of peace. And I think the crisis that you are suggesting is that we are in wartime right now. This is, this is a crisis moment where there is a flight. And so this is not a time to be thinking about innovation and layer twos. This is a time to be thinking about safety, simplicity, redundancy, because this is a crisis moment.

• 1:07:07Speaker 02

  That's exactly right. That is exactly right, David. And, you know, that's why I tweeted something like, look, I'm not a Bitcoin maximalist, but we are all Bitcoin maximalist now. Like, you know, you know, in Indian mythology, like, you know, the third eye, right? Like, imagine like the third laser eye, you know, kind of opening, you know? That's literally what I'm talking about, okay? We are truly in wartime mode and there's a digital fire burning that not everybody can see yet. Right. That's why I put up the fire alarm. Okay. When I did that, people are still watching Tik Tok or whatever. If you go back and look at the tweets around that time. And now the entire world was talking about, wait, could the dollar hyperinflate against? They started to actually, you know, whether they yelled at me or not. Okay.

• 1:07:50Speaker 02

  I, before I rang the fire alarm, and by the way, I did it with a bit signal first before taking the bet. The bet was just got even more people's attention because very specific kind of thing, right? Bit Signal got a lot of attention in its own right. The point was not to get attention for its own sake. The point was to get attention to get to the lifeboat. Because the final digital devaluation of the dollar is coming. And did I show you the chart of the hyperinflations? How, how quickly that can happen? Right? And we, we just went through a bunch of graphs. We're like First Republic, which went to zero like this, right? Signature to zero. They, they just shut it down like over a weekend. Um, the, the bank printing went to $150 billion, you know, in, in a few days, like, like over the weekend. And David, I'm so glad that you get that, right?

• 1:08:34Speaker 02

  That in wartime Bitcoin, because Bitcoin will be protected by enough governments. Bitcoin is well understood and that will be a fundamental cleavage in the world, which is, um, it's going to be. Are they like, uh, you know atheist, monotheist, polytheist, right? You know, the concept. Okay. So in, in the network state book, I have this concept of God state and network. Okay. And you remember we were talking about that, you know? And, and the question is, what is your mental model of world is the most powerful force? Is it almighty God? Is it the US military, which is, you know, the state, right? Or the Chinese military? Or is it encryption? Right? God, state, network. And then from that, you can, you can actually have, obviously you have combinations and stuff. I talked about that in the book.

• 1:09:18Speaker 02

  But from that, you could have like an atheist, monotheist, polytheist. So for example, on the God Leviathan, right? Atheist doesn't believe in God. The monotheist is like Christian, Muslim, you know, Jewish, et cetera. The polytheist is like a Hindu, believes in multiple gods. Right? Okay. Now with the state, you have the atheist doesn't believe in state. They're like an anarchist. Okay. Um, monotheist, mono statist, that's like a, an advocate for empire, like a Chinese nationalist or, you know, like a dollar nationalist. That's what's gonna, I think, gonna come.

• 1:09:48Speaker 02

  Um, and then, um, the third is you have, um,

• 1:09:53Speaker 02

  You have a poly status, like a digital nomad. They hop between states. Okay. And then with coins, you have a no coiner. Okay. Like fiat only. Okay. They hate coins. Okay. A mono coiner, like a maximalist, Bitcoin maximalist. And then you have a poly coiner, which is me in normal times. Okay. But in wartime, we have to just focus all of our energy behind something. And it's not a portfolio strategy thing. It is, it's not even, and this is very important. It's like, people just don't get it yet. This is not the make money time because everybody's going to be a lot poorer soon, unfortunately. Okay. Um, the, the actual devaluation of the dollar means the entire party that we lived in were things we were all much richer than we think.

• 1:10:38Speaker 02

  Right. That's about to come to an end. And exactly how much poorer we are, I don't know. But like, you know, America is a new Argentina is not a bad mental model, in my view. Right. Joe, do you know how, do you know what Argentina was? Or I mean, it obviously still exists, but the rich country that became poor?

• 1:10:55David Hoffman?

  Yeah. The Argentine agricultural industry is amazing, but then just corruption set in, government mismanagement of money at all. Just it broke an entire, what was once a very rich country and it just hyperinflation and government corruption just broke it all.

• 1:11:11Speaker 02

  If you're really, really, really, really bad at capital allocation, a rich country will become poor.

• 1:11:16David Hoffman?

  You're saying the time has come where like we kicked the can down the road, but then it fell off the cliff.

• 1:11:21Speaker 02

  Exactly.

• 1:11:22David Hoffman?

  The sidewalk ends here.

• 1:11:24Speaker 02

  Bankruptcy, bankruptcy happens gradually and then suddenly.

• 1:11:27David Hoffman?

  Mm hmm.

• 1:11:28Speaker 02

  And so now the question is, the dollar holder is the bag holder. Right. At the end of the day, now the fire alarm has been run. It used to, it would have been without the fire alarm.

• 1:11:39Speaker 02

  Everybody would have just been hit by this digital Pearl Harbor. Right. Because the whole thing, you know, like FTX, assets are fine. Don't worry, et cetera, et cetera. Boom, Venus flytrap, you're done. Right. Because you, you didn't get your money out in time. Right. So Uncle Sam Bankman Freed is saying assets are fine, et cetera. And if you have, and by the, it's not just a dollar, by the way, it's basically any fiat currency that is controlled by the US. Or really by China. Okay. Cause that's the other sector. I'll come to China. Right? Any fiat currency, if you saw that thing where it's like, I mean, I'll clarify because I think there are like the Saudis or there's there are countries that have fiat currencies that the US does not control. Okay.

• 1:12:23Speaker 02

  Um, India and whatnot. Those may, um, those will probably, in my view, after this crisis, eventually be gold or digital gold backed. Okay. So that combination of gold plus digital gold. Gold will be like a state to state thing where, you know, like states will be able to trade that amongst themselves and it'll be very ritualized and infrequent. Okay.

• 1:12:45Speaker 02

  But it'll happen. But then digital gold will become important. And so literally you'll need gold and or digital gold to back your currency. It will kind of go back to the 19th century after this fiat crisis. Uh, and all the stuff that we've talked about kind of in crypto, it'll just like happen very, very fast. A particularly extreme version of when I talk about like absolutely insane inability to allocate resources is, um, is this. 20 years to build a bathroom. They held a ribbon cutting ceremony in a press conference and the photo just tells it all. That's a California state senator and a bunch of people there

• 1:13:26Speaker 02

  with a press conference, cutting a toilet paper to open a single stall bathroom.

• 1:13:32David Hoffman?

  Well, Audrey, do you, um, subscribe to the whole fourth turning idea?

• 1:13:37Speaker 02

  Yes.

• 1:13:38David Hoffman?

  Yeah, this is, this is just kind of feels very fourth turning.

• 1:13:42Speaker 02

  It's very fourth turning.

• 1:13:43David Hoffman?

  Well, so the idea of the fourth turning is that there's like this four cycles of generations and they all relate to each other. But the gist of it, to put it very, very reductively is like the whole meme of, um, good times make weak men and weak men make bad times. Uh, and I think the point that you're trying to make with a bunch of just of our leaders, our, our government leaders who are mocking to cut toilet paper with their fingers to announce the launch of a single stall public bathroom is a bunch of perhaps weak men who are about to create some bad times because we are misallocating our funds. Uh, and then the downstream net effect of this is that we, you know, make bad financial capital allocation.

• 1:14:23David Hoffman?

  Choices, but then we try and cover it up because we are weak men not taking responsibility. And we can do that for so only so long. And this is also highly actually related to Ray Dalio's whole entire idea of macro power cycles. And so a lot of this is all kind of like lining up. And I definitely see the point. And this, all of this is what you're saying is like, like you said at the beginning, this isn't necessarily your bet, which is how this whole thing got started. Your bet that Bitcoin hits $1 million inside of 90 days, isn't a bet about Bitcoin. It's a bet about the devaluation of the dollar.

• 1:15:03Speaker 02

  Yes.

• 1:15:03David Hoffman?

  And also you said at the very beginning is like, there's only two real banks. There's the Federal Reserve and there's Bitcoin.

• 1:15:09Speaker 02

  That's right.

• 1:15:09David Hoffman?

  And I actually also 100% take your point that like-

• 1:15:12Speaker 02

  That's such a good quote. That's great. Great. Do you trust-

• 1:15:15David Hoffman?

  And they also take the point that just like, it's not about Ethereum and all of its smart contracts or all that, all that cool stuff. It's all about just like, people are going to run and they're going to flee and they're not going to think too critically about where they're going. They're going to see collapsing banks. And this is a function of your average Joe or your average money manager and like, oh, banks are collapsing and I kind of see the devaluation of the dollar. What is my inert spinal reflex? Bitcoin. It's Bitcoin. That's my spinal reflex. That's where I'm going to run to. And I think that's really the punchline that you're, you're kind of like leading up to, right?

• 1:15:51Speaker 02

  That's exactly right. That's exactly right. It is the shelling point, right? You know, basically, do you know the concept of the shelling point? It's like coordinating without coordinating, right?

• 1:15:58David Hoffman?

  Right. Yep.

• 1:15:59Speaker 02

  For example, if, right? So you tell people, hey, meet me in New York City, right? And there's various shelling points people can come up with, but most, many people will say, okay, I'll meet in front of the Empire State Building. Because Statue of Liberty, they might say, but that's like kind of an islandish thing, or you might say the clock in Times Square.

• 1:16:18David Hoffman?

  I was going to say the Times Square. Yeah.

• 1:16:20Speaker 02

  Yeah, that's right. So it's not a perfect example, but it is the concept, or let's say you need to meet in London. Where's it going to be? Big Ben. Right? So that's a better example. San Francisco will be Golden Gate Bridge. Right? That's like the iconic landmark, you know, right? So the shelling point is how people coordinate without coordinating based on their prior information. And that's what Bitcoin is, right? It is. It is basically the thing that everybody in our space respects. Every crypto exchange supports. It has social defense. It has, you know, I'm not saying, I'm not saying we will win. There's going to be some serious attacks, but I'm saying we might be able to win.

• 1:17:01Speaker 02

  Right? The question is whether the currency of the people, by the people, for the people will not perish from this earth. And I know that sounds crazy right now. Okay. But that's what this one is about. Because the thing about Bitcoin is it can't be seized with the key press. Right? Okay. It means that all of that stealth seizure that was happening there. You know, that's just like hitting buttons on a key and, you know, you know, okay, there's a billion dollars here. All of that can't happen anymore because it's outside the system. It's escaped the system. It's literally exited the matrix, right? And then some interesting things are going to happen. And so people need to sort of be just locked on philosophically.

• 1:17:46Speaker 02

  I mean, the fun, the interesting about this, I was going to write an article. Actually, I'm in the middle of writing it, which is that Bitcoin maximalists are best positioned like mentally for what's about to happen in my view. And it's going to be fast even for them. Okay. Hyper Bitcoinization refers to not simply the, it is the collapse of all fiat currencies against Bitcoin. Okay. It is a gigantic global redistribution of wealth in a sense. But it's basically like all of the bills of all of the people that have run Keynesian macroeconomics. Because they kicked the can, kicked the can, kicked the can, they didn't have, you know, at least the British, they gradually handed it over to the next people, right?

• 1:18:31Speaker 02

  They gradually handed it over to the Americans. But

• 1:18:36Speaker 02

  The internet is what comes, the internet is the next America.

• 1:18:39David Hoffman?

  I would like to see how this maps into your, your understanding. And so this is a Martin Koppelman saying, detect the pattern. And we've got a bunch of two different kinds of banks, United States banks and Chinese banks. All the Chinese banks are up into the right. All the American banks are down into the, down into the right. How does this map into you, to what you're talking about here?

• 1:19:01Speaker 02

  So some people are probably moving deposits. See, what the Fed has now signaled is that and actually, best I can show, do you see Moody? Moody has downgraded the entire US banking system. Okay. The banking system is negative. Okay. You know how like San Francisco, it's, remember I used to say like the ascending world and not used to say, still say, it's not about first world, the third world. It's the ascending world and the descending world. Right? You know, and if you've been to San Francisco, it's not an ascending world place. It's a descending world place. It's a, you know, there's, it's poop in the streets and needles and it's like worse than it was 10, 20 years ago. Whereas India is ascending world. Right? The US banking system outlook is negative. Here's the thing. Powell has

• 1:19:43Speaker 02

  turned America into Argentina. The series of bank runs and currency crises and printing and so on, that's about to begin means you will obviously have to have some money in the US banking system to pay your bills for, you know, whatever, so long as this crisis goes on. Okay. However, people are going to learn that you cannot trust the state. You can't trust the US state. It's like a South American, you know, corrupt government, but, but at massive scale. Right? So a ton of people are going to lose faith in the centralized state all at once when the money is gone. And if you look at the, the other tweet I sent, many fiat banks are dead. Many more are going to die all because of the Fed. Cause Powell ain't Satoshi. And the US is run by heirs who wrecked institutions they

• 1:20:28Speaker 02

  inherited, including the accounts of dollar holders. And after the Fed kills its own banks, will you want your money in a US bank? An assistant with insane bank runs where regulators deceive depositors? Powell made America Argentina.

• 1:20:42Speaker 02

  So the internet is a new America. All the next banks are crypto. Where one BTC equals one BTC, the new reserve currency of the world.

• 1:20:49Ryan Sean Adams?

  What's hard to believe about this, though, apology is like, this is, uh, this is quite the statement that it happens now and that it happens so fast.

• 1:20:57Speaker 02

  Yep.

• 1:20:58Ryan Sean Adams?

  Like, that's the part I can't wrap my head around. I mean, obviously, from the inception of Bankless and a lot of people are in this crypto journey because we see what's going on in the background. But the idea that all of this could happen over the next 90 days, that's the part that's boggling to me. Like, I always expected this to be sort of a decades-long play here. And now, but you're saying it's here. And like, what, what is your certainty that this is the fire alarm that this is actually happening now? Like, would you give, is it, it can't be 100% confidence. Is it in the, in the 90% zone?

• 1:21:33Speaker 02

  I don't know, but I'm going to show you just, just to read, you know, a bunch of digital graphs. Okay. So here's with very relatively little forewarning. Okay. There is some warning, and if you go back to December 2022, they're like, you know, banks are going back to the discount window again. It's not something they were doing for a while. And it's because the ones that had bought these bonds or whatever were like, ah, I need some money. You guys crush me, you know, can you give me some money? Or, you know, I don't know what all the reasons were, right? But, um, here's another one where you had some warning and then it's digital, right? Okay. Here's another. Yeah, you had some worrying, there's decline, and then it's digital at the end. You see what I'm saying? Right?

• 1:22:17Ryan Sean Adams?

  By, by digital, you mean like, it's gone and.

• 1:22:20Speaker 02

  It's gone. It's analog up until the end, and then you enter the digital age, digital death. Right? It's continuous and it's discrete. It's an analog curve and then just sudden death. It's not like a gradual decline all the way to the end. Okay. You see my, you see my point on these? These, this is like, these are not, there's not graphs I'm making up.

• 1:22:40Ryan Sean Adams?

  I see it can happen. It's just so hard to fathom that it happens to the Fed, that it happens to the dollar, that it happens to the United States of America.

• 1:22:51Speaker 02

  I know.

• 1:22:53David Hoffman?

  Well, I think really the point here is that this has been the the long term vision of this has been predicted by the Bitcoiners.

• 1:23:01David Hoffman?

  And I think but even Balaji is saying that like the Bitcoin is happening so fast, it's going to actually boggle the Bitcoiners minds. And like, of course, like, humans aren't supposed to, we're not really used to being able to think in these terms. Humans don't think in exponential terms. And so to to think that if this idea about that Balaji is presenting here is correct. If that's true, like, we are about to enter a phase change that is also accelerated by technology. Like, we're already watching that with the bank runs. And so it's not only not only is it one of these times where like decades happens inside of weeks, but we've also never had one of those moments of history. Where decade a decade happens in weeks with all of the technology that we have.

• 1:23:43Speaker 02

  Yeah, so it's this is like World War One or something like that. When you people were entering World War One, they were starting it. First of all, by the way, let me show you that there is some forewarning. Okay, so take a look at the next link I sent you. So since inception, the US dollar, the smart money has been voting against the dollar and entering Bitcoin. This has been a joke chart, but it's actually a really important chart. You have had forewarning that the dollar is going to zero against Bitcoin.

• 1:24:13Speaker 02

  For 13 years, it's actually just like some of those other charts where it's like continuous, you know, and then it was discrete.

• 1:24:20Ryan Sean Adams?

  I think part of the troubling thing here is like if what you're saying is correct, though, right? So Bitcoin appreciates, but like, isn't that the end of? The United States? I mean, if if the dollar hyperinflates, we're in for real bad times. In the US, and I guess I might say Western liberal democracies as a whole. And so that is hard medicine to swallow as well, if that's what you're prescribing.

• 1:24:48Speaker 02

  I know. So here's the thing. So again, I'm not sure what to say, because the problem is. If I tell you what my world model is.

• 1:24:58Speaker 02

  So the thing is, I, you know, there's people who are like, oh, no, you can't ever panic people. I'm like, look, I'm not, I never actually call for quote panic. I, what I call for is understanding the severity of the situation and taking um calm, conscious steps to ensure yourself against it. Okay. You know, I actually did a good job. I'm very glad that Dalio published his book, right? Principles. Do you remember this came out last year?

• 1:25:28Ryan Sean Adams?

  Yeah, it was great.

• 1:25:29Speaker 02

  Right? So big devaluations are abrupt and episodic rather than evolutionary. The six major currency transitions that have happened before have just been like, once the alternative appears, the old one just kind of disappears. And we've kind of felt that the US has been running on reruns, right? Marvel movies over and over again. We've got 70 year old Fed chair and Trump and Biden and so on. Where people are still like, we're fine, the communist Chinese, you know, like they're still like in this kind of 1980s Cold War. Even, um, and you know, I'm just kind of make, I have nothing against southerners. I, you know, I like that, but I'm just saying like, or it's like, oh my God, we're, we're standing up for, you know, this and that.

• 1:26:09Speaker 02

  And, and people, people are just kind of running their old scripts where, uh, you know, and they're great, perhaps the best example of this is, um, what Powell is doing is the 1980s formula of Paul Volcker hiking rates. And he thinks that it's, that's the same move at the same, um, that the same thing that worked 40 years ago, he could just kind of do today and it'll work in exactly the same way. And the state of the world is different, right? So by running those old scripts that don't, don't work anymore, you lose. And when we're thinking about it is like on the eve of World War One, right? In like 1913, like that was a world of kings and princes and horses and so on. There was strained tension on this world.

• 1:26:52Speaker 02

  Because of the new clanking machines and the industrialization, all of this stuff was, you know, something which there's obviously tech pressure on it. You had, you had these social movements, you had people who wanted to vote, you had communists, you had all these different things clanking and straining against this, right? And then, you know, there was a catalyst of, you know, a few things. There's World War I, there was, and just like modernity roared into being like, you know, like when something is born, it's like got blood all over it and so on, right? It wasn't, I'm not saying it's good. I'm saying though, that like, you know, people started World War I, for example, with horses and, and they certainly didn't end it with that, right? The thing is that the future can't actually, you know, it's saying the future is already here,

• 1:27:37Speaker 02

  it's just not evenly distributed, right? If you go to that next photo, the, the other one I sent you, right? All those kings, it's kind of like all of these heads of fiat states. And I'm not saying they all go to zero, right? But those that trusted the Fed and that don't have, um, you know, either natural resources, gold, manufacturing, or digital gold, or something like that to back their fiat currency, will probably be in trouble after the fiat crisis. I know that sounds like, if you take the full implications of what I'm just saying there, that's actually a pretty big thing, okay? But a lot of these states that trusted the Fed, after the fiat crisis, the money is gone.

• 1:28:19Ryan Sean Adams?

  This has been a lot, Balaji, and I'm sure you found, like, felt the full weight of the things that you're saying over the last few days, um, you know, also on your shoulders, because if this does come to pass, we will wake up in an entirely new world.

• 1:28:35Speaker 02

  Yes.

• 1:28:36Ryan Sean Adams?

  In whatever timeframe, whether that's 90 days or it takes longer.

• 1:28:39Speaker 02

  I don't know the exact timeframe, exactly. I don't know the exact timeframe. I'm just ringing the fire alarm to try to get people to realize the scale of the change that's about to unfold.

• 1:28:46Ryan Sean Adams?

  And you feel the same, a similar way as you felt to COVID in January of 2020, when you rang the fire alarm for COVID and you're saying, "Bank crisis is imminent. This is not just a regular bank crisis. This is the fiat bank crisis and the fall of the US dollar. So prepare yourselves. Get to hard digital assets as soon as you can. And for you, that means Bitcoin." That's what you're saying.

• 1:29:11Speaker 02

  I'm saying that, and I'm also saying, basically, there's four options you can take. Okay, and people are going to choose one of these four options. The first is trust US banks, trust US media, just like 2008, all the other crises. There's always a crisis, who cares, going to go back to TikTok or whatever. Okay, a lot of people do that. Number two is, okay, I actually am seeing that there are something serious going on. This is now something which is like user tangible, like a bank run is user tangible. All the other stuff was just sort of like an enterprise thing, you know? What I mean by that is it was just banks that had liabilities to other banks. It was on balance sheets in the backend somewhere, and they could work it out amongst themselves. And there wasn't an impact on you, the end user. Do you know what I'm saying? Right? I don't recall at least, I don't know if you recall, I don't remember bank runs during the financial crisis.

• 1:29:56Speaker 02

  Right? Okay, so depositors were taken care of or whatever. Then it was just like a, you know, moving funds around, it was all made invisible. Okay. Now, so number two is if it's exploded on you, you're at SVB or something, you cannot ignore it. The money is gone. Right? And so actually, a lot of people, they did, they actually wired money now. You know where they're trusting more than the US banking system? A lot of people wired money back to India. Okay, they're getting out of the US banking system. Maybe that's what that graph is on China or something like that. Because the US banking system, people were literally calling it, and I want to speak to this for a second. They're like, oh, my God, it's a bailout to want your checking account back. Now, that's just actually a true inversion of what happened, and here's why.

• 1:30:34Speaker 02

  If you go to Mogadishu and, you know, like people tell you not to go, and then you ask for like a helicopter, airlift out, okay, that's a bailout. You took a high-risk activity, it's atypical, you're making other people risk their lives to get you out. That's a bailout, okay? If you walk down the street and you're attacked by somebody and you're like, call for the police, that's a paid-for. That was a low-risk activity you took, and this police protection is part of your budget, your subscriber budget as a citizen. You paid for that. Okay? Similarly, if you make a high-risk investment that nobody told you to make or whatever, and you want your money back, that's a bailout. Okay? If you're operating a business checking account and you're just literally just doing,

• 1:31:17Speaker 02

  you know, by law required to keep your money in a bank and so on with a, you know, 200 billion.

• 1:31:24Speaker 02

  You have some expectation that these federal regulators that you paid for would give you some hint that not just your bank, but all the banks are insolvent, especially when they knew it for months and years beforehand. Okay? And so what actually happened is you paid for all the regulation and got none of the protection. It's anarcho-tyranny. It's just like in San Francisco, right? You pay for the police, but the only thing they do is issue parking tickets. They don't stop a crazy guy from smashing your window. Okay? If you're like an Uber driver in San Francisco, you get the tyranny of the whatever $100 parking ticket for being on the side of the road. Then you have the anarchy of the guy who smashes your window and nothing happens to him. Okay?

• 1:32:07Speaker 02

  So the same way, we are going to have anarcho-tyranny, but for banking. We have the tyranny of assets frozen, funds seized, a CBDC, potentially price controls, serious inflation, and so on. But the anarchy of the money can be gone and it's your fault because you were supposed to read the statement and find that it hid in a footnote their $80 billion loss that makes the bank insolvent. That's not practically regulation. That's not consumer protection. That is a third world country. You see what I'm saying? That is a corrupt regime that has betrayed its citizens. And the full scope of what that betrayal means, see, most people won't be able to process that. Okay?

• 1:32:50Speaker 02

  Some people will because what it is, it's like their god has died. Do you know what I'm saying? You know, like to truly think of the US state as betraying you to that extent, not just like making an error or something like that, but something where the banking system has lost all the money of all the people. Right? Like an error of that extent is something which just crashes people's operating system. And then what's going to happen is one of two things, or a few things, right? First is, they're living, they're foreigners and they're in a place with a functional government. Like, I have, I hope that India, Israel can stand up to be the leaders of the free world in what is to follow, okay?

• 1:33:31Speaker 02

  Second is, they're in a place like, you know, Russia or China, and if, like, you know, what I'm saying is actually what's happened, if the money is gone and this is like that final crisis, okay? Then you have to assume that all kinds of troops get pulled back, Ukraine, that just stops happening, Russia and China, which were kind of in a, in a box before and they were getting, they're getting sanctions put on them and all this stuff, that just tense, stress tension loosens and you have this just unleashed Russian bear and, you know, the Chinese dragon are just like, roar, okay? Because they're let out of their cage.

• 1:34:07Speaker 02

  I mean, you know, could it be that like Taiwan is captured without a shot and TSMC, now the sanctions are on the West? You know, quite possible, very possible, that if, if, and the only thing is, by the way, the fundamental premise, all of this is, just like with Corona, right? I only had one premise. And that premise was, this is going exponential. We're going to have millions of people infected and a lot of people are going to die and nobody understands this now because they're not actually calculating out that. From that, and only from that, I had a rubber band tension model of the world and I was figuring out what things, you know, would move on that, okay? It wasn't a perfect, you know, there are things I got wrong or whatever, you know, I thought full face mask covering would be there, but I do want to show you this, which is-

• 1:34:52Ryan Sean Adams?

  This is Max Roser tweeting your original COVID tweet, saying, "The world has changed so much in just the ways biology predicted. It might be almost hard to appreciate how prescient this thread was when he wrote it at a time when nothing had changed yet, one year ago today. Is that what you anticipate people tweeting about your original Bitcoin BitSignal tweet one year from now?"

• 1:35:16Speaker 02

  I hope not.

• 1:35:18David Hoffman?

  Yeah, I also hope not, for the record.

• 1:35:20Speaker 02

  Maybe.

• 1:35:23Speaker 02

  Um, but, um, like, you know, I should probably tweet that. I should say, this is a bet I hope I won't win, in a sense, right?

• 1:35:32David Hoffman?

  Yeah, I think from people who are paying attention to your tweet and your gamble apology, I think that would actually go a long way because, like, kind of, we said in the intros, like, some people are just thinking, like, oh, he's, it's profitable for him to make this trade by tweeting this or something like that. I think people are understanding this to be a Bitcoin trade.

• 1:35:52Ryan Sean Adams?

  Or else he wants to watch the world burn, something like, something like this.

• 1:35:56David Hoffman?

  Yeah.

• 1:35:56Speaker 02

  Yeah.

• 1:35:56David Hoffman?

  But, apology, this has been very, very scary, if not informative.

• 1:36:04Speaker 02

  Yeah, and hopefully I've given you enough links to give you a sense of, you know, this is not just, you know, me coming up with stuff. I don't know, there's like 50 or 60 references or what have you, right? I have a role model here, which might be wrong,

• 1:36:20Speaker 02

  but that shows that this financial crisis is actually a very extreme one. It, you know, I'll leave you with one last thing, which is, you know, the Ray Dalio Principles for the Changing World Order? Yeah, so, that's right. So this, the video of it is, yeah, you're right, there are two separate books. The video of it is really good to watch, and the thing is, Dalio did something very smart with this video. He got the concepts across with cartoons.

• 1:36:48Speaker 02

  And with the cartoons, you can kind of process it without realizing how serious what he's talking about is. The collapse of empires, right? Lots of people fighting. No money. Right? Um, you know, with the cartoons, you can process it, but then you have to, like, apply it. That's a key thing, because there's something about it where, you know, history is, like, we're on like a cycle because people live and die and so on, right?

• 1:37:21Speaker 02

  And the thing about this is here's the one thing that Dalio doesn't get, okay? And he's a really smart guy. He gets politics and he gets finance, right? And he gets history, but he doesn't get technology. And so what he doesn't see is that there's actually another force that is as big as China that hopefully becomes the leader of the free world in the aftermath, and that is technology.

• 1:37:47David Hoffman?

  I think we, Ryan and I have also shared our critiques of Ray Dalio is that like everything that his whole patterns and cycles for our history is all spot on, but he just misses the next phase change as a result to crypto. I think he started to get it, but I don't really know how complete his understanding is about all of this.

• 1:38:07Speaker 02

  Well, he's partially, he's right about one thing, which is if we don't have a critical mass of people in the free world get out to Bitcoin, then China is number one after this and they're out of their cage because those money going to China is like, well, China's the stable system. China gives you stability, right? It doesn't give you the chaos of the US. It also gives you totalitarian control of the CBDC, but at least it's a stable version. Unfortunately, a lot of people will go for that. And you know, the thing about this, by the way, I talked about this in the network state book, between American anarchy and Chinese control, right? We want the decentralized center, right? We want to have the free world. And really like this is the moment. So, you know, take everything you guys have said seriously over the last five years,

• 1:38:52Speaker 02

  everything you've got all the concepts, okay? And help your guys go bankless.

• 1:38:57Ryan Sean Adams?

  That's it. Balaji, we're going to end it there. This has been very helpful to walk through your brain and to kind of understand all of the pieces that you've put together here recently. And we'll certainly be having someone on to do the counterpoint to, you know, talk about reasons why this might not come to pass or might not come to pass so soon. But we really wanted to unpack your brain here today and certainly like if what happens comes to pass, it will be.

• 1:39:26Ryan Sean Adams?

  It will be absolutely world changing.

• 1:39:28Speaker 02

  The biggest event of our lifetime.

• 1:39:30Ryan Sean Adams?

  And I don't think any Bankless listener will be fully prepared for it. So it's worth taking a moment to understand and dissect Balaji's arguments, to look through the references and links that we put forth in this episode, and do your own research and come to your own conclusion on this. And to do it fast, I think if things collapse in the expedient way that Balaji is predicting, you may not have much time to put the pieces together in the aftermath of this. Balaji, thank you so much for coming on Bankless once again. We appreciate you.

• 1:40:03Speaker 02

  Thanks, and I'll say one last thing, which is even if what you think I'm saying is crazy, hopefully it will be something that now you've been exposed to at least once. And as you see events unfold, you might think, okay, some percentage of that might be correct and then take action, if that makes any sense. It's like a retargeting of some kind, right? You have a different frame or lens to view events, just like that original Corona thread where people might have thought it was crazy and then they had the lens to view events. So anyway, all right, guys, get your coins, get your Bitcoin, get your coins off exchanges, get to a crypto-friendly jurisdiction if you can.

• 1:40:38Ryan Sean Adams?

  There it is. That is the alarm. Risk and disclaimers, guys, got to end it here. Of course, none of this has been financial advice. Maybe just simple life advice.

• 1:40:47Speaker 02

  Life advice, that's all, yep.

• 1:40:49Ryan Sean Adams?

  Bitcoin is risky, so is crypto. But my God, the banking system is more risky than ever. You could definitely lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.