Trump's Secret Plan for a US Economic Renaissance | Brent Johnson

27:05I think they would be cutting rates in unison. So in other words, Warsh could come in, cut rates, do two or three cuts in the next year, have rates at two and a half percent, which is still fairly low, but still fairly high on a relative basis. You know Trump is going to spend money through stimulus and the big, beautiful bill and all the other things that they're going to try to do. And so you kind of have, and you already have everybody needs to be, you know, long the dollar anyway to operate on the global stage. You have the potential for flows to continue coming into the United States and push this economic renaissance that Trump so badly wants.

27:51And so I think Warsh and Besant kind of understand this. In other words, if you take rates from three and a half to zero, you know, Trump would probably love that, but that would also be a signal that something is wrong, right? Why are they taking rates from three and a half to zero? And if you don't get paid to sit in the currency, you could actually see that currency leave and go somewhere else. So again, I'm not saying that this is what they're going to do, but I think it's really important to understand it as a concept and why Warsh might not just cut rates immediately and why not doing so might actually still help the US.

28:34I've got so many questions in there. So in this framework, why does percent want a weaker dollar? How does that play into this? Well, so I think they do want a weaker dollar. And I'm not sitting here saying that Trump wants a strong dollar. But I don't think they want a dramatically weaker dollar. So some people are saying that Trump wants to devalue the dollar and they'll say DXY going to 75 or 80 or whatever it is as a result. Listen, that could happen. And if that happens, then asset prices are probably doing very well because for that to happen, and there has to be a lot of liquidity. So if that happens, we own a bunch of assets, that will be fine.

29:17But I don't think they want it to go that low. Here's why. Okay, I'm gonna try to explain this in simple terms, but there's a band within which, if the DXY trades within this band, everything kinds of works. If it goes to the outside higher than this band, or if it goes to the outside lower, things start to break down in the global monetary system. So I'll explain why. So in our current system, money is loaned into existence. And when it's loaned into existence, it has an interest rate attached to it. So anybody that borrows money and then puts it to work has to get a return that's higher than that interest rate.

29:56In financial lingo, that's called a carry trade. You're borrowing money. There's a certain amount of carry that you have to exceed. And if you can exceed the cost of carry, then you do the project, right? So anybody that does that on the global stage typically does it in dollars, both U.S. institutions and non-U.S. institutions. That's the euro dollar market that exists outside the United States. So the United States only has to do it in one currency, and that's the dollar. Everybody else has to do it in two currencies because they use dollars in the euro dollar market and then they use their local currency in their local markets.

30:38The problem is that currencies trade relative to each other. So if the carry trade is going against them in dollar terms, then it's helping them in local currency terms, right? And that's fine as long as the DXY remains in the span. But if the DXY goes to 103, 105, 108, now that dollar carry trade starts to go against them and it starts to hurt them, right? But if you take the other way, let's say that the DXY goes to 82 or 80. Now, their local currency is getting very strong, even though the dollar is getting weak. And not only is the local currency getting strong, that puts pressure on their exports.

31:23And as there's pressure on their exports, it makes it harder for them to exceed the cost of carry in their local currency terms. So now they start to fall apart because of that. So that's why I mean the dollar has to stay within this band for the global economy to kind of expand and function. If you go too far outside either way, problems start to happen. And so that's why I think the U.S. would love it if the DXY went to 90, 91, 88, because that provides easier exports for the United States. The dollar is not completely collapsed. It's weaker, but it's not completely collapsed. And the other currencies are stronger, but they haven't gone through the roof.

32:07But again, if you go outside that band, either way, problems start to happen. And so I think that's why. And I guarantee you, again, I'm not saying that Besson is managing based on this principle, but I guarantee you he understands it because, again, he was part of the team that made a billion dollars in a day doing this. Right. He understands these dynamics. So that's why I don't I think this may have been lost on other people. I don't think it's lost on Besson. yeah no i i can believe that besan's clearly a very smart person but the other thing that he wants is or he said he wants is a weaker dollar and he wants to be able to term out the debt so to term out the debt he needs interest rates lower um right if he gets that through wash then tell me how this imperial circle is going to work like who is the winner and who's the loser obviously us being the winner is everyone else the loser well it's a good question and it of depends on how fast it happens and over what time period.

33:03So remember, if you go back and you look in the early 90s in Germany, they raised rates on the short end. And when that capital flowed into Germany and the economy started to expand, long rates came down because it was seen as a growing market. If you have what is perceived to be a growing market, long-term rates will typically come down because it's a safer place to invest, right? It's when things start to go bad or when there's fear of high inflation where the long-term rates would go higher. So potentially, and again, we don't know. And actually, my base case is not that we get dramatically lower long-term rates.

33:49I think they probably kind of stay where they're at. Maybe they go down a little bit. But I think what Besant and Warsh and Moran and their whole team is counting on is a growing U.S. market that draws in capital from around the world and as an inflation fears continue to come down. And if inflation fears continue to come down and economic growth picks up, you should see lower long-term rates. And he has said he wants to get long-term rates lower and then he wants to term out the debt. I don't think that he's going to wait for zero to do that. I think if it's at four now, long-term rates are at four, I would think if it gets back to two and a half, 3%, he starts terming some of it out.

34:44Because remember, long-term rates at zero is not a great indicator either, right? I think his point with Yellen was - That has to be a cost of capital. No, exactly. And again, he's a markets guy, so he knows that there has to be a cost of capital. Maybe he doesn't want it to be at five or 6%, but I don't think he wants it at zero either. But if he could get it down to two and a half, 3%, my guess is that they would start terming some of the long-term debt out. And for those who say that they won't be able to sell the debt at that rate. I think they will. I think they would go around to the world and they'd say, hey, we are terming out all our debt.

35:21We're going to sell. We're going to buy back. We're going to sell new treasuries, 50-year treasuries or whatever it is, at two and a half, three percent, and you're going to buy them. And then we're going to take that money, turn around and pay off the debt that's already out there, right? And if people say you're not going to buy them, I think they'd turn around and say, yes, you are. And if you don't buy them, then you don't get a swap line anymore and you don't get preferred trade status and perhaps your tariffs go higher. I think this is the world we're in now. I think we're in the world where we're no longer cooperating because it seems like the right thing to do.

35:56We cooperate because the most powerful entity says do it. And, you know, people aren't going to like that. But I think I just think that's where the world is headed. I think we're I think we're I think we're going back towards power policies as opposed to efficient policies. Ray Daly was talking about that in this piece, saying it's we're going back to the jungle yeah in that scenario if he gets the economy chugging along things look good there's less fear of sort of inflation or deflationary bursts do you think that is a scenario where gold starts performing worse and bitcoin actually starts performing well because at the moment it is trading like a tech stock even though i think it's something entirely different potentially i mean if if you get if you get growth and interest rates start to come down a little bit, that could put, then I think, you have to remember, most people in the world don't want to buy Bitcoin and don't want to buy gold.

36:51Most people want to buy stocks, right? Now, I think the markets for Bitcoin is obviously growing because it's a great debasement trade. And I think, you know, people are starting to wake up. They see gold at 5 ,000. They say, hey, what am I missing? You know, but again, when things start to go crazy, the first thought in every person's mind is not let's go to gold or let's not go to Bitcoin. You know, it's not that people, there's not people that don't do that, but that's not the first thought of most people. And so I'm not sure that we're going to see gold double from here anytime soon. We might.

37:29And listen, I'm not selling my gold. I own gold, you know, exactly for these reasons. But, you know, gold came a long way really quick. Silver came a long way really quick. It wouldn't surprise me if they just go sideways for a while. Maybe they even go down and sideways for a little while until we get more certainty on how things are going to play out in going forward. But, you know, if Besant and Warsh and Trump and Moran and his whole team are able to boost growth and provide and not, you know, and have adequate liquidity, then you could see gold or you could see Bitcoin go higher. It wouldn't surprise me.

38:04But I think there needs to again, there needs to be there needs to be plenty of liquidity for that to happen. And I don't think that that happens as a result of a crisis or a deflation trade. In other words, I would not expect Bitcoin to perform well if we get into some kind of a deflationary wave. What if you could lower your tax bill and stack Bitcoin at the same time? Well, by mining Bitcoin with blockware, you can. New tax guidelines from the big, beautiful bill allow American miners to write off 100 % of the cost of their mining hardware in a single tax year. That's right, 100 % write-off.

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40:34and the only thing i'd push back on there and i think you'd actually probably agree with this is i don't think most people do want to buy stocks i think most people want their money just to not lose value um but i think that's that's fair but i think that ship has sailed um one of the other things you said in there is um you think trump's going to try and do stimulus whether that's through the big beautiful bill or something else do you think we have some kind of like if he gets this if he gets the economy ticking do you think he will start hitting the money printer again pretty hard

41:06Well, if the economy's humming, then he doesn't need to do money printing, right? So I think the only way we get QE coming back is if we get some kind of a crisis, right? So I think people need to remember that QE or, you know, quote unquote, money printing, that is a response to a lack of liquidity. If there's plenty of liquidity, they don't need to provide more of it. And it would be very hard, you know, to just start doing QE without a really, really good reason to do it, especially after the negative consequences of the last time they did QE. Right. They're sitting here calling Jay Powell the worst Fed chair in history, but they're going to do the exact same policies that he did.

41:54You know, so I'm not saying they won't do it. If liquidity dries up and they need to do it, they will absolutely do it. But I don't think, first of all, I don't think they want to do it. And second of all, I don't think they would be doing it by themselves. I think the rest of the world would be doing it as well. But I do think they're going to spend money. um so and and you got this this big beautiful bill you know that's like three and a half four trillion over i think a five-year period or something um that's a lot of money that that's already kind of queued up to be spent he's now talking about raising the the the military budget from one trillion a year to 1.5 trillion a year first of all one trillion a year is an ungodly amount of money.

42:41To take it up to$1.5 trillion a year, that's$500 billion. That's about the size of a QE program, right? And they're going to do that every year. So, you know, think about, and the difference between the big, beautiful bill and, you know, an increased budget, military budget, is that money gets spent immediately and goes right into the economy. It doesn't have to go through the banks where it then has to get lent out. So you remember with QE, they're giving collateral to the banks. But if the banks don't turn that into loans, it doesn't find its way into the real economy. But with government spending, it goes into the real economy right away.

43:24And so then this is where you get into this fiscal dominance, right? Well, the government is crowding out, you know, it's taking all the money and funding its projects and that crowds out other projects that may be more efficient and better allocated, et cetera, et cetera, et cetera. So, but I do, but, and I don't, I think a lot of people think that the U.S. is not going to be able to fund these budget deficits. I think that they will be able to fund the budget deficits. I think buyers will show up. It doesn't mean the rates won't reflect that, but I don't think we're going to have a failed treasury auction.

44:02And if we do have a failed treasury auction, that is a nightmare for the whole world. It's not just a nightmare for the United States because everybody's bonds are priced off of the U.S. Treasury. All corporate bonds in the world are priced off of the U.S. Treasury. So the idea that the United States is going to have a fiscal crisis and not be able to fund itself, but England will be able to fund itself and germany will be able to fund itself and australia will be able to that's that's uh that's that's silly yeah no i mean for lack of a better word i i occasionally like will check in on what's going on in the stock market in the uk and when it opens obviously the us hours everything's closed in the us the stock market in the uk looks like it's just guessing what the us is going to do until everyone wakes up in the us and then it knows the direction like clearly everything is downstream in the US.

44:51But when you look at this like Imperial Circle, how does that play into your dollar milkshake theory? Because I kind of want to do this in two ways where we can talk about like the normal system and then let's bring stable coins in. Yeah, so I will be the first to admit that the Imperial Circle heavily influenced my whole dollar milkshake theory. That is, you know, understanding how and why Besant and Druckenmiller and Soros did that, that's kind of what helped me come to my conclusion that rates would go higher, but U.S. stocks would go higher as well. So again, when I started saying the dollar was going to go higher, people said, well, then that's going to be bad for stocks.

45:35And I thought, well, no, that's not necessarily true. And this imperial circle was a big reason about it. And then they said, well, okay, so even though rates are higher in the Germany, And even though money's flown into Germany, Germany still has a lot of challenges. But they said, even though, but we're not going to try to take out Germany. We'll try to take out the weaker ones. So that's that influenced me as well. I said, OK, so that's smart. No need to try to fight the Fed. No need to try to take on the global superpower. Let's just look for the weaker ones around the world and let's stay away.

46:08Let's let's be long the US. Let's be short the other ones. If we're going to try to, you know, attack one, attack one of the weaker ones. And so it was a great influence on the dollar milkshake theory. It's part of the reason why I think some of these currency pegs around the world will eventually break. Now, will they break for sure? I don't know. Maybe they won't. And the other thing I'd say is the one thing I'm going to pivot here just for a second, but I think it's important to say this. I think there's a misconception around what Trump and team wants with regard to China and what they don't.

46:46if they wanted to break the Hong Kong dollar peg, or if they wanted to break the CNY's kind of quasi-peg, they could do that. They know how to do that. They have the tools that they could use to do that. They don't want to crush China. They want to keep China in a box. Because there's two things that Trump wants more than anything in the world. Number one is he wants his face on Mount Rushmore, right? He wants to be the greatest president that ever lived. You can't do that if China surpasses you while you're president, right? So he needs to keep them under wraps. But he also wants to be on the front page of the New York Times and the Wall Street Journal as this great dealmaker that's overseeing this fantastic economy.

47:28If you crush China, that causes a global crisis, and you can't be seen as a great dealmaker if everybody suffers as a result, right? So what they're trying to do is actually harder than crushing them. What they're trying to do is not let them grow as much as they did and not surpass the United States in certain areas, but also not cause them to fail because that and that hurts everybody. And so that's why they still want to do business with them. It's why they haven't totally cut them off. But it's also, you know, the U.S. and to be clear, the U.S. would be if they tried to crush China, I think they could do it.

48:05But the United States would get hurt in that as well. Right. So instead, they're trying to thread this needle, and it's really, really hard to thread that needle. But I do think, bringing this back to the imperial circle, I think that they understand that there's natural gravitational pull to U.S. markets for all the reasons that we've already discussed. And if you combine that natural pull with government stimulus, that should be good for long-term rates coming down. It should keep the dollar relatively strong, even though they're trying to weaken it. And it should be good for growth and overall markets.

48:46And it should be good for the economic renaissance of the United States. So what they're trying to do is very hard, but I think that's what they're trying to do. That makes sense. And so when you came up with this theory, stable coins were around, I believe, but they weren't the behemoth that they are today. When did you start properly paying attention to Tether? And actually, just to put the size of Tether into perspective, I was in DC about a year ago and Paolo from Tether did a fireside with Jack Mallers. And the scale of their company is insane. It's about 400 million users when they were talking at least.

49:22And they're adding 250 ,000 users a week. It is growing so fast. And essentially, that is dollarizing the global South without any governments having to change policy. Yeah. So, okay. So first thing I'll say - Actually, I got that wrong. It's 250 ,000 users a day. Yeah. Okay. So Tether is a juggernaut. There is no way around it. And I've had my problems with Tether for a very long time. So I've said this a few times now in the last couple of months, but I'm going to say it again. So there's three parts of this. Number one, I messed up. And what I messed up once is I let my opinion of the people influence my opinion of the technology.

50:06So because I didn't like the people that were running, not like I've never met them, I don't know them personally, but because I thought some of the things they were doing as a company were less than pristine, I let that influence my understanding of the technology itself. And I should have done a better job of understanding the technology despite my personal views of them, right? So that's number one. Number two, there was a guy that I used to know in San Francisco. His name was Max. I think he worked for Fidelity. I can't remember for sure. but he told me back in 2018 that these stable coins are like euro dollars.

50:46And I agreed with him. I thought it was a very good analogy because he was talking about how it's a parallel system for dollars. It's mainly outside the United States. And I thought that's a very good analogy. My issue was that I thought, and there's actually evidence to prove this and I'll discuss it, that if and when the United States or other governments around the world wanted to stomp these out or stop this parallel system from developing, that they had many tools that they could use to do so. And while I wasn't sure that they would be successful in shutting these, you know, parallel systems down, I thought they had enough tools to make it interesting and be a battle, right?

51:30And if you look and you see some of the different actions that governments around the world have taken with regard to crypto, that's been proven out. I think the biggest one was, I think they called it Operation Chokepoint 2.0, you know, when the Biden administration started defunding the ability for crypto companies to operate. They also, it was a pretty big fanfare, Facebook or Meta was trying to launch their own currency, their own token. And the Trump, I can't remember if that was Trump or if that was Biden, but they shut that down. And so I was saying, while I understand that, you know, this is this parallel system and this is pretty interesting technology, I thought it was being run by some fairly shady individuals.

52:20And I thought the government would not allow it to exist. So that is why every time I went down that rabbit hole, I eventually came back out and said, no, I don't want anything to do with it. when they started talking about the Genius Act maybe a year or two ago or a year and a half ago, you know, I started thinking, well, this is probably just a way for them to officially regulate it. This is an example of them doing what I've always said they're going to do. But then they came out and they basically endorsed them. And they basically said, this is a new technology. It's very powerful. These are the rules by which we think that they should operate.

52:58And then I was like, oh, well, okay, why are they doing that? I didn't expect that, but I have, that's new information that I have to at least take account of. And when I went back and I started thinking about it again, you know, and I, you know, again, I'd already kind of thought of, or, or, or had had the analogy given to me that stable coins were euro dollars. And I had seen the, the, the, you know, the growth of the industry, the ease of use. And now the, And, you know, the fact that Trump was starting to battle, the Treasury was starting to battle with the Fed, you know, but the Treasury needs the Fed.

53:36Right. But if they didn't need the Fed, it would be much easier to do what they're doing. Well, you know, I guess these stable coins, they don't they wouldn't really need the Fed. Right. And so that kind of made sense. And then I was like, oh, then I then I then I started thinking about it. of the issue. And then I got, okay, so it's not really a CBDC, but if they can let the market proliferate these, then every place around the world starts to, starts to, you know, dollarize. And if it gets big enough, they just won't be able to stop it. And then they can come in and put their own regulations on top of it.

54:07And because these are programmable digital rails, it's super fast, but it's also super, um, uh, what's the word controllable, right? Um, And and maybe they go out and they say, OK, maybe they will grant five licenses to people that can operate stable coins. Or maybe they'll say you can have a stable coin that trades in the United States. But, you know, you have to have these issues. You know, it has to follow these guidelines and has to have audits and you need to hold certain number of treasuries. And so the more I thought about that way, the more I realized that this was not only like euro dollars, but it was a potential way for the U.S.

54:47to have a, you know, kind of a world class cutting edge technology version of the euro dollar market that they could actually use as a weapon and control. and that's kind of the dream of every government. And so this scares the heck out of me, to be really honest. I mean, this is not for the faint. This is really big. It definitely is very big, but I'm curious, how do you think they will use this as a weapon? Because they have the ability to close accounts of anyone they want. Yes, but I think that's further down the road. I think they can use it as a geopolitical weapon against small and emerging countries, and even some of the bigger countries.

55:31Because once another country's currency starts to be rejected, and instead using dollar stable coins, because as bad as the dollar is, it's better than most other local currencies, that starts to strip away sovereignty from those local governments. One of the primary tools that any government has to control their population is the money. And that's why the legal tenders laws exist. It's why they say gold can't be used as money. It's why there's rules around you can't pay your taxes in Bitcoin, because they need to be able to control those channels. If they start to lose control of those channels, they start to lose control of the economy.

56:15And if you look around the world and look through history, anytime an economy has collapsed or a currency has collapsed, the government typically collapses shortly thereafter, which makes sense. If you lose your primary form of control, then you resort to your only remaining form of control, which is violence, right? And when that fails, you're gone. and governments can, they can put down revolutions for a while, but if enough people revolt, they eventually fall. And, you know, when a country's currency fails, people feel like they have nothing left to lose. Let's revolt. Let's get rid of these jokers.

56:56Let's put some new guys in power. And that becomes very tenuous for the local government. I'm going to give you a perfect real world example right now. And that's Iran. Iran, and this is again, you're asking me, why do I think they could weaponize it? Besant just came out two weeks ago and said they weaponized the dollar against Iran. In a speech he gave, I can't remember where it was at, it might've been in Davos, he said, well, what we basically did was we caused dollar liquidity in Iran to dry up. that forced Iran to have to print a lot of money. When they printed a lot of money, their local currency fell in value.

57:40And when it fell in value, the people started to revolt because they couldn't do anything with the local currency. And it wasn't too long after that before they're out in the streets protesting. And here we are today. So, you know, you combine all those things. And then two days ago, he was in, Besant was in Dallas and he gave a speech and he said, stable coins are a financial innovation that are very important and are going to be part of the system going forward. I know I'm paraphrasing, but that's essentially what he said. So when I see a guy who was part of the team that broke the Bank of England, come out and say he knows how to weaponize a currency against a country, and then a few days later says stable coins are going to be a big part of the future, you know, he's got my attention.

58:28Yeah. It's not surprising in hindsight at least that the US have embraced these because really there's no loss to them. Like, I don't think there's any real reason that people in the US are going to be using Tether as their money. Like you just use the dollars. But if all these countries in emerging markets, like if your option is a currency that's inflating all the dollar, you're obviously going to go to the dollar or Bitcoin or gold or whatever. But I think it's worth breaking this out into two parts because there's Tether, which is like taking some market share of like fiat currency being an actual currency.

59:02But then also on the back end, it's propping up the treasury market. Like which one of those two is the most important? So it's my belief that many people are focused on stable coins as a way to sell more debt and help the financial fiscal problems of the United States. I don't completely disagree with that, but I think it's a much I think it's a secondary or derivative issue. I don't think it's the primary reason. And I think by focusing on that and maybe the government wants people to focus on that because they don't want them to think of it this other way. But to me, this is a geopolitical tool that they will be able to use.

59:47And, you know, I think it may create some demand for treasuries kind of on the margin. But I am of the belief that there's plenty of demand for treasuries anyway. So I don't think that this is like the white knight that's coming in and saving the treasury market. But I do think it will help. And where it will specifically help is it will help continue to fund the government at the short end. because the primary backing of stablecoins is short-term U.S. debt. And it gives them a buyer, it gives them a big buyer of short-term debt while they wait for those longer-term rates to come down like we talked earlier.

1:00:29So from that perspective, I do think it helps. I just don't think it's the primary benefit to the U.S. The other thing, we haven't really talked about this yet, is that, and I haven't fully thought through this all yet, but it's just something that's kind of I'm thinking about is that this could ultimately, and this goes back to, you know, do you have US dollar stable coins that are issued by US institutions that are regulated by US regulatory agencies? Or you could have a US dollar stable coin that's issued by, I don't know, a company based in Thailand, right? And is not subject to US regulations.

1:01:06So then you get into a, And right now, euro dollars trade one for one. Euro dollars and U.S. dollars trade one for one. There's no spread, right? You could potentially get into a thing where there's an onshore stablecoin and there's an offshore stablecoin. And those prices would not necessarily have to trade at par, right? So you could eventually get into an onshore dollar and an offshore dollar. And perhaps the U.S. would, you know, in the next time there's a crisis and everybody wants bailed out, they could say, if you are a holder of U.S.-regulated stablecoin, you get this preferred funding.

1:01:42But if you're not, then you don't. Right. So there's a number of different things that could that could come out of this technology. And again, I don't have perfect insight to how this goes. I can just see how much money is being made by them. The benefit from a geopolitical perspective, the benefit from a fiscal financing perspective. And, you know, you've got a hegemon that wants to remain that way. I don't see why they wouldn't use it. Right. yeah it's one of the interesting things that came out the genius act was obviously they basically embraced stable coins but said you can't um share any of the interest i i actually heard david sachs on all in just after that got announced and he said the exact reason they did that is because there was pushback from i think particularly the regional banks because they basically saw this as just eating their lunch the interesting thing i think that's 100 i think that's 100 right and i think the thing that will come out of this is tether will likely at some point have a US regulated entity, which doesn't issue interest.

1:02:46And then they'll have something else for the rest of the world where you can like have a share of the interest. Like at the moment, if they're growing at 30 million users a quarter, like they have really no incentive to start sharing that. But if that growth slows and they could start sharing the interest with the users, and again, just speeds up the, um, the dollarization of every other country. Some people will say, well, why would the government do this with Tether? You know, They're a fraud. They don't have all the reserves. Maybe that's true. I don't know. When I did a deep dive on these guys five or six years ago, I came to the conclusion they didn't.

1:03:21But so far, maybe they've been able to plug those holes. Or maybe the U.S. government went to them and said, listen, we know you messed up. We know what you're doing. Here's your choice. You can either help us or we will crush you. And there's nobody better at helping than the people who have perpetrated the event, right? Or the thing. Like, you know, the U.S. government does this all the time. You know, they take confidence. You know, somebody who was part of the crime, they give them an easy deal if they help them put the other guys away, right? or, you know, it's not unusual for governments to do business with either terrorists or former, you know, former enemies if it now helps their interests going forward.

1:04:08So maybe they said, yeah, okay, we know there was some bad stuff that happened five, 10 years ago going forward. This is what you're going to need to do. And if you do that and you stay within these lines, you know, we're going to start to regulate these things. You can help us proliferate them around the world. and when the time comes, we give you the signal and you do what we say. I'm not saying that that's necessarily what they're doing, but it wouldn't surprise me. Yeah. I mean, this is pure speculation here, but like Tether, when it first came out, I don't think they were thinking of Tether becoming what it has today.

1:04:44It was initially like a way of moving money between Bitcoin exchanges. I think it's a catch arbitrage because there was a big arbitrage opportunity in Korea at the time. I don't think they saw Tether becoming what it is right now. And I could totally believe there was a period of time where they weren't fully backed because they used to have all sorts of corporate bonds and stuff in their reserves to a way higher degree. Whether the US sort of helped bail them out or what I think is maybe a more likely scenario is when interest rates started going up from essentially zero to where they are now, I think they might have accidentally been bailed out by the Fed.

1:05:20And I do believe they're probably fully back. I'm almost certain they're fully back now. In fact, I think that they are over collateralized. Could be. The interesting thing is that they're also moving into gold now. So Tether have Tether Gold. I think they are the largest owner of physical gold for a private company, I believe. I'm pretty sure that's right. Do you see this as them becoming sort of a new age central bank? Well, so what I, potentially, right? It's, maybe this, I hesitate to say this out loud, maybe they're the new Bank of International Settlements, right? I mean, I don't know, maybe.

1:05:56um the uh but you know this brings up another battle that's coming along too is that well why would people use a u.s dollar stable coin if they could use a gold stable coin because a gold stable coin or bitcoin or whatever it is is you know it's not going to lose value the way a u.s dollar is and i okay there is some truth to that but to me that that feels a different function. You know, the dollars are used for payments, for commerce, for everyday use, for living your life. You know, the people that are looking for dollars are not looking for the same thing that a holder of gold or Bitcoin or stocks or real estate is, right?

1:06:36But that doesn't mean that Tether couldn't offer all these different, you know, options. The other thing is, you know, despite gold, gold stable coins have been around for a while, you know, Paxos has been around, I think, five, six years. But despite that, 99 % of stable coins in the world are tied to the US dollar. And the reason they're tied to the US dollar is that's where the demand is. That's meeting the market demand, right? And so, but yes, but going back to your point, I mean, Tether is a force now, right? I mean, they're, and not only that, but Lutnik, as I understand it, custodies a big portion of their treasuries, right?

1:07:21I mean, that's the US commerce secretary. So, you know, you don't have to connect the dots too hard to figure out that there's potentially some cooperation here, right? I think one of the real telling signs is that Paolo from Tether, it was his first trip to the US when I saw him in DC last year on stage. There's probably a good reason that he hadn't come before. and uh he's no totally i 100 agree with you if i if if i was the if i was paulo and i didn't have like a a ironclad guarantee that i was going to be able to leave i wouldn't have shown up absolutely and the thing that i do like about it is the tether people are bitcoiners and like we always talk as bitcoiners of being like you have to have a seat at the table and i think tether are giving bitcoiners a seat at the table because they are becoming just you can't ignore them anymore.

1:08:13So it'll be interesting to see how this plays out. You wrote a piece recently, The Stablecoin Wars. Is there anything we've not touched on that was in that piece that you want to get into? I think, so let me just set it up because we wrote our original paper back in October and that basically laid out the geopolitical angle and why I thought they were going to be a big deal. This is a follow-up which lays out all of the battles going on within this arena. And the reason all of these, and there's many of them, and they're enormous, and they're like knife fights. And the reason is because the profits are so incredibly huge, right?

1:08:52The one thing that's in the paper that we did not discuss yet, and again, I do not fully understand this because I'm not a technology guy, right? But if you believe in the AI trade, and you believe that AI is going to become an increasingly important part of the future, stable coins are the currency of the AI trade because there's these bots, there's these AI entities that will trade with each other all hours of the day, even when businesses are closed. And they do these microtransactions, but they do it in such great volume that it ends up being a lot of money. And it's not something that legacy finance can do because legacy finance is too slow.

1:09:38The minimums are too high. The regulations are too high. And so it's almost like marrying the base layer of the monetary system with the currency that goes along with it, right? This is huge. And I can't believe that I was so slow to the table on it. But now that I see it, I can't unsee it. And I guess if I give myself a little bit of break about it, it's because I thought that they were going to try to keep them from developing. But once I saw that they're actually encouraging the development and embracing it, then I understood it pretty quickly. Yeah, the AI using money is a really interesting one.

1:10:22Bitcoiners have for quite a long time said that Bitcoin would be the money of AI. And I think it will be for some, but when these are controlled by like such large corporate entities, there's going to be people in their area being like, use this currency. And I think Tether, USDC are going to be at the forefront of that. Do you think, talking of USDC, do you think this is a race that Tether have already won? Because if you look at the market for stablecoins right now, USDC have a lot of the regulated institutions in the US that have been basically forced into this because it's the most, quote unquote, compliant stablecoin.

1:10:58But Tether are by far the largest and they're attacking the global south, which is a ginormous market. Again, maybe less money per capita, but a huge amount of people. Which one do you think wins? It's a really good question. And I don't know the answer. I will say, I think Tether is going to be around. There are a couple caveats. Number one, it's possible that they don't have all the reserves, and it's possible that there's a crisis and Tether goes away as a result. But let's just take that as an example. it's possible that if that happens tether management goes away but new tether management is installed the government makes them whole and says the people were bad the technology is great it's a global good we're keeping it that's possible the other thing is maybe they would use that as an event to say hey this technology is amazing but it needs to have state backing and it needs to be more regulated.

1:11:59And therefore we're rolling out our own US dollar coin and the private companies are gonna have to be more regulated or have a license or whatever it is. This is a long way of saying. And then I think it's very possible, just if you think back to kind of the whole make America great again, I kind of have a hard time thinking Donald Trump wants a non-American company to be the main player, right? So maybe Tether becomes the big player offshore, but playing within the rules that the United States has set up, and Circle or whoever the next one is becomes the onshore version. um i but they're there this is why i think people should read the paper for a couple reasons number one i would love to hear what how people think this is going to play out so if you think i have something wrong tell me that if you think you have an insight of which you know and all these different battles going off when which faction's going to win and why that would be helpful because i can see this going so many different ways but regardless of which way it goes i think the technology stays.

1:13:09Yeah, I think that first scenario laid out is the scariest because while I think Tether is over collateralized at this point, they own an incredible amount of Bitcoin. I believe they'll be fully reserved. If the US government don't really need a legitimate reason to try and take over a company. Right. And if this goes from being like essentially a private bank digital currency to being too big to fail and then taken over by the US, it becomes a CBDC essentially. And that to me is the scariest potential outcome. Yep. Yep. But it's going to be interesting. Brent, this has been awesome. I love talking to you.

1:13:45I saw you're going to be at Bitcoin Vegas. You're going to be amongst the Bitcoiners in the den. I'm looking forward to seeing you there. I'll make sure I link everything in the show notes, but anywhere else that you want to send anyone before we close out? No, you know, I think what I would just say is so, you know, I do a show every week on YouTube. It's called Milkshakes, Markets and Madness. If you liked the topic that we talked about today, we do have a special going on right now. If you go to research.santiagocapital.com and go to the promotion tab, you can get both of the reports that we referenced by signing up for an annual subscription.

1:14:21So these reports are typically for our pro level, which is our higher level service. but because we think it's so important, we're making them available to premium level subscribers for a limited time. Awesome. Well, congratulations for being a Goldberg over the last year. Hopefully next time I speak to you, Bitcoin's got one up on you. But I really appreciate it, Brent. Thank you. Thanks for having me.

1:14:58Thank you.