The Dollar Changed. Bitcoin Is the Endgame | Matt Dines

47:47What do we do? We come out with like the allied powers, they form an economic block and it's the largest trade block in the world. Like we talk about global trade, right? You see it in the headlines almost every day. That is the most important business in the world that trade franchise it there's no public equity that that foots to it but if you think back in history right like the dutch voc or british east indies companies like these are the largest market cap firms and like those transitions that happen like which nation state owns it or who who or which nation state do they own yeah or yeah exactly exactly like india like the entire nature like exactly or nation states um but uh yeah that so that trade block is the i mean it's bigger than spacex bigger than google all of that and then the the flip side of that right when you move a shipping container from let's say it starts in hong kong loads up the goods delivers in i don't know rotterdam right if you're in europe or you're in australia i don't know where your main port is.

48:55I'm going to guess Sydney, something like that. Yeah. Your counterpart of that is like flip it. Transaction is, or sorry, money is one half of every transaction, right? So when those goods move from A to B on the ocean, your financial centers, like your network, this offshore dollar network, dollar just became coin of the realm, right? It replaced the British pound, which, you know, replaced the Spanish silver dollar, which replaced blah, blah, blah. um but that global dollar network that offshore dollar was actually tied to this post-war like post-world war ii architecture that got set up right and it's still holding together today like nato um your bis member banks right these the all of these federal or central banks like the nation states who opt into this system um and settle let's say between themselves at the bank of international settlements, all of that.

49:55That's part of this business franchise, right? All right. So what you've slowly seen since 2008, right, in this system is over time, you've started to see the, let's say there's cap table partners on this franchise. And before World War II, let's say that, you know, London firms were the, you know, the senior partners and the New York firms were the junior partners or the American capital was junior. It's become very clear at some point that role has flipped over the 20th century. And in the last, let's say, 10 to 15 years, ever since we've gotten through the GFC, the GFC was like the starting gun.

50:38Oh, this offshore dollar bubble thing. This is not long for the world anymore. We need to move on to some other thing, some other framework. and it's been in process like moving gradually then suddenly but in the last i'd say you could say sofer the launch like the go live of sofer and roughly 2017 2018 was your was a key seminal event but it went even further than that obviously we can talk about covid uh and and and and its role in this but 2022 like when the bond market was selling off what the fed did like we saw the inflation coming. We raised interest rates. We sacrificed the U.S. dollar bond market.

51:21We let the price depreciation hit to account for the purchasing power loss from inflation and all of that. At the same time, what we did is we moved the venue for the marginal dollar in this credit base dollar system from london which was set uh by the london interbank offering rate or libor where all these capital market banks like mostly mostly uh firms based in the uk but it included american banks as well like they have a they have a presence in london um just like you know hsbc standard chart etc jp morgan's in the game there but you move from this venue where all the banks with LIBOR would get together at the end of every trading day and set the overnight cost of short-term dollar funding in a mechanism that was not, there was no market-based transaction to it.

52:17All you did was reply to an email or something like that, report your number of what you would lend to your best customer on an unsecured basis for a short-term dollar loan. um you just report that into a spreadsheet here's a statistical process you cut off the top i can't remember it's like the top four and the bottom four and you take the middle i don't know take average of those or whatever and oh that's libor and that's the reference rate for all of the the dollar credit outstanding like your adjustable rate mortgages your uh your auto loans like credit cards like anchored the libor in this process and very easy in that statistical process you have no economic skin in the game, right?

53:01There's nothing you're not going to lose. It's pretty easy to manufacture or massage the number that comes out of that process if you're one of, let's say, the 15 or 16 money center banks who is a contributor or has a vote in that process. So you can see in that framework how that's more important than the Federal Reserve, right? And people talk all the time about the Federal Reserve being like 12 people in the room that get to pick the rate and this is essentially the same yep well more so right because the fed has had to respond to them all right so this is where i say i wrote a piece on substack maybe put in the show notes but um i explain it in terms of in this era so think about it's a it's an offshore dominated era the whole point of this system is you've got all right you've got this block coming out of the the western side of the allied powers um you know west of the iron curtain post-World War II.

53:56They've got a financial system and the economic model was, hey, we're going to build up credit, dollar credit. At the beginning of this framework, at Bretton Woods, you started with all of the local currencies like in FX markets were all pegged to the dollar and then the dollar would be pegged to gold and that's for cross-border capital transactions and then domestically, your dollar was pegged to silver for households, businesses in the U.S. Over 20 years after World War II, we broke that metallic peg, famous Nixon 1971 window. And then after 1971, think about Nixon, what he did is defending the U.S.

54:42gold vaults. We'll start there. I'll just not go any deeper than that. But once we got off of that metallic, like redeemability or anchor to the dollar. Now you're on the credit standard. And in the economic framework for this trade block, the idea was, okay, well, if you just expand credit, like money is credit, right? They're the same thing. You print dollars into thin air. It's debt, but you're printing the dollars. What you were doing is you're generating incremental economic activity. Like you're moving a, a shipping container of HDTVs from China to Rotterdam, right? You raise the amount of dollar credit outstanding.

55:30And it's a one-way trade up for money supply. And this is how you get a offshore dollar credit bubble plus onshore dollar credit. It's hundreds of trillions of dollars, right and in that framework right where credit has to like it has to increase uh you can't let that thing contract otherwise the whole thing just deleverages upon itself the u.s has to be subservient to the rest of the world and then you have to have a u.s uh inside the u.s you have to have a like a dominant a framework where the central bank is dominant so i call this era like once we get into 1981, Volcker raises rates to 20%, squeezes out the inflation of the CPI inflation right up the 1970s.

56:20You get a policy framework in the US where the Fed dominates, right? And what it's doing is every time that the global economy wants to, like it goes into recession, the US, like the onshore institutions had to bail out that offshore bubble, right? And it's increasingly, every time, right? So let's say in 1987, we get into the flash crash, right? What do we do? Oh, we cut interest rates, right? Then once we get to the next version in the late 90s, you got the Southeast Asian financial crisis taking place, Russia's defaulting, all that stuff. LTCM is collapsing with all of its Nobel laureates, the hedge fund operating out of New York.

57:03What do we do oh we start to do um uh you know the the typical lower interest rates but then you're adding you're starting to add in qe right which is like maiden lane facility central banks coming in as the they're not even lender of last resort they're like reliquifying the system they're sopping up all of the excess credit that exists um and then it like monetizing it issuing it out And that's what QE is in each cycle. 2008 gets worse, COVID gets more so. That's why we all recognize it, right? And Bitcoin, we all nailed it. And everybody came around the table, listened to the podcast 2020, 2021, and we got that.

57:44And then we just extrapolated that story and said, this thing's going to go on to infinity. All right, so you had a role where, all right, it's Fed dominance. And then you also had Congress as well, right? You had the Keynesian approach where, what do we need? We need more fiscal stimulus, right? Just fiscal spending acts that don't make any sense. They're just boondoggles. There's diminishing marginal returns on these same projects. I make the analogy. So fiscal spending in the 1950s, what did we get for it? You got the Eisenhower interstate system in the United States, which is awesome. I've been to a lot of countries in the world, and our highway system is pretty good.

58:20I haven't seen the German Autobahn, though, so maybe that's – I haven't seen the best of the best. Um, but by and large, the Eisenhower interstate system, like it did wonders for the U S economy. It was great, right? Clearly, um, a good use of, of, uh, credit and, and, uh, federal government spending. But by the time we get into 2008 with the American recovery act, you get into things like, I can't remember exactly the size of it, like just ballpark it trillion dollars. Um, what we got out of it was like, like my city where I came from and growing up in Missouri, Like we got one more interchange on our, on our highway.

58:56It's like whoop-dee-doo, right? Didn't make a bit of economic difference to anybody. Like just, there's just one more stoplight on my way home. Um, and I think most cities in America, there are probably thousands like that. And then by COVID it's like cares act. Uh, you're, we're going in, we're, we're taking on these trillions of dollars of debt. Um. Placing it on the public tab, right? And we were literally just paying people not to go to work. So like you just, it's like the, the, we just make less and less sense over time. Yeah. It's into absurdity and decadence and, you know, all of the above.

59:30All right. So that's the fiscal route. And we just had a Congress that would go along with it. And, um, I don't know how much time or we can beat this dead horse, but I view Congress as just a total deadbeat organization in the United States. And we don't have any way out of this. Like we can't, um, you know, unlike a European democracy or constitutional structure, like most of them have the ability, like the king or the prime minister or something, they can disband Congress, send them home, hold snap elections, all that. US, we can't do that. So we have a Congress that's compromised, bought and paid for, all of that.

1:00:02And they'll pass any fiscal spending bill up until, I mean, maybe modern day, but we still do it, right? I haven't seen a Congress yet who has turned down like a fiscal stimulus bill. So I called that era like the era of Fed dominance, like from a U.S. framework. And what that was like, you had Fed chairs like Alan Greenspan, who just passed away this week, age 100, Ben Bernanke, Janet Yellen. and I'd include Jay Powell in this bucket, where they're willing to just keep cutting, like doing what needed to be done to bail out this offshore dollar credit bubble. And you kind of had to, right? The guns to your head.

1:00:46You can't just change the system on a whim. They put people in these roles who would do what the system needed them to do. So what do you do? You cut interest rates every cycle, lower lows, lower highs, until we got to ZERP. Europe, Japan, they try to do NERP, negative interest rate policy, QE, rinse, repeat. But 2022 was that moment where, all right, there was a tug of war. And at the end of the day, all of this offshore dollar bubble is parked on the economic potential. And you could just say the existing economy itself as well of the domestic United States. The system requires the United States Treasury to go into ever-increasing amounts of debt.

1:01:33Like I said, if you're offshore, you don't have access to the Fed. So your next best IOU is that US Treasury security, right? It's the Treasury's IOU. That's the highest quality dollar you can get with minimum credit risk. That's as close as the money printer as you can get in this framework. So this system requires not just a Fed that'll dominate domestic policy, But it requires a United States Treasury that is subservient to the central bank and then also subservient to the rest of the world, the other G7 countries or whatever. And if you think about it in that mindset, that's how you get the America first kind of seeds springing up in the 2010s and it starts to make a little bit more sense.

1:02:20But your treasury secretaries in this Fed dominance era, or I'll call it equivalently, the other side of the coin is treasury subservience. You get treasury secretaries who will just do whatever that system needs. They're guys like Larry Summers, Timothy Geithner, Hank Paulson, Jacob Blute, like we just named Janet Yellen. And they'll do whatever that offshore system needs them to do, which includes running up a debt to$40 trillion every stop of the way. All right. So the seeds of this transition from this offshore dollar to the stablecoin dollar, which we've seen materialize that I've talked about, it didn't happen overnight.

1:03:08It was in the works. I worked at Citigroup back in the early 2010s. post i came in post gfc and had no idea what i was getting into um yeah let's just say that it's shocking like uh balance sheet like we were looking at like a couple trillion dollars in subprime uh like asset exposure on the balance sheet now was a time when like i didn't even know what a trillion dollars was um just seemed like an insane amount of money back in 2011 you know era. And our team was publishing basically the rate card of Citigroup's mortgage rates for all of its branches in the United States. It was like, well, a lot is riding on the line of us getting these numbers right, people's mortgage payments for the next 10, 20, 30 years potentially.

1:03:58All right. So even in those meetings, and I was just an analyst starting out, we were still talking about replacing LIBOR and moving to something else. We knew LIBOR had to go away and SOFR was already on the table. I'll explain SOFR a little bit as early as those days. And most of us like at the non-executive level, like we didn't even understand what the heck was going on. Like coming through university, I did a master's in finance, very quantitatively focused. We didn't go through any of this, like how the dollar structure worked. Like it's just just not there, right? You're learning quantitative formulas, number crunching, all of that, like pricing exotic derivatives.

1:04:38How the system actually works isn't taught to you or isn't a focus. Maybe that's changing. Who knows? Actually, it's the podcast circuit. Now that it's talked about, people can find this and that's made all the difference in my opinion. All right. But this was going on at least since the early 2010s and that transition to sulfur, We spun up that system and I think it went live like for scale in 2018. And those dynamics, let's just say COVID showed up at a very opportune time for this transfer away from London-based pricing with the LIBOR model to New York-based pricing, the SOFR model. And the key thing about SOFR, right, we talked about the banks, like you literally just make up the number.

1:05:29You don't need that much evidence to support your submission at the end of every business day. With SOFR, it functions differently. Like it's actually published by the Federal Reserve Bank of New York. They're operating as a middleman, a custodian, call it a tri-party lending relationship. Three players involved here. thing about like the federal reserve bank in new york is like the house and then you've got a borrower and lender showing up borrower needs dollars on a short-term basis lender has dollars that they can you know deploy into that loan but the borrower and so for has to post collateral right and for the most part like most popular collateral it's going to be treasuries so now the skin in the game exactly you can lose your highest quality credit the risk-free rate in this systems framework, right?

1:06:21So, or your risk-free asset, right? So, so if you mess up, you over lever yourself, you've actually, yeah, there's consequences now. Which is obviously how it should be. Like that makes total sense. A hundred percent. Right. And in a perfect world that hope, I mean, there's no such thing, but as we move along, like notice here, your skin in the game is just another IOU on this treasury debt that keeps ballooning. But moving from nothing to something, it actually is a massive step. And then eventually, hopefully, it'll be a real economic asset, like, let's say, gold or Bitcoin, where you lose something of consequence.

1:07:03And the private sector, households, businesses, they have a say as well. If you zoom out in the bitcoin story right now it's starting to make sense like genesis block chancellor's on brink of second bailout of banks right what was that saying like when bank of england or the fed or you know whatever central bank when when they come in in qe what they're actually doing like think about it like think about it like a poker game right you got your players who are who are playing this game shrewdly wisely they're building up a chip stack and then your counterparties your other players at the table who don't calculate their risks correctly or take too much risk they get off sides um you know take too much risk at the wrong time in the cycle you get you get rinsed um as you know maybe is going on right now in frontier credit um you know topic we mentioned earlier but the whole point like chancellor on brink of second bailouts of banks being in the genesis block was when you change the reserve money or you can just you know willy-nilly inject more chips if you're the house at that poker tail table so that the short stacks get reliquified every time the the the big the big stack is about to take someone out um sent his break exactly so that's what bitcoin does it's a it's a reserve money um unlike gold it's a ledger money and it's an even playing field for everybody who chooses to play at that poker table is not the right analogy here never bring the casino games into a financial analysis is is uh what i've been taught to do in speaking with clients but it that it makes sense to me though yeah um so in terms of this transition then i guess this is this isn't something that's just happened in the last couple of years it's been a long thing which maybe started or you know started in 2007 2008 you then have the sort of 2017 libel switch to sofa then the sort of 2020 to 20 it wasn't switched yet in 2017 2018 yeah we'll get into that transition starts i guess and then 2020 2022 is you have covid and it's also like the end of the 40-year bond bull market which i imagine is a part of this oh absolutely yeah the end of the 20 or end of the 40-year bond bull market was your It was like one of the three worst returns for U.S.

1:09:25dollar-denominated credit in the nation's history. I think like 1929, 30. Like, you had one by the Great Depression, maybe one by the Civil War, you know, something like that. But that, you know, we talk about the fourth-turning framework, right, as a way to understand this. You know, like 80-year type of transitions. It's like, oh, that was that. We just saw it. we're in it yeah exactly uh so yeah exactly so so for spends up it's your competitor like now you're like whatever you were running your little scheme you know on lombard street in london your end of day process like well that's cute but uh over here this is where you actually have to go for dollars and we're going to set our interest rates with triparty collateralized repo and uh And that's where the puck is headed.

1:10:17At the end of the day, we're, it's the U S dollar we're talking about here, right? We own this or it should be our, you know, real estate to own. And, um, we spent like four years, like with that processing contest, but 2022, uh, the, the hiking is, was kind of the last straw. But right when the hike started, March of 2022, Putin invaded Ukraine, created the commodity spike, similar to what we saw in Iran with Epic Fury here in the first quarter of 2026. That created the final, the alley fight, right? someone had to tap out and and we we uh stopped pricing the marginal dollar in libor and we started pricing it in sofer and um at some point in the last like year or two we just stopped even printing uh libor as like any reference to it because there's all kinds of old credit outstanding that was like benchmark to this thing like someone's car loan from or home loan from like 2001.

1:11:26Those loans are still out there. Someone's paying based on LIBOR. We figured out what's the number, how many basis points do we add to convert this over from LIBOR to SOFR. It's a business negotiation, same way that these ceasefires or these deals between Iran and the United States, I view them at the end of the day as a business negotiation. It was that process. So 2022 was that that kind of power struggle, the tug of war. What was formerly like a cooperative partnership, like the cross-Atlantic framework, right? NATO being the military front, but then you have like WTO for the trade, you know, that framework.

1:12:12And then you add this offshore dollar cartel, you know, think about it, BIS, IMF, all the central banks opt in. You've got the Basel III, you know, frameworks, which are still in open negotiation and implementation. Um, 2022 was that moment where like, if it was an arm wrestling match, like, yeah, U.S. just like other side's fist hit the table. So that's kind of like the last remnants of the old world power giving the baton over to the U.S. That's how I view it. Exactly. Yeah. And then, okay. And then on a separate front domestically, this is where you get into art. The Fed was responding to its interest here.

1:12:50The Fed, its shareholder, it's a public-private institution. It's got some public oversight, has to report to Congress, all of that. The president gets to elect or nominate board of governors members, all that process. So you do have some public input into the management of the organization. But the shareholders are the domestic U.S. Fedwire banks. And so Fed chair, you know, pushing this thing along, ultimately, you have to have the backing of the domestic U.S. capital, for lack of a better word, behind you to push this ahead. So that's what I think when Jerome Powell was doing this, like you can view like Jerome Powell will go down as a very interesting transitionary figure because he was doing all these things that a Fed dominance era Fed chair would do.

1:13:43He QE'd the crap out of the market. He zerped the market and didn't say anything wrong with the fiscal state. He wasn't opposed or didn't raise his hand to CARES Act, American Recovery, all this stuff. But then he also did these things for moving from LIBOR to SOFR. So I view him and, you know, the decision recently, like after his term ends, we were in the wars fed. Now he chose to stay on kind of view him as like, he's your transitionary figure. He's kind of like in history. I think of him as like a man for the last war, but you have him in place as a general to like, just maintain institutional integrity.

1:14:26It's like, all right, very interesting figure, complicated, complex figure is how I think he goes down. All right. But in the meantime, now you've got a political process. We still have to get through like the White Houses say and Congresses say on what direction this domestic dollar is going to take. And that's where the difference between the Biden White House and its Treasury Secretary and National Economic Advisor, Lael Brainard, and the direction they wanted to go down are the polar opposite of what we got coming out of the November 2024 elections. So in the big picture of United States monetary history, the November 2024 election, in my opinion, will be about the fork in the road that the U.S.

1:15:15voters chose. And what they were actually voting on was the future of the U.S. dollar. So I'll explain this. same time that the fed started hiking in 2022 and we were going through this transition from libor over to sofer you know strangulating it to death in the bathtub right all that gruesome analogy but capital wars right that's that's kind of what happened um in the biden white house and those players involved yellen and brainerd there was an executive order that was like the standing memo to all these governmental agencies that basically said it was paving the way for the CBDC. They instructed the Fed, OCC, all the agencies, all these technocrats, these bureaucrats, all of that.

1:16:03They were tasked with figuring out this, you know, this path to get the future of this dollar system from the United States framework onto a CBDC. What do I mean by CBDC? It's a good Bank of International Settlements paper today on this exact topic. I'll just, TLDR, BIS and this legacy framework, call it offshore dollar framework, which is dying. They don't have that anymore. You'd call it Davos man, that type of globalists. They don't like Bitcoin and they don't like the genius X stable coins. They want something else. And that something else they want is they want the base money or the money that banks use to transact and settle between themselves to be central bank money that sits outside of the private sector.

1:17:02So you as a household, you as a business, you can't interact with the Fed, right? You need a bank charter to do that. You need a piece of paper. That's how it works in the United States. current standard and most central banks in the rest of the world as well. So they want to gatekeep, they want to retain control. Yeah. And the term for that would be outside money versus Bitcoin. If Bitcoin emerges as a base money, that would be an inside money, which means the private sector has the ability to own, hold, transact, and basically market make. We talked about this upfront at the conversation, right and the old days of the federal reserve dollar versus the silver certificate dollar and the contests that worked between it with the with the dollar that's redeemable into silver what that does is an acts it acts as an arbitrage mechanism where the central bank or the state can't direct the central bank to go out and uh issue too many credit claims like if they if they were doing that what you would do as a household or business would be i'm gonna put my dollar to you i'm gonna redeem it for the silver.

1:18:06That's right. So if we had an inside money, so we could redeem for gold or redeem our dollar for Bitcoin, that would be like a check on the monetary power of, you could say, the state, but also the private banking interests. This is the definition of sound money that everybody talks about. What they're actually asking for is that ability as a private sector entity to hold your your banks which are you know that intermediate layer between the the public sector which is the state and the private sector right and then also hold your state accountable from uh committing monetary tyranny right so what the biden administration was instructing uh with this executive order for for all of these agencies to go out and do was figure out you know legally how do we do this uh technically how do we do how do we how do we custody how we're gonna need some blockchains go hire the ethbros the solana devs all of that they'll build this thing for us um and and that was the that was the standing like management policy directive uh under under the bide administration we were marching down that path we still have the eu marching down this path like that's what the digital euro is they just made an announcement today, this digital euro is going to have a pilot test at the end of 2026, and they're shooting for a 2028-2029 launch because they're going to need it at the end of the day to do what they want to do, like prosecuting a broader war with Russia, let's just say, or industrializing or monetizing private sector savings to prosecute said war.

1:19:51They will need this CBDC, this digital euro, as the base money to go out and do what they intend to do. All right. So Biden administration was on those grounds. What happens? November election happens. Day one, we get an executive order uh or it's like thursday right if the inauguration was like a monday or tuesday it was in that first flurry of executive orders what did it do it the first one uh on like the monetary roadmap for this new administration the trump administration um it repealed that standing executive order that said hey let's go down let's figure out what's the project management roadmap, the Gantt chart, all of that to get the United States onto a CBDC.

1:20:40First executive order pulls that, rescinds it. That's dead in its tracks. No CBDC from a White House directive standpoint. Next, you get, this is where I say, we're moving from an era of Fed dominance and treasury subservience to an era of United States treasury dominance, and then Fed is going to be reformed. It's going to play a totally different role. It's not going to be used in this era we're heading into. It's no longer going to be used as this behemoth to keep bailing out the offshore dollar or everybody else's monetary systems that are squatting on the U.S. economy, in my opinion, or have been for the better part of a century, at least, we're moving to an era of treasury dominance.

1:21:38And so the next executive order that after repealing what Biden was doing with the CBDC, the next one, and this is how I view it as key, you had a lot of Bitcoin in custody that had been like, let's say, criminal asset seizures or civil asset forfeiture, all that.

1:21:52Matt Dines:Say it's sitting in different branches of this government bureaucracy. That is Washington, D.C. It's in some U.S. Marshall's file cabinet. Some Bitcoin's over there. Some is in the FBI file cabinet over in Virginia. It's just scattered all around. The next executive order gave a directive. All of that Bitcoin that is technically within the ownership of an agency that reports into the federal government chain of command, all of that now needs to move to the treasury right so now the treasury is the united states treasury is the custodian and uh holder of the bitcoin that the federal government has you know claim to title ownership all that stuff all right that's huge like we we we were looking for this as bitcoiners we were looking for the strategic bitcoin reserve like when are we going to get it when are we going to get it's a sequence of events like there's a process to get there and if you look at these little steps along the way you're like oh now the treasury is asserting dominance it's not just you know going to uh you know be the bottom in this relationship and uh do what the rest of the world needs and keep racking up this you know 40 trillion dollars of public debt like the number is still going to go up but we're asserting dominance and say no I don't know, those Bitcoin are over here.

1:23:19And then gradually, you're going to start seeing all of these steps implemented to ultimately, like if you look at Scott Besson's statements, what he's telling you is this Bitcoin reserve is coming. It's just going to take more time to do it the right way. You got to follow parliamentary procedures, figure out custody, all of these things that need to be taken into consideration to do it the right way. Make sure someone's not just going to walk your Bitcoin out the door, like an intelligence community hack or nation state attack, all that stuff, like do it the right way. That'll take time. But series of events, I'm trying to think of other executive orders.

1:23:57But I guess just quickly on that, the question I would have is, they obviously saw the strategic reserve executive order go through. And like a lot of Bitcoin is probably expected to happen quicker than it has. do you still think it's likely to happen and then as a part of that question what do the treasury want to do with it like why do they want it held in the treasury okay all right let's answer the the timelines here it's not a there's no probabilistic guarantee that we're going to get a strategic bitcoin reserve there's still a lot of milestones that we need to hit to get to that end game so think about it like a couple weeks ago we had um representative Begich from Alaska, United States, introduced the American Reserve Monetization Act, which is an updated version of the Bitcoin Act that Senator Lummis introduced about a year ago.

1:24:51And my answer to that is, I don't think we have a Congress to get it done at this point. So same thing in November 2024, what we were actually voting on was which fork in the road we were to go down CBDC route with Biden or a Bitcoin route with GeniusX tablecoins. I didn't get into specifics why the backing one-to-one of tablecoins with T-bills is important. We'll get into that and second part of my answer to this question. But I don't think right now we have a Congress that would pass the ARMA, even though it had like 22 sponsors. Can we get the majority, like 215 votes i think it would take to pass congress i i think speaker johnson would introduce this um if if he knew he had the votes to get it done i i think what we don't know is do we have the votes to get it done with this congress so that's an important thing i think we're voting on this november um i get it bitcoiners were confused about what's going on geopolitically with Iran.

1:25:56Maybe I can put that into context, how I think about it. But there's going to be a lot at stake in November, like what we're voting on. And if we want that strategic Bitcoin reserve, we're going to have to send a Congress to Washington, D.C. that gives it to us. So full stop there. So not guaranteed it's going to happen. I do think in the Besant framework, he was in congressional testimony, I want to say two weeks ago. He got asked a question by by Tim Scott, Senator from South Carolina, I believe, who asked about progress or are we still working on this? And Scott Besson's answer was like, we're working on it with all deliberate speed, right?

1:26:33And that just goes to the order of operation. This isn't something you can just spin up overnight. Like there's no precedent for this. It's a big, it's a big change to have a Bitcoin reserve, have a treasury stockpile, all that stuff. It's not something you just ask chat GPT, how do i do this and press a button and it's like does this work like no a lot goes into this so what's the what's the end game here all right let's think think about this and this is where i'll get into maybe a little bit of speculation because i don't know how this is going to play out what i do what i'm thinking about though is prior iterations and these dollar transitions where we move from one definition of the dollar say it's an asset-backed dollar like silver certificates, for example.

1:27:17We moved to a credit dollar and then we moved back towards that asset-backed dollar. The one I like to think of is during the American Civil War, the greenbacks. Very similar time, thinking about the fourth turning framework, it's like all the institutions are going through a big transition. We have to find a new steady state equilibrium for all the social order, financial order, all of that, to reestablish stability, right? Civil War was kind of that, right? Like America, there were also like military conflicts all around the globe at that time too. Like all of them playing into each other. But you had a dollar that was on a like silver standard, gold standard, bimetallic standard, coming out of a financial panic with the panic of 1857, kind of an analog of the financial crisis of 2008, if you think about what we're going through currently.

1:28:18But that just wiped out credit. And the president at the time, Buchanan, didn't bail out the banks. And so you got replaced. We got Lincoln as president. We had the war. Now, the United States Treasury was in a position where we didn't have the financial resources, We didn't have the gold to fund the soldiers, purchase the armaments, all of that for the union to get what it needed to win the war. And what we did is we, by roundabout way, created a dollar, the greenback, that was a treasury-issued IOU. No interest rate, no maturity. this was the precursor to the federal reserve note you know legal tender dollars redeemable for nothing only payable like legal tender for credit you know arrangements all of that once the u.s like once it was clear um that the the the union was ultimately going to like persevere in the struggle like probably 1864 the discussion around like washington dc and within the capital markets in New York started to switch to, instead of this massive proliferation of like, literally that was like money printer, right?

1:29:34We just printed greenbacks like off the press. The discussion in capital markets and policy circles started to shift to, ooh, actually we're going to win this thing and we can start to rein in money supply. And within the span of civil wars coming to its conclusion in 1865, and then by 1875, that discussion of, oh, we're going to re-monetize, we're going to re-peg to some base money, and this won't just be funny money paper script anymore. The dollar won't be paper script anymore. You had the Gold Remonetization Act of 1875, and we were back on the gold standard, pegging to the base money that the world was choosing at the time, gold, in the second half of the 19th century.

1:30:23So this can go quickly, if you think about it. We're going through the same thing um like an american re-industrialization right now we're in the very early phases of that it's built out on this um ai trade right all of the capital flowing into that as part of this massive energy investments like all the above but um you can see a world like it's fuzzily coming into existence where all right think about this we we're already in a world where that liability based IOU dollar, that's gone with the wind, right? It's a prior era. We're moving on like trains left the station. We're moving to these stable coin dollars.

1:31:04They're backed by a treasury bill one-to-one, like that's genius act, 45 days or less maturity. Interestingly, right? Like what's the collateral for SOFR to get a marginal dollar in this credit-based system? Ooh, it's also, it's also a uh more and more just a treasury bill right as the most common uh favored collateral and repo markets lowest haircuts all of that um and you see this world now that we're moving from that liability-based offshore dollar to this asset-based stablecoin dollar give this thing enough years let these trends keep right like just keep extrapolate them i can see a world where we're just calling someday these stablecoin dollars, we're just going to call them dollars the same way after the silver certificates were pulled from circulation and all we had was the Federal Reserve notes.

1:31:59They're dollars. From the private sector, we'll just call them dollars. They're technically backed by treasury bills, right? So they're backed by an IOU in the old system. What we're seeing as this offshore dollar bubble as we're reining it in, what's happening, the capacity for lending further and further out. So if you look at, let's say, for example, the 30-year treasury bond, it's like$15 billion is the auction size, and they hold it once a month. If you look at the treasury bills, these things might be for the four-week bill, it's like$80 billion and they do a new issue every week. And they have not just one 30-year once a month or one 20-year month once a month or a 10-year once a month, which are like 10 to 20 billion, that type of size or scale these treasury bills are like 80 billion dollars each auction um they hold a new one every week and there's a four week an eight week a 13 week a 26 week a 52 like so the the maturity of the debt profile has this bubble this offshore dollar credit bubble the old post world post world war ii framework that's that's kind of transitioning to its next state it'll be a major upheaval, right?

1:33:09We can all sense it. The maturity profile of the debt in that system is just coming smaller and smaller. And so I can see a world where let's say five to 10 years of letting these trends play out more and more of the, the liability based dollar and those IOUs, um, like the, the, the, the credit stack, it's naturally shifting more and more. So T-bill heavy, right? And you can see it in the Treasury's debt outstanding, right? It's becoming more and more Treasury bill heavy. And is that intentional? Because I remember when Scott percent, before he came in, he was criticizing Yellen for doing everything like on the short end, but has then continued to kind of do the same thing.

1:33:52So that's an intentional move rather than it's just a force of the market. No, it's a force of the market, as you put it. If there were a better, like people like, oh, you idiot. Why didn't you extend all your debt out at 30 years back when it was a 1.25 coupon in March 2020? It's like, because you couldn't. The capacity wasn't actually there. The treasury bills is the direction. The system is telling you what it needs to do. And as the operator here at the helm, you just take what you get at the end of the day. You can play the poker hand very well. You can be a good player or a bad player. but at the end of the day like the dealer is just going to deal you the cards you get so that that's how i view it um so naturally that debt profile is is just shrinking shrinking shrinking um uh credit maturity so you can think about this like the in the u.s right we have we recognize this is a problem that longer term uh or like longer maturity financing it's it's going away when we can feel it.

1:34:59So earlier this year, remember that, um, feeler tweet, I think Trump sent it out. It's like, what do you guys think about a 50 year mortgage guys? Yes, I do remember that. That's part of that. We're trying to figure out how to extend, you know, maturities longer or get more people into housing or, or underwrite mortgage loans that, you know, borrowers can qualify for. We're trying to extend it out, but there's just no capacity there. So you're working, like you're squeezing all the the blood you can out of the rock and there's after 70 years of doing this there's just not that much there's nothing left really is what's happening so as that maturity profile shrinks right we become more and more um treasury bill concentrated in that treasury debt stack as this stable coin like genius act proliferation really kicks in and that old offshore dollar like if you're looking at all the dollars outstanding in the stable coins start to grow their market share, eventually there's a tipping point.

1:35:58But more and more of, like we talked about the arbitrage incentives, where can you generate the most bang for your buck on$1 of capital? That same way that Henry Jarecki, all those fellows, cleverly arbitraged away, walked away with 10 % of the purchasing power on another dollar transition. The way I see this, more and more of those treasury bills are going to find their way into stablecoin issuers like genius act regulated they'll become stablecoin dollar rails and then the what's happening here venezuela iran all of the like cuba coming soon to a theater near you uh greenland like what's happening is we are re-architecting like the dollar payment rails and all of that kind of orbit and we're bringing in the commodity suppliers and the trade of those the base layer goods in the economy, right?

1:36:52Your energy resources that everybody needs, those will increasingly settle in stablecoin dollars. And if you think about this from the Venezuelan perspective or Iran's perspective, you no longer, like if you participate in this version of the dollar, which is more New York, less London this time around, you no longer have to pay the one extra hop through the whole foreign exchange, swaps, all of this offshore dollar credit kind of big transaction costs that is just paying this financialist cartel at the end of the day. They're sucking off whatever the share is, what is it, 10%, 20%, who knows, of the actual real growth on all those ships moving through the Suez Canal, moving through the Panama Canal, moving through the Strait of Malacca, crossing the Pacific Ocean, all the above.

1:37:50Now to get the dollar you need, which is like the coin of the realm to buy your energy resources or minerals, critical minerals, right? Headline keeps showing up in the papers, right? You no longer have to cross through all these middlemen, you know, foreign exchange, you know, counterparties. And you go straight to what you need, which is that treasury bill counterparty risk that dollar settlement rail and and you like get at the end of the day you get wholesale pricing or sorry you get retail pricing for your commodities and you aren't like selling your goods at wholesale pricing anymore or deep discounts say on the black market to let's say iran oil iranian oil going to china for example at deep discounts or russian oil being sold into india at deep discounts so what's happening like this system is all you know we're transitioning from an old offshore dollar system onto this u.s uh like centered um stablecoin dollar system there's economic incentives for the resource producing countries to do it and go along with it that's where if you look at the mou that was just signed with iran the most important thing is like oh, you're going to reenter the SWIFT system first.

1:39:09But really what you're coming into is the stablecoin system. Same thing with Venezuela selling its oil, right? They settled through, I think it's like Qatar. But you're now going to be on these stablecoin rails. There's going to be lower transaction costs, all the above. You're going to get better, more transparent market-based pricing for your commodity exports that your economy relies on. and over time what this is doing is we're replacing that old post-war you know the last vestiges of the breton wood system with this new i don't know what's called genius act system all right so next what happens what happens once this stablecoin dollar becomes like they're all the dollars right well at some point if your stablecoin you know money supply is bigger than the 100 trillion dollars or you know multiples of that that's in this offshore dollar system and you're backstopping with treasuries eventually you need something else to repeg your stable coins too so and that's where the bitcoin reserve this was going to be my question because like i i see the transition that you're talking about from the petrodollar to this onshore dollar system that's stable coins backed by treasuries what i wasn't sure is where bitcoin plays a part but this is where bitcoin plays the part well so think about this so what happens when stable coins supply and this is why go into coin market cap or whatever like the majority of liquidity is in right now it's old tether usdt tether tether's in process of transition another another key highlight we talked about the executive orders the 2024 elections um the fork in the road in monetary history i want to say was it december 2023 where tether made the announcement that they were cooperating with, I want to say it was the FBI, for enforcement of the United States Treasury's OFAC sanctions.

1:41:02That was a huge tell. Now, Tether is on board with what was happening when we talked about the United States, the American capital base moving in one direction over the 2010s. That event, and I don't know, Tether guys, I've never met them. I don't have any inside information, But looking in hindsight, that announcement from Tether, which preceded, I want to say, the election result, that was a huge directional tell that they were going to cooperate with this new version of the dollar that was being pushed through. So if you think about that quote, 2020 taught us nothing stops this train. We're all stuck in this mindset that this whole system is still running on the architecture, the blueprints, the players involved, the incentives.

1:41:50It's just what we saw in the past. Like, you know, we had 2001, then 2008, then 2020. We're just going to get more QE, more ZERP, more stupid fiscal spending from Congress. I think the game has changed and it's very clear. All of the players who, you know, were cooperating around this old business deal, you know, that lasted for 75, 80 years. they're now like maybe it's too far to say they're at war with each other but they're not seeing eye to eye and uh they're definitely not cooperating anymore and the u.s is definitely uh now asserting uh itself uh on the international stage and and not just geopolitically what we've seen uh during 2026 but it's now an extended story like that they're asserting themselves and the international capital markets arena, which is just one plane, right?

1:42:53Capital markets are war by another means. So when we say nothing stops this train, right? It's like, well, there's another train and it's like, you know, that's what Scott Besson represents, all of that. So we'll see how this plays out. But what does it mean for monetary policy? Because like either domestically or globally, whenever there's a problem, it's either stimulus, money printing, swap lines, whatever it might be. How do they do that in this new system? Well, did you notice how much of a fit that the legacy institutional media, politicians like Elizabeth Warren, that camp, Christine Lagarde at the ECB, everybody from the establishment, from this prior business order, who was like an elite who benefited from being at the top of the system did you notice how much of a fuss they raised about kevin warsh and his nomination not really no oh maybe i wasn't following it close enough though oh it's a oh central bank independence like danny this is terrible we need central bank independence i did see that yeah yeah yeah uh this guy is going to be donald trump's sock puppet like the framing of what Kevin Warsh and his chairmanship.

1:44:12You haven't seen anything from a Fed Board of Governors nomination until going back to the Judy Shelton nomination. I want to say that was 2019, thereabouts, in Trump's first term. They raised a huge fuss about that for Judy Shelton's, I would just say more Austrian leanings in monetary policy it's like no no we can't do that we got to stick to the Keynesian consensus we can't take any non-orthodox views here at this around this boardroom we do groupthink so Kevin Warsh what he represents so notably Kevin Warsh was nominated to the board of governors back in the 2000s by George W. Bush and he was very anti-money printing then wasn't he?

1:45:03Exactly. He resigned. I want to say 2011 or 2012. Once he saw the GFC response, he's like, I'm out. I talked about this era of Fed dominance. Federal Reserve was going to dominate monetary policy, public policy as it relates to money itself within the domestic United States. and it was going to cooperate in a subservient world to the to everybody that this global offshore dollar standard right that it proliferated kevin worst was the opposite of that like he's not a keynesian he's he's a monetarist and you saw that at his first um press conference it was almost two weeks ago now but he came out and he said we're getting rid of all these things uh the dot plots forward guidance what is this whole like we're getting into like jargon here But forward guidance is this monetary, it's a central banking policy framework.

1:46:04It's a 2000s era development. Like this wasn't handed to us like on the stone tablets at Mount Sinai, right? This is new. We literally made this stuff up in very recent history. But the idea is if the central bank communicates to capital markets what it intends to do with short-term interest rates, the rest of the livings out there, the private sector, banks, etc., but also households, businesses who make credit borrowing decisions with their real economic activity. if the fed can just be up front and telegraph with these dots what the interest rates are going to be for the next three years and then longer term um it'll be a self whatever reinforcing reality and we'll just spin this into like well it'll it'll the castle will just build itself up in the sky is kind of the framework it's it's it's truly just wizard of oz uh bs um but it really is like part of your central bank dominance framework like you really believe that if you as a central banker if if your economic models and your you know dsge econometrics all this stuff what you say gdp is going to be what's what's unemployment going to be all this stuff they're all wrong by the way they never they never play out their their track record is terrible for the you know 10 10 or so years that we've been doing this these were Bernanke inventions uh the dot plots i'm talking specifically but um it's it's all like um it's like tinkerbell clapping for fairies if we all believe in her this will work out kevin morse comes in on day one like so think of him as like uh the new manager coming into an existing operation or like a new coach coming in to coach a sports team this is the way i framed it on my podcast after you know we saw that that first um uh press conference what you come in to do if you if you want to instill change in like an organization that maybe used to be great or was a winning or functional organization and it's gradually slipping and and losing it's uh like like you know is it good to great framework well you're not even great anymore you're you're slowly just figuring out ways to explain away your lack of success or losing.

1:48:38If you're coming in as a new manager into that environment, if you just try to change processes, whole hog, cold turkey, all of that, almost guaranteed you're going to run into resistance. The people staffed around the building are from that old organization. So if you come in and try to change things and tell them what not They're going to reject you, right? So what he does is he comes in, he says, number one, we're not doing forward guidance anymore. We still did the dots. Everybody submitted a vote. But I made it clear I didn't submit a vote or I didn't submit a dot, which is a leader, what you're doing.

1:49:17You're modeling behavior and you're telling people, say there's 11 other people who are voters at this meeting. You're literally showing them as time goes on. It's like, well, if you don't want to do it, I'm the manager around here. Like I'm the one who would hold you accountable. So if you don't do it, what I'm telling you is like, you're not going to be punished for not doing this. And then over time, same way, like sports rosters or like they'll, they'll, they'll transition over time. Same way. Like you're going to see new people come in who are more aligned with the view of like where the dollar is going that we talked about and this reform that's happening down to the structural level at every level of the dollar um and you'll get new staff in place right so the play the the players playing with like victor wimbanyama this year like go through an off seat you're going to bring in new players that play with him and and do what the coach wants to do yeah and so it's a it's a it's a slow process but what we're what we're doing away with is this forward guy of guidance mumbo jumbo which is really um what it really is is backstop it's ammunition for the Fed to do all of the things we talked about, QE, ZERP, and then accommodative fiscal stimulus to support this offshore dollar framework.

1:50:37That's all being thrown on the wayside. And then slowly, you're going to see a less Fed-centric monetary system within the United States, and it'll get back to being a lender of last resort, specifically for money markets or short-term commercial paper markets or SOFR or enforcing these policy interest rate corridors within those overnight capital markets that we talked about that were so important with LIBOR to SOFR, all of that. That's interesting. So your take is they've kind of brought Walsh in, they're going to build the team around Walsh and it's not that he's going to necessarily end the Fed, it's they're going to drastically reform the Fed and its sort powers yeah exactly exactly so it'll be a totally different like the fed has changed like we talked about the dollar um going through all these different metamorphoses um over the history of the united states i mean the federal reserve act of 1913 like the fed we had in those eras it's not the fed we know today right you all you had was the regional banks with the federal reserve act you got this um you know the washington dc like the mothership fed in the 1930s uh under fdr and then it just became this centralized behemoth uh that it is today but that was a process uh to get there so we're we're going through one of those processes so as we change this uh as we just re-architect restructure this dollar financial system um the the fed's role will change So the way I think about it, there's$3 right now.

1:52:16There's, all right, the easy one for Bitcoiners to understand is the stablecoin dollar. But then there's also two flavors of the stablecoin dollar, right? There's Genius Act compliant, which are going to be backed by T-bills. And there's going to be non-Genius Act compliant, which is like old tether that's going away. But stablecoin dollars with Genius Act, they're anchored into this onshore system through the treasury bill. All right, so that's key. and then you've got the onshore dollar that's our that's our u.s commercial banking system right it's your fed wire members you could also you could also say like credit unions in the united states there's some other entities involved but like the fed is the king of the hill and then the offshore dollar is this hodgepodge of just purely liability-based dollars where your dollar is only as good as the credit worthiness of your counterparty so like let's say you're hsbc hong kong or something like that or you know whoever like and you've got all these money center jurisdictions like the big ones tokyo london frankfurt uh i mean new york would be the western hemisphere sponsor and you got all these secrecy jurisdictions like the cayman islands panama gibraltar dubai uh which are like part of that that network um but that offshore dollar so what you're what you're actually doing here if you read if you read the history all of this you're actually like the name of the game is to be able to enforce par like enforce your hundred cents on dollar your claim same way that stretch is trying to defend par measuring hundred dollars right on its uh perpetual preferreds all of these dollars are going to be tasked with um maintaining their hundred cents on the dollar so if you think about the stable coin genius act you're you're defending par by anchoring to the treasury bill right which is a short duration um you know treasury bill and they limit you got to be backed one for one stable coins outstanding with uh treasury bills in custody onshore so there's a good mechanism for depending defending par versus like algorithmic stable coins would be an example let's say you you want to try to make a dollar you want to try to make a u.s dollar but you're not going to interact with uh the the american banking system well good luck we've already seen what algorithmic stable coins do you can't defend them it's very hard um you got to over collateralize all this stuff but at the end of the day it's it's a very tough game.

1:54:55You're fighting a losing battle. Okay, so the onshore dollar, you got the Fedwire banks. They have a very robust mechanism. This is why your JP Morgan dollar, your Wells Faro dollar, your 100th smallest bank in the United States, if they're a Fed member, because you have the Federal Reserve System, they've got a defensible mechanism for defending par their 100 cents on the dollar. Now, if you're offshore, you don't have access to the Fed. This is where you need your treasuries, right? You need that dollar flow, which is draining out. The US is exporting treasuries to the rest of the world, but what it's actually doing is it's leaking economic value from its own real economy to the rest of the world to prop up the offshore dollar.

1:55:42So if you're, let's say, some Cayman Islands bank, you've got to reserve a whole bunch of treasuries to backstop all those IOUs, those liabilities you've underwritten on your own balance sheet to keep your money good. And it's a vicious market. If these arbitrageurs can spot weakness, like if you've got a$100 billion prize just sitting there like a sport animal, like these people hunt this and they'll go and they'll attack you and they'll they'll they'll extract your hundred billion dollars of of weakness and and they'll put it on their wall like i'm not kidding this is this is how these this is how the game works it's a poker game you lose the hand there go your chips right so the offshore dollar they now have to defend par right and that's where it gets hard and that's why you like follow the tick reports all this stuff you see like all right who's buying treasuries and yeah that so that's going to be the name of the game these next few years especially as what this administration is doing and we say that the the trump administration it's also the military right like if you think about this thing as like a giant game of risk i don't think trump is like the only one playing like what what is he announced like 40 5d chess or whatever and he's just the only one playing this game it's like no the generals the war planners they're they're the ones actually like organizing strategy and like the president has to get it and understand it and ultimately as commander-in-chief like make the go no-go calls but there's there's generals in the playbook yeah there's a war college all of that and then the same thing for the capital market side like there's definitely like the astute players they they know how this money game works they've designed this strategy they've been doing it since before Trump even came down that escalator in 2014.

1:57:45So there's a lot backing this. I guess we'll just say that. So there's a totally different train. And that's where I think the framing is like, can you stop this train? If you're the offshore dollar, you've got to defend against this train. And I mean, if you have to place chips on the table, you've got the onshore dollar, they've got robust mechanisms to defend and also like a military a capable military um they've got they've got the stable coin architecture set up ready to go you don't just pass a major piece of you know legislation that that changes the dollar framework and you're just going to say like as history plays out like is this thing going to be important or not it's like no that's not that's generally how that's generally not how this works like another famous act like when i foot to that the history of the dollar pieces of eight by uh edwin vr jr for anybody listening that's that's like your seminal book on the legal architecture and structural framework of the dollar changes uh of the united states history but in general like if you see something of that important or like that scale coming out of congress like genius act was in 2025 and all these other developments we've been following along since the 2010s but really kicking up with the November 2024 elections.

1:59:04It's like the line when you're looking at screenwriters, right? If you introduce a gun as a prop in Act 1, it has to show up in Act 3. So if I'm placing bets here, it's like, all right, this is the way the dollar wants to move. So you want to organize your behavior, your portfolio allocations. I'm a fixed income manager. You want to build along that because like that's the that's the the tides that's the oceans and like it's the big picture those are the forces you can't change same thing with let's say bitcoin treasury company so we haven't really heard this like enter the zeitgeist or the communications but it's like guys your your dollar strategy here has to foot to the big picture of what's going on and um you know maybe i think we're getting that yeah the really interesting thing to me here is like I've had a lot of people on who talk about how the dollar Ponzi can't continue.

2:00:04There's going to be a big print. And it's really like, can it survive? How many more big prints can it survive? All this kind of stuff. And it sounds like you're saying it doesn't matter. The dollar's already changed. Yeah, exactly. So same way, the greenback. We're like, well, yeah, can the union just keep printing greenbacks? Well, it's like, well, that's not the right question to ask. Can they print and procure the resources they need to win this competition versus the Confederacy? The same thing in other conflicts, World War II. Can the US and the UK procure through the financial system, can they raise the capital they need to defeat the Nazis?

2:00:51and also defeat the Japanese imperialists in the Pacific theater. That's the question. And I think, yeah, if you're like, Matt, this isn't World War II or the Civil War. It's like the Secretary of Defense just gave you a huge signal. They changed their name to the Department of Defense is now the Department of War. I think that's your tell. That's your PR. They view themselves as at war. Oh, man, it's so interesting. How are you for time? Because we've been going for nearly two hours, but I do have more questions. I'm good. I'm good. Okay, cool. Because I kind of sidetracked it before a little bit when I was asking you the role that Bitcoin plays.

2:01:31And I want to get that a little bit more concrete in my head, like how Bitcoin plays its part in this new system. Okay. All right. The way I view it, all right, Bitcoin is like it just wore it on its sleeve in the Genesis block, right? The Chancellor's on brink of second bailout of banks, published in the Times of London, right? Like printing presses are literally down the street from, you know, Lombard Street and where this problem originated from LIBOR, all of that subprime mortgage originations in the United States anchored to like variable rate. LIBOR was the reference rate. What we realize there is, oh, gosh, we can't just squeeze all this, you know, blood from the rock.

2:02:16That is the United States economy. me. It's like, there are limits to this system. We're going to need a new framework. All right. So what was Bitcoin? Like in my mind, like we've heard it described as a solution to the Byzantine generals problem. It's like, okay, dive deeper for me because that's just jargon. In my mind, what it simplifies down to is it is a level playing field as a money where any participant who comes in cannot change the rules of the monetary protocol. So what it does enable is a fair playing field for two...

2:02:59Unaffiliated or disinterested parties to come together for an economic transaction and settle together in that base money. And so who are these two participants, right? Well, think about it. It's like, oh, the oil is leaving Iran and it's headed to China. What are you going to pay in? Well, you got to settle in a money. So at the end of the day, you got the businesses, an oil refiner in China importing from the producer in Hong Kong. within the financial endpoints of that transaction. You got a bank at both ends. Prior to this, they were dealing, the world was on this global dollar standard, which was running through centralized intermediaries.

2:03:37And what we realized is those centralized intermediaries over the course of a hundred years or longer, they become corrupted. They fail to like political influence or capital influence or whatever it is, the playing field could definitely be tilted from one counterparty away from the other. All right. And so that's what, like my mind, that's what Bitcoin showing up in 2008 arrives right at the Lehman collapse. It's like problem solution, right? But what it is, it's that level playing field money that allows for economic trade to take place without or by bypassing these centralized intermediaries that have become corrupted over time so if you think about what's going on this adoption of bitcoin as as a reserve asset doesn't happen overnight it starts off as we know like early days it's hobbyists it's it's anarcho-libertarians and then it moves into i don't know crypto bros whatever and then at some point we get into like u.s public equity markets um the non-operating companies like you talked about this before like block is actually running a business and accumulating bitcoin spacex is running a real economic business accumulating bitcoin strategy does have a real economic business and is accumulating bitcoin but the tilt has gone very clearly with management's focus like in my opinion on the matter or reading this as a third-party observer it's definitely skewed more towards just pure play financial financialization type of player versus running a real operating business but i think that like what these bitcoin treasury companies you know represented for capital markets integration and you know the 2020 to 2025 era that was part of the process of moving towards more mainline adoption so um what's a signal like in bitcoin you'd be looking for if this is getting deeper ingrained into the financial system well it's like well first blackrock launches the etfs and like it's like the the ibit bitcoin like it's it's it's its single largest uh product revenue line or like an individual uh revenue line at this point so they see it they're like oh well we got to get a bitcoin uh income statement revenue line uh for all for the future of our company same thing morgan stanley then is like oh we're doing a uh an etf uh this is in like the 2026 era and like things like this week you see schwab like a legacy brokerage which itself at one point was a disruptor of the uh stock market brokerage industry the way the way um uh equity trading used to work um it was basically limited to your high net worth ultra high net worth families and huge commissions for shares to trade so it was like it was a it was the wealthy man's game like you you wouldn't see your uber driver today you know giving you stock picks uh back in 1960 or whatever like charles schwab when they came in they were the disruptor uh what what he did is he said oh we're gonna use uh mainframe technology when get rid of or eliminate you know back office you know pen and paper ledgers all of that stuff uh processes for um execution and settlement of of trades for our clients so instead of a hundred dollars per trade we're gonna we're gonna charge seven the industry was like you idiot you're killing you're gonna kill the the the golden goose what are you thinking no they hated him.

2:07:19And he did it. And what he actually shows is by bringing costs down, you actually get more trade and you expand your market instead of just wealthy business owners in your town or maybe a few people in every city having access to buying stocks on the New York Stock Exchange. You now have Robinhood. Well, that's where we go as the logical end point. There's a whole different geopolitical bag of worms to unpack there. I do have a take on that, but let's not go there. um cut it down to seven but you get this massive market and boom like it's just wow the pie is way bigger and it's like yeah i brought you 10 golden gooses where you had one before but um charles schwab um in the last like few weeks they opened up um trading of not bitcoin etfs like for their client base now they're letting uh their customer base buy utxos directly i don't i haven't i haven't piloted their product but um i don't you know i don't know if you can withdraw to like a self custodied wallet but that's a huge step right so you're cutting you're cutting middlemen like exposures and that hot between the actual beneficial owner now there's no um there's no blackrock there's no etf wrapper that you have to buy like if you're a charles schwab client to get access to your bitcoin and that's a huge tell on where the u.s securities market is going uh for the years ahead so this went kind of under the radar and and um financial media but it's a big deal in the back end like the back office side of the financial industry so the way corporate bonds used to work like settle prior to 2022 they settled t plus two so if i bought a bond today on wednesday june 2024th we would actually not settle the transaction until friday friday morning open a business right so and this is the way it'd been forever uh it's like this podcast this is podcast t plus two t plus two yeah it'll be out on friday yeah awesome um but in uh 2022 we shrunk the time for back office settlement of corporate bonds and basically all non-us treasury bonds used to trade t plus two we shrunk that to t plus one this um april and may you saw all the leading exchanges in the the u.s securities markets so nyse nasdaq cme they said they're going 24 7 trading with real-time settlements so you can see where the puck is going here um so the the whole tokenization uh trend right this idea so if you look up like the real world assets tracking like what uh what is what does davos man want to do he wants to tokenize everything like that timberland and you know the canadian whatever alberta british columbia tokenize that um that becomes the collateral for this offshore system which won't be an offshore dollar system anymore so instead of treasuries we need something else that's being taken away we need your timber we need your commodities or it could be we need your equity so if you go to the the trackers right well the number one tokenized security is actually stretch uh by total assets then behind that it's actually your ai plays like tokenized micron um but what's going on is it's that same way you know in my framework that anchoring of um like the offshore capital market system want to anchor to the u.s dollar and then kind of squat on uh that real value being created by the domestic economy same thing so let's say we want to tokenize tesla shares tokenize mstr tokenize spacex whatever like If you look at the graphs on just total capital outstanding in that it's the offshore bucket shop of crypto tokenization.

2:11:23It's the replacement plan for this offshore dollar in my understanding of what's going on. What the U.S. capital players are saying is like, no, no, no, no, no, no, no. You're not going to disrupt us here. NASDAQ, NYSE, CME. they're going to match you feature for feature on liquidity. So they're going, we'll allow 24-7 trading. We'll allow near real-time settlement. So your brokerage coming on on Bitcoin, what do you get with Bitcoin? Bitcoin is not yet your base money. We have to work up to that. It'll take at least, I mean, think in decades to get there. But if you're thinking about 24-7 trading and liquidity pairs, you need that, that you need Satoshi's solution to settle frictionlessly on that level playing field in real time to accommodate that tokenization.

2:12:22But what it really means is 24-7 near real-time settlement of securities and trading, liquidity, all of that. And then the other thing you see is this adoption of prediction markets, right? So CalC, Polymarket, all that stuff. There's also huge developments there with the CFTC. And you can see this like a few weeks ago, the CFTC, the US regulator for commodities, gave CalC the approval to launch their own Bitcoin perpetual futures product. And that actually like hit the stock prices of the legacy players in the US. So CME, Intercontinental Exchange, they were down like 8%, 10 % on that news. My read on what happened there is the kind of the legacy incumbents, their shareholders realized like, oh, we don't have a moat anymore.

2:13:20The disruptors now are going to encroach upon this territory. So we're going to have to respond. And they have equity exposures. like they're investors in polymark calcio they see where the puck is headed but um you can kind of see slowly this thing coming together and it's going to go extremely fast because like the 24 7 trading for um commodities like in july um comex is going to start um settling gold futures 24 7 for the micro contract and then oil starts like the next month so those are your two biggest uh commodity pools for for liquidity most important um commodities and hard commodities in the real world um cme is already there and uh what you see with these like uh what do you call like prediction markets whatever which are just starting to really like the growth is huge like if you just look at the chart the assets involved in all this complex it's just like like you can see it's like oh this is like the internet in the 1990s and this is this is where capital is going um if you look under the scene at how polymarket works right they're binary contracts it's 100 cents each the the person with the long they own yes the other counterparty owns no they add up to 100 cents on the dollar that's all there is and uh the way polymarket works i found this very interesting like their funding and stable coins uh not the u.s the u.s app is just a sports betting app it's very early on but what they do for the the global market for poly market you fund in usdc and then each counterparty in a given contract is fully collateralizing their position let's say it's um what is it 100 cents for yes no i don't know big event england wins its next world cup match right yes maybe they put in 60 cents no puts in 40 cents that's 60 cents of stablecoin adds up to 100 the exchange here just takes a fee they're not like as opposed to cme which is fractional reserve right you put down could be like 10 cents of margin right and this is where you get the basis trade all these carry trades you post your treasury as collateral you buy 10x that you lever up and you you ride the carry money magic money tree right with the with the poly with the poly market world and where prediction markets are going stablecoins all of that think about this the long and the short the contract is fully collateralized they're funding in a genius act stable coin which is reserved uh one-to-one uh with treasury bills so if you think about like the the the hoops that uh these positions like where does the counterparty go start off long and the short you got 100 cents on the dollar that's in sitting in circle usdc behind that is a treasury bill and there's some yield generate on that like i don't know 3.6 today and um that yield is is um being passed to all of the um participants up this value chain so if you go look at polymarket what they're actually doing to incentivize the build out of volume they have these special contracts or events like um 2028 elections or bitcoin price is one of them um where they'll pass through the interest on those t-bills to grow liquidity and build up the market share so it's part of this stable coin adoption story and this doesn't like just want the audience to know like hear me out it's like am i a stable coin maxi no like these are all like it's it's ious all the way down but um what i'm talking about here is a system like a framework that gets us to that end stage i think that everybody on the what bitcoin uh did audience wants to see which is a like a financial system if it's not hyper bitcoinized and we're not all settling in sats well at the at the next best thing would be a financial system where your counterparties at the end of the day have to reserve and a sound money they have real skin on the game and for like for a base money behind their swaps their collateral all of that if they get it wrong or they try to bend the rules and steal purchasing power from the rest of the market uh that that they're not entitled to that there's no bail out coming and uh they'll have to post a hard collateral and and risk losing something of uh of uh dear important which is your utxos so bitcoin ends up just being sort of the the the base the base layer of everything the base layer of the financial system yeah but and then the answer is like what timeline are we thinking on right because if you're thinking about a dollar order and you're you're trying to you can't cold turkey this post-world war ii system and this framework and just move straight to hey we're fully on bitcoin and all of that value uh tied up and stored in the hundreds of trillions of dollars has just evaporated overnight.

2:18:33That's really like read when money dies about what happens to a society when that happens. You probably have it on the bookshelf. I actually recently bought it. I've not read it yet. Okay. It's not a good tale. So you don't want to live through that. You want to work through this. I mean, it's like the Indiana Jones scene where he's swapping out the idol he's after with the bag of sand. It's like you want to do that to the best degree possible because there's a lot of people counting. like they've saved their purchasing power in this system and if they get rug pulled like go look at weimar germany this is like i did a big deep dive on bismarck right because i was like looking into social security right autovahn bismarck in germany created the first um nation state level public pension scheme or mandatory retirement savings scheme i asked okay well it's probably not in in survival anymore like how did it fail because everybody who's looking for social security is like all right how does it fail right you look at what bismarck did it was actually the loss in world war uh world war one uh and then the weimar hyperinflation that you it didn't actually like totally kill the pension system but for that generation they rents their claims like they they wiped out their purchasing power um and and what you ended up with was like your grandmothers all lived their end of life period and complete destitution.

2:19:59It's just not good for societies to go through that social breakdown. Once you get in that state, if you look at the Russian Revolution, like the October Revolution, it almost happened in Berlin coming out of World War I as well. That's where the Bolsheviks come in, the disorderlies. If you think this Mamdani situation is bad in New York right now, just oh wait wait wait and see what happens if you have a complete monetary breakdown um it is it is very difficult to defend city hall all of the uh governance institutions away from uh what are ultimately i think most of society would agree the people we don't want holding the keys to the car all right so if you can if you can like do this and preserve broad system stability over the course of let's say like decades or conduct this handoff over you know a generation or two you can get through like your society your civilization we can get through this process without face planting and um the problem like the the entire global economy like talked about this starting as like the western allies coming out of world war ii running this coalition the other the other side of that was the russia the ussr that's collapsed right we've incorporated china japan the whole world is in this basket right so if this old system just base plants here and we're like oh a dollar is going to hyper inflate tomorrow it's like okay but you do realize that it's going to be extremely costly disruptive chaotic random uh good luck defeating the Marxists, the Bolshevists, all of that, versus if you can do it and maintain stability, we can actually get to that world we want and we actually don't have to go through a century of humiliation, like a wasted century, something like that.

2:21:59So the way I'm seeing this play out, this dollar transition, it's happening. I'm not a fanboy cheering for this. It's like, no, I can, my take, reading the players, like Genius X, stable coins. um we're going that way that transition away from the offshore dollar towards the stable coin dollar and then the reformat of u.s onshore regulation all of that is happening and at the same time from these same figures like scott vicent i mean not just in his testimony to congress like he was at the pub key washington dc opening night like someone spotted him in a photo it's like oh their signal there kevin warsh also i mean he does some crypto investments all that stuff but i understand he's uh favorable to bitcoin as as well uh with his other shitcoiner bags as i understand it that he that he uh has uh capitalized and made investments into but um yeah the way i see it and congressmen we have a ton of congressmen who are supportive of bitcoin and you know 10 years ago that number was probably exactly zero and you know we don't have 215 votes at this point i don't think but we have more than 22 sponsors on that bill i think uh was the last i saw so this is that process playing out it's not a guarantee that we get bitcoin in this process we may end up i don't know stablecoin shit coins all of that and uh we short circuit ourselves like we have to actually go out and make it happen so this is a global audience we're talking to but like this november election and we're two hours and 17 minutes in and this is the payload like i know it's hard right now to see what's going on geopolitically we thought we were getting out of forever wars what are we doing in iran what are we doing in venezuela it's part of this fourth turning um but the biggest thing we have riding on this is like we need to if you want that that um that strategic bitcoin reserve and you want the dollar system to go this way and lean into Bitcoin, we have to elect the Congress to make it happen.

2:24:07And that is the straw that stirs the drink at the end of the day. It's a United States... We're living in a multipolar world, but the United States is... Maybe it's going above the... I don't want to offend anybody and say it's the biggest, most important player, but it is. So if we do that, then it will put us on that trajectory towards that Bitcoinization endgame that I think most people listening here to WBD would agree they want to see in the world. Matt, this has been unbelievable. This is the best explainer of the transition to this potential new future that I've ever heard. It makes me so bullish on Bitcoin, the fact that we're sat at$60 ,000 right now.

2:24:57We're still so early. There's so much winning to do. i agree at the very start of the show you were talking about like how you really don't want to position yourself during this transition you don't want to be like way out on the risk curve bitcoin by the market is still perceived as being very risky i think if you like understand what bitcoin truly is you don't necessarily see it as risky as that but how do you think it it will sort of perform through this transition what do you think happens to bitcoin so the name of the game here you got to realize like back in the 2010s right i was young had no capital i was selling bitcoin for let's just say like payoff student loans thing like that like things i wish i didn't have to do and could have held those early stage bitcoins that i i no longer have those cost basis so what i would say so early on in those days i realized like capital was dear, but I didn't have the ability to hang on to those UTXOs.

2:25:54Those decisions, if you're young right now, you realize if you're parting with your Bitcoin or if you're buying a credit claim on Bitcoin or someone else's IOUs and they'll pay you some percentage of the Bitcoin and they'll reduce the volatility for you. I think over this whole process, what we're learning, we're all fighting over those 21 million utxos and i mean fighting literally in some sense right iran if you look into it like um their cost of energy right i don't know if this is accurate or not but once when their oil was sanctioned their uh access to the dollar system shut off oil was trading at the equivalent of like 12 cents a gallon in iran so they just like dirt cheap and energy at that price like plug in your bitcoin miners doesn't matter if it's 60 000 or you know down 50 on a drawdown it's still the most like the highest and best thing you can do with your energy resources at that point at any price of bitcoin is plug them in mine the bitcoin get a hold of those utxos um so i think like yeah we talked about what do you do as an individual here name of the game it's still i know it feels hard in this cycle and i think whatever happens to these treasury company a lot of people got caught up in that uh if it gets worse from here this is this is june 24 or june 24th when we're recording this it was a bad day on um the equity or the common equity the preferred shares uh across the complex so i don't want to kick any any of these management teams while they're down they've got a knife fight in the alley they need to get out of but um what whatever happens here people should like realize those bitcoin you own you hold custody of and it like even if you can't manage your keys yourself like if you don't want to manage a hardware wallet there are other collaborative custodians out there who can give you access to keys and make sure what you own is not paper bitcoin at the end of the day so as this process goes on it's going to take years we're going through one of those other one of those bear market valleys for a lot of people this beating we're taking is going to be extremely hard to hold on to your utxos through and that's the definition of bear markets.

2:28:26If it were easy to hold for the long term, we'd all be in yachts and all that stuff. So I think, yeah, just that mindset. I know some of our friends say at Matt O'Dell, stay humble, stack sats. It's going to be an extremely volatile geopolitical process as well. I know we have that MOU signed between the US and Iran. What it really is, it's 60 days. We have to get to the next stage of this. And it's over like the nuclear question. Like that has to be settled. I don't see that getting done by 60 days. So all of this volatility, all of this chaos, I hope it's resolved, but I'm preparing like my base cases.

2:29:13Like we're not through it yet. um so yeah batting down the hatches everybody uh plan for the plan for the long term and at the end of the day um yeah you see in the like the bear markets the drawdowns go on x like all of the non-bitcoiners they're dunking on us right now um but uh i think one of my friends uh parker lewis put it well like back when ftx collapsed like day of we were at a conference uh pacific bitcoin down in southern california conference that no longer exists right just tells you how how fast these things move, like how much happens in a short amount of time. But I was down there, we were working on a business deal and FTX collapsed.

2:29:51I go, this is terrible. This is so bad. This sets Bitcoin back for years. And Parker's like, no, no, no, no. I see a totally different way. This is fractional reserve Bitcoin. We're getting liquidated at all points in times, the way he thinks about it. Someone has to own those 21 million units and we're all just you know trying to get our claim maintain our claim own as many of those as we can over time and be able to hold on to them too because defending uh is also part of the game so yeah that's what i would i would say as as the uh the end state to this and then also there's agency i know you had simon dixon on and uh recently and he went deep into this and yeah he has some coverage, you know, intelligence community, all of that stuff.

2:30:41I don't get down in the weeds, like to the full degree. But I think where I would say I disagree with him is in his framework, he just kind of puts it aside that there's no, or you can say the sovereignty movement for each one of these nation states, but even more important is the American sovereignty movement, which I think is going on. And any given leader, like you can say, if Trump is your figurehead, he may be, he may be compromised. He may not. So don't, don't ever put all your chips in one man. We have yet to have a George Washington arrive on the scene or an Abraham Lincoln arrive on the scene.

2:31:21And, and, and my reading of, you know, what's going on, but this idea that we, as the, like the electorate, the people, we have no control over or no agency in this process. I think we're actually a lot more powerful than you think. And what we've seen take place in the pull of the center of gravity of the U.S. dollar away from that offshore dollar, away from London, towards the domestic United States, and it sits in New York now as the center of power. But within the United States itself, that power center is also decentralized. You have Dallas spinning up the Texas Stock Exchange. You have Miami spinning up as a major capital market center.

2:32:12A lot of the finance industry is moving down there. Citadel, everybody's setting up their offices down in Miami. So like even within the US, the capital markets, the center of gravity is just is distributing as well. So my point there for people, I do think Americans, you have agency. You've got the most important government structure in the world where the people are the sovereign. Like no other constitution has that like framework at the base level. and I think yeah this is this is the time to not just lose lose um conviction in bitcoin but don't lose your conviction in you know america itself you know we're celebrating the 250th anniversary um I know I know you're not an american but like we have work to do so let's let's get out there and go do it so yeah it's a bear market amazing I love it man this has been awesome um before we close out though just tell everyone where they can check you out on substack podcast everything that you're doing all right on x my handle is levered usts it's just a play um just took the handle it's free real estate can't believe it but yeah that the offshore dollar system it's just levered usts all the way down um that's you that's where you can find me day to day and then um my business partner cameron at suka and i do a weekly podcast where we just take the biggest news stories of the week we crunch them into one update try to get it done in 30 45 minutes and give you the the real-time update on all these things and try to try to try to get an audience the the core of what's going on in the big picture developments and that podcast is mindprint hash or youtube channel sub stack you should be able to find us just about anywhere on that one awesome i'll make sure all the links are in the notes um one of my favorite episodes is done in such a long time thank you so much man we'll we'll have to do it again at some point i'll maybe I'll come over and we'll do it in person next time.

2:34:10Matt Dines:That sounds awesome. Thanks, Danny.