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Federal Reserve

How The Federal Reserve Will Ultimately Fail

This is a transcribed version of the “Bitcoin Magazine Podcast,” hosted by P and Q. In this episode, they are joined by Lawrence Lepard to talk about the hawkish Federal Reserve and how its policy decisions will lead to its own demise.

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Transcript

[00:00:06] Q: I am excited to introduce our guests for today. Lawrence “fix the money, fix the world.” He’s an investment manager at equity management associates, a sound money advocate. We’ve had you on the show once before. Thank you so much for coming and joining us again.

[00:00:21] Lawrence Lepard: Thanks, welcome. Thanks for having me back. It’s nice to be with you.

[00:00:24] Q: What did I miss when introducing you? I feel like there are so many, there’s not

[00:00:28] Lawrence Lepard: much else. You forgot the part about where I’m the gold guy who’s trying to orange-pill gold bugs.

[00:00:35] Q: And, and that is how you sort of came into Bitcoin.

I mean, you were pretty much all in on gold. Not to sort of recap or rehash that last conversation, but just very quickly let’s do it like this. What would your pitch be right now to Peter Schiff as to why he needs to at least get some, some.

[00:00:53] Lawrence Lepard: I’m not sure where Peter is hung up on this whole thing.

I think it’s his ego. That’s got him hung up, and maybe he’s just committed to his existing business. He doesn’t want to change, but a lot of gold bugs, what happens is they can’t get over the fact that it’s not physical. You know, they’re kind of locked into commodity money and the notion of a ledger kind of escapes them.

And the value of an immutable ledger is not something that we fully understand. And so I start there and just say, look, before we even had gold before, you know, we’d done gold out of the ground, people kept score on caves. You know, I killed two bison, you killed one, you only one blah, blah, blah. So an immutable ledger that can’t be changed, that’s accurate and verifiable through thousands of nodes.

Isn’t, isn’t a sense we’ve created something very, very unique, which is the huge, you know, the huge invention of Bitcoin, which is it’s it’s we’ve created digital scarcity, verifiable, secure digital scarcity. And therefore, as a result of that, and then capping the amount of these things at 21 million, you know, you’ve been assessed, created a digital form of gold, that digital gold ledger.

So they compete with one another. And what Peter’s missing is that, you know, Bitcoin’s enjoying two, two curves. I mean, gold has got a huge Lindy effect. It’s fully distributed. Everybody knows what it is, but around 5,000 years, that’s the advantage it’s got, obviously that, you know, you don’t have to tell anybody that gold is money.

Everyone knows gold is money. Bitcoin is out on an adoption curve. I mean, it is sound money into sound is gold right now. And the next having occurs will be sounder, causing the stock-to-flow drop. But the issue really becomes, you know, right now probably a couple hundred million people understand it or 7 billion people on the planet and only 21 million coins.

And as everyone comes to understand the values of these monitoring properties that these points have you know, there’s going to be an adoption curve. And so, with fixed supply and continually growing demand, you can tell what’s going to happen to the price. And so that makes it, you know, and that’s why it’s outperformed gold since it was introduced.

And it’s going to continue to outperform gold. Now it’s going to be more volatile and, you know, 80 year olds, you know, shouldn’t be putting a hundred percent of their money in Bitcoin because 80 year olds don’t like having 50% drawdowns, but everybody should own some Bitcoin. I always say that, you know, the only wrong answer is zero.

You know, if you’ve got a one, a two, a five, a 10, I mean, I have a pretty high, high allocation to it. Cause I’m, you know, I’m risk prone or I’m very comfortable with the risk. But you know, you need, you need to own some of it. So, and, and I’m not quite sure where Peter can’t get over it. I mean, it’s funny, his son gets it.

[00:03:13] Q: Do you think this one, it just feels like a bit, yeah. I mean, it

[00:03:16] Lawrence Lepard: feels like it’s, it’s part of his brand, right? Like, yeah. He asked to maintain this frame even though, I mean, I suspect separate from his son that he is actively invested in Bitcoin, but his entire enterprise is based on the idea. And he’s painted himself into a corner and I think that it’d be, yeah.

And I’m not so sure of that though. I’ve met him and I know him pretty well. I, I, you know, I read him as a pretty arrogant guy and so, I think he might believe his own bullshit. You know,

[00:03:44] Q: He is so deep, so deep in the lie that he doesn’t know what factor.

[00:03:49] Lawrence Lepard: Yeah. And I found that I found that kind of universal in trying to orange pill people, the people who are the most arrogant seemed to be the slowest to get it.

You know, you kind of have to be open-minded to it as a possibility. And the more humble you are, the more likely you are and understand that, oh yeah, things are changing and this is a difference and it’s, it’s got a value and therefore I understand it. A lot of people, some people are just plain afraid of it.

And I get that too. I mean, look, when, when dogecoin and all the other, you know, shitcoins were doing all that stuff, you know, you basically had, you know, every sound money guy in the world complex, you know, how can a digital asset be sound money, look at this. And, you know, the right, I mean, it’s the shit coins.

It really annoys me the way the shit coins have cast a poor light on the one thing that really is a true technical innovation is not a shitcoin. And so it’s, you know, to me, there’s Bitcoin and then there’s all other crypto and all the crypto is, you know, kind of a speculum of mania. Bitcoin is actually, you know, real signal in a real technical development.

That’s going to be extremely important in my opinion. So

[00:04:54] Q: I’d love to, you know, get your thoughts on what is strangely becoming the most looked forward, most anticipated Fed meeting in my lifetime, possibly in your lifetime. We will be, Chris will send us an update. Just over 30 minutes when the minutes are released and we actually see the official call on what the rate hike is going to be.

I don’t want to spend time speculating. I’d rather just get your thoughts on how the fed has been handling, you know, the economy for some time and what your expectations are on how you’re preparing for the immediate and near term future. I would say the next 18 months.

[00:05:37] Lawrence Lepard: Yeah. Good questions. I mean, look the feds an unmitigated disaster, right?

I mean, it’s a money cartel. You know, their only job really is to look after their owners, which are the banks and Wall Streeters. And you know, they, they run this boom bust cycle and you know, they you know, I mean, it’s unclear. I mean, there’s, we know what they do and it’s unclear what their motives are.

I mean, some say they know exactly what they’re doing. Others say they’re stupid and they don’t really know what they’re doing. I, you know, I’m between those two camps somewhere. I think there’s a certain element of stupidity. I mean, Jay Paul’s a lawyer. I don’t think he really understands or has studied economics or markets.

So I think he’s kind of coming at this with a very simplistic point of view. But having said that he also is a political animal and he’s doing what he has to do in light of the circumstances. And so, you know, he thinks he can do it. You can become another poll Volcker, which is ridiculous. He can’t.

And so, you know, as I’ve said in the past, what I see them doing as they’re kind of driving this clown car between the two guard rails, I mean, when you, when you got a credit expansion, similar to the one we just had when you had as much easy money as we just had, I mean, you know, ZIRP zero interest rate policy from 2009 to 2015 or 16 was just an enormous crime and led to enormous misallocation of resources.

And created what we now all call the everything bubble and the everything bubble has burst. And so, you know, there’s, you can’t really put the genie back in the bottle when a bubble burst, it’s going to collapse all the way to the base and you know, and, and by the way, what they’re doing right now is helping speed up that collapse.

So, you know, I’m not sure again, if it’s stupidity or its intention, I mean, one could argue that their intention is to speed it up, have everything collapsed, then reset with a CBDC or, you know, rich people will get by all the assets for 10 cents on the dollar. I’m not quite sure, but, but the point is that, you know, if they continue the policy, they’re going to continue the stock market’s going to implode.

I actually think it’s, timer’s going to probably implode either way. One thing that everyone’s missing is that you know, you can’t have a bubble of the proportions that we had, which I don’t think anyone would disagree that we were in a bubble and everything bubble based on free money. And you can’t break that bubble which was clearly broken, right?

There’s no going back. Crypto is the leading edge. You can see all that workload, but it’s, it’s flowing through to everything now, including, you know, small countries like Sri Lanka, not small, but periphery countries like Sri Lanka. And you know, when you, when a bubble bursts you know, it’s gonna take, it’s gonna, you’re gonna go from massively overvalued to fair, valued or undervalued.

I mean, in the case of the oh eight bubble or the 2000 bubble, the S and P went down 50% in both cases right now, the SMP is down roughly between 15 and 20%. It needs to go a lot lower and it’s going to go a lot lower probably soon. You know, my prediction on today is actually going to shock the market, go a hundred and be a tough guy because that’s in tight with what he’s been doing recently and he wants to make the point and try and get inflation under control.

And there’s also a national security aspect to it. I mean, they’re hoping that doing this can really kill enough demand to get oil prices. So that Putin makes less money selling oil. And of course, you know, so there’s this whole geopolitical ramification. I think their view is, well, if we’ve got to have some unemployment and sacrifice all the speculators and stock market people, so be it, you know, pals rich and it’s like, well, whatever.

So it’s a really, really screwed up system. And sadly we’re all forced to live with it and we’re forced to, you know, it’s like I was going to tweet this morning, like it’s, it’s like watching the, you know, the you know, the, when they changed Pope’s and, you know, expect to see the different color smoke come out of the chimney of the Vatican.

I mean, and that’s what this is like. I mean, our grandkids are going to say what, you know, you guys let the, you let the entire world economy blow up because you had, you know, the most important price of the world, which is the cost of money set by committee that was, you know, run by a banker cartel and the.

What the fuck were you thinking? I mean, that’s like the, that’s like the dumbest idea since forever and you know, so, so that, I mean, that’s, that’s, that’s coming, you know, but, but sadly, we got to get through this. Right. I

[00:09:41] Q: love that analogy of, you know, we’re just waiting for the smoke to come out of the chimney for a new Pope.

Larry, I want to, I want to unpack something you said where. If Powell actually does follow through and keep going at the rate, he’s going to be raising rates and continuing to try to crater the stock market and potentially the broader economy with rising unemployment, his other option would be to reverse course and reintroduce liquidity into the market.

But would that not also just have the same effect? And if so, which one do you think now we’re gonna speculate a little bit. Which one do you think would in turn cause the collapse of the dollar quicker?

[00:10:24] Lawrence Lepard: Boy, I don’t know. I mean, it’s, again, it’s very, very hard to know which, you know, we’re in this period of incredible volatility, you know, everyone’s seeing the murmur can chart on Twitter.

I mean, you know, when monetary systems blow up, you know, it’s, it’s like look out because there’s just, there’s a lot of volatility in both directions. And so if he continues down the path, he’s continuing down the market’s going to look like 1920. I mean, we are going to do it out and out. Credit collapse is going to, there’s going to be contagion and, you know, one guy can’t pay his debts.

So, you know, the person who holds those debts loses money and you get laid off. I mean, it’s just, it’s going to be a spiral. It’s going to look like 1929 and nobody was alive during 29. My grandparents were alive. I heard a lot of stories from them. And, you know, the fact of the matter is, I mean, there were houses, I mean, houses that were selling for $40,000.

Like the one my grandfather bought, you know, in 1928 were selling for 7,019 33, you know, I mean, and you know, people felt lucky to have a job. They felt lucky to have any kind of income, you know, they, they were all, you know, living on just, you know, reduced ration, ration, so to speak. When you read history of the depression, I mean, parts of the country where, you know, people would’ve starved, if they hadn’t been able to shoot small animals, I mean, it was really pretty damn bad.

And so, you know, that, you know, that’s where we’re headed. If he continues. Blow up the system, the way he’s blowing it up. I don’t think he will continue all the way through. I think eventually when the bond market goes, which it will, he will be forced at that point to pivot and support it. And you know, this next particular pivot will lead to a much larger amount of money.

I mean, one thing, you know, press the pitch. So the site’s a really brilliant analogy. So the contractions are getting closer and we’ve all, well, not all of us, but I’ve, I’ve been around when my wife gave birth. And, you know, as the contractions get closer, you’re closer to having a baby. And so, you know, in 2000 we had a contraction in 2008, we had another one and 2020.

We had one. And now I think we’re about to have another one. Things are getting, you know, things are getting closer and you see, you know, the parabolas have a lot of these lines. I mean, you know, prices in a lot of areas are already starting to touch on the edge of a hyperinflationary environment. So things are, things are happening.

Things are blowing up and as to which makes the dollar fail faster, I’ve always said, and I really strongly believe this. The dollar is going to fail. When a majority of the people realize that you can’t trust the federal reserve to control the printing of money and that they’re trapped and that they will always go to the default condition of printing more money.

And when they do that, everyone who has any savings and that’s not everybody because a lot of people are just net in debt, but anybody who has any savings will under aggressive law, like scenarios, recognize that they have to put their savings into something that cannot be debated. And that’s not the dollar.

And the three leading candidates are Bitcoin gold and silver, but real estate qualifies because you can’t print real estate and food and commodities and even cars. I mean, things qualify and you know, those, that’s all part of a crack-up boom. If everyone starts spending their money, the minute they get it you know, that creates more inflation, more demand.

And that’s the crack-up boom. So it’s, it’s just, I’ve never seen anything like it. And I can’t believe they ran it this way. I can’t believe they let it get this far. And I can’t believe how ugly it’s about to get and how few people fully understand how ugly it’s about to get. And whether that is in the form of massive deflation or massive inflation or both.

I mean, I think there’s a chance that everything you own will have deflated prices cause nobody will have the money or the credit to buy it. You know, banks’ mortgage rates will be higher and banks won’t be able to make loans. They won’t want to make loans. They’ll be afraid of the risk, et cetera. So, you know, your house, your boat, your car with.

The stuff you own will be going down in value, but all the stuff you need to live, the food and the gasoline, the heating, you know, et cetera, that’ll all be going up in price because I mean, the thing that the fed doesn’t realize is that this wrecking ball policy of swerve one way swerved the other way.

I mean, you’re destroying demand. You’re, you’re destroying businesses. I mean, how, how do businesses exist? I mean, we already know there are a lot less restaurants cause like a lot of them got wiped out when we had COVID right. And so, you know, if you’re a business person and this environment is extremely tough to know what to do.

I mean, home builders, six months ago, couldn’t get workers, couldn’t get lumber, couldn’t get anything, were having a hard time getting houses built. They didn’t know whether they should start the next project. You know, recently there was a big Twitter thread that showed that they’re all like, Hey, who turned out the lights?

You know? W we got no demand. You know, we got plenty of workers. We got all kinds of things. You know, and I mean, it’s very simple. What happened, right? The 30 year mortgage went from 3% to 6%, almost 6%. So it’s, it’s just an incredibly EFT up system, incredibly have to up. And so as investors in participants and so on, I mean, you know, what we’ve got to do is, you know, you’ve got to make sure you got a job that you think is going to be around, you know, even in a downturn.

So the more essential your job is, the better off you are. And then you gotta make sure that you’re not levered because you, you know, especially with respect to sound assets, because if you’ve got hard assets, which are levered and they go against you, you can get carried out. I’ve seen that happen. I’m going to all the people that were following the plan B nonsense, you know, they levered up their Bitcoin thinking it was going to 150 and they got blown out.

You know, that’s really sad. I mean that’s so, you know, I, which makes the dollar fail faster. I don’t know. And, and, and one thing is for sure, I mean, I did something with Brent, Brent, I’m forgetting his last name, but I did some of the brand, you know, San Diego capital, Ron Johnson yesterday. And you know, how fast this thing fails?

I don’t know. I mean, you know, it should, it should have failed years ago. I can’t imagine they’re going to keep it long alive for more than a few more years, but they’ve got a lot of tricks up their sleeve and they’ll, they’ll try and use them. I mean, I’ve seen them, they’ll do whatever they can. I mean, they’ve got a lot of privilege.

They’ve got a big system and they’ve got a lot of wealth tied up in it. So they’re going to do everything they can to try and tilt the table in their favor. I mean, Roosevelt dinner was confiscating gold and, and they’ll, they’ll do similar things. I mean, I can see, I can see bad stuff coming as times get worse.

But I also know that, you know, if we Hoddle sound assets on the other side of all this, these sound assets, I think would be the things I think we’ll be very glad we did it. And we’ve got the best chance of getting through this with our wealth and TAC or possibly even really growing your wealth. I mean, if you actually look at the depression, you know, there were a lot of great fortunes made out of the depression.

I mean, if you, if you had, you know, if you had cash or you had the ability to buy assets cheap, you know, there were people who got rich and and the same will happen this time. But you know, it’s going to be tough. There’s no doubt about that.

Th there are a few different directions we can go from here, but I kind of, I would love if you could actually, for like, I I’ve spent negative amount of time understanding bonds.

I’m, I’m more of an equity guy. I understand the importance of them. So when you said earlier about how the bond market may force Paolo’s hand, what, what are you looking for in the bond market? Is there a certain level you want to see yields get to, or are expecting to before Palo pivots or what does that great

question?

And that it’s really important. I don’t think enough people focus on the bond market. Greg FOSS talks about this. A lot of me bonds are actually more important in some ways than the equities they’re smarter than they lead it. So here’s the deal. I mean, the 10 years in the 29, 2 0.9, five or 3% area when inflation’s last sprint was, you know, nine.

So that’s an enormously terrible deal to own a 10-year bond, right. You know, and, and one could argue the nine one’s understated, but whatever the bonds suck. And yet there’s a certain, you know, category, a certain number of certain investors out there need to buy bonds, insurance companies, others need to buy bonds.

And, and of course they do, but as, as it becomes more and more apparent that buying a bond is a bad deal that you’re going to get paid, repaid the principal. Cause the government can always print the money to pay back the principal. The question is what’s that money going to buy? And so, is that becomes more and more obvious?

I believe the fed will actually quote unquote, lose the bond market. And by the way, they kind of did in March of 2020, you know, when we had the COVID crisis before Paul came in with his draggy, like imitation, where he said, we’re going to do whatever it takes to get. The economy and the system going the bond market went no bid for awhile and they even commented on the fed minutes and said, you know, there were, you know, concerns that there were no bidders for the bonds.

And it was, it was really effectively, no market. Well guess what I mean, the U S government needs to have the bond market function without the bond market functioning, U S government can’t, you know, it’s just, it doesn’t exist and no one will get paid and, you know, no money can be printed. None of it. And the whole thing only collapses.

I mean, this kind of is the 2008, you know, were where they said the ATM’s won’t work if we don’t, if we don’t keep the market stable. And so, what could eventually happen, I believe will eventually happen. It goes back to what I said earlier about Gresham’s law and enough people come to see that, you know what?

These bonds are a bad deal. I’m not buying them anymore. And you’ve already seen that foreigners were net buyers of bonds all the way up to 2014. And that’s shifted at the end of 2015. And so now the foreigners have not been net buyers, but in fact, they’re net sellers. Russia’s taken those down, you know, in Japan because they’re having their own troubles.

They’re having to sell them. China has been letting those run off, et cetera. So if the U S bond market goes no bid, or it goes closer to no bid and the only buyer for us bonds is the fed. Well, that’s kind of, you know, emerging country, banana Republic, you know, Argentina, Venezuela. I was involved with sort of stuff.

I mean, if we are printing money to make our interest payments and to make our bond payments. And it’s very obvious that we’re doing so, and it’s, it’s relatively obvious we’re doing that to a degree now, although it, that waxes and wanes, and they have a lot of ways of disguising it. I mean, as they say, and they claim they’re not printing money, but they create reserves to the backs of the banks effectively lend against them.

So that really is growing the money supply and creating money. I mean, there are a lot of peas and shells here. They move around and try and confuse us all. But, but the bottom line is that what they’re trying to do is. Keep everyone from realizing the bond markets in trouble. And as the bond market gets in trouble, and you asked the question, how high could rates go?

Well, rates at 3% are somewhat problematic, but if you consider that our debt is $30 trillion at the government level approaching 31, and you take him to say 4, 5, 6, I mean, so five 10, let’s take five as a, as a reasonable number. I think it’s a longterm average that, you know, 10 years been around there.

So five times, so that’s 1,000,000,000,005 in interest payments alone. As against last year, they were like 660 or something. So, so that would add another trillion dollars toward deficit. And it, you know, row garden ran off of study that written books about it. It’s over the space to be shown. Anytime a government gets this upside down.

I mean, like in 20, out of the last 20 cases, when you have this much debt and you were running a negative, you’re running a deficit of say 10 or 11% or more. We’re not there yet, but we will be with this downturn. You effectively, you’re guaranteed that you’re either going to go bankrupt in default, or you’re going to have to inflate it.

And, and the, really this in both cases, they’re the same thing. I mean, what I, what I think will happen is I think they will basically have to go to yield curve control. I mean, Japan has already done it and you’ll Kirk control means that they’ll say, okay, these bonds, you know, we’re not letting them go any higher than three and a half percent because if they did, that would be a problem.

What that means is anybody who wants to sell us your bonds for three and a half percent, you’ll, we’ll buy them. And eventually the bond market’s going to look at the fed and go, you know, what sold to you? You can have all of them. And so the fed balance sheet, which is now about $9 trillion, it’s going to go to 10, 15, 20, 20, 5, 30, that’s all just money out of thin air that they’ve created or credit, I should say, out of thin air that they’ve created and put on the bank balance sheets.

So, you know, and at that point, everybody, I think comes to the conclusion that they can’t ever stop. And so remember that money is money is a collective delusion in the sense that money has value because we all agree. It has value. I mean, in the U S case it’s because we have a military and a big country and a productive, we get 200 year history, theoretical rule of law, blah, blah, blah, which has all gotten very debased.

But, but still there’s a lot of resilient resiliency there on some people think the dollar has value, but you know, it’s, it’s not beyond the realm of imagination that eventually everyone could come to the conclusion that, you know, the U S government and the U S dollar they’re, they’re not, they’re not credit worthy, they’re just not credit worthy.

And so people will eventually get to the point where they say, I’ve got to protect myself and that’s, that’s the rush. That’s where everyone makes that that’s the change. So, so it’s a psychological phenomenon. It’s, you know, people have to come to the view that their dollars aren’t going to hold any value and they want.

And when that occurs, it’s, you know, it’s all over, it’s all over for the dollar and we’ll have to do a monetary reset and we will, you know, that’s, that’s what will happen next. We’ll have you know, we’ll probably do the right thing after everything else has been tribal reset to a sound money standard.

Hopefully it’ll be a Bitcoin standard. It might be, they might try gold in the interim because of the history of gold and all the boomers believe in gold, but, you know, it’s it, you know, or it could be a basket of commodities. There are a lot of ways of doing it, but you know, we’ll have to go back to a sound money standard because this unsound money has effectively ruined the financial world.

And the, the event we’re about to experience is going to be worse than what we saw in 2008, by, by an order of magnitude. And it’s probably going to be worse than what they saw in 29. So, you know, it’s, it’s it’s not, it’s not a great situation, to be honest with you. You know, they, they painted us into a corner and or they painted themselves into a corner and, and we’re all gonna suffer as a result of their stupidity and and a broken system.

[00:24:41] Q: So I’m going to play devil’s advocate and I have to caveat it by saying there is not a single thing. Lauren, you have said that I disagree with I’ve, I’ve long believed that the next iteration of the dollar is some sort of a basket of basket of sound money, most likely gold with something else like Bitcoin involved, and God knows whatever else they want to mix into that pot to dilute it.

I want to, however, get your thoughts on just the. You brought up the fact that the U S dollar is really backed by our military, but there’s another thing in my opinion, that really gives the dollar it’s strength. And it’s the fact that on the global oil market, we, we use the petrodollar system. We started to see Putin, really poke a hole in that and saying like, don’t give me any dollars, give me anything but dollars.

And how did the ruble respond to that? Hit a five-year high after this announcement. So what’s to stop these other oil producing countries from not accepting dollars anymore from saying, I want gold now instead. And what effect would that have on the dollar on a global stage, if that were

[00:25:48] Lawrence Lepard: to happen? Well, nothing’s to stop it and we already see it.

I mean, you know, the, the the Russians are taking rupees Indian rupees in exchange for oil. You know, they’re accepting. There was something all currencies, really, other than the dollar and that’s going to continue. And it has to continue because the U S has used the dollar as a weaponized, the dollar.

I mean, we grabbed their reserves and, you know, we’ve made it very clear that you know, that the dollar is, is our currency, but their problem, and they’re going to say fine, you know, w we’re not going to accept your currency anymore. You know, you want to do trade with us. You’ve got to give us something real.

And that’s, that’s really what Putin’s move was he just, he recognized that he had a piece of the puzzle and he recognized that we had financial aid. The U S has financialized the world for its own benefit for many, many years, and has been passing bad checks. You know, these, these, these diluted dollars.

And he had, you know, he had the real stuff. He has the physical, and everyone thought, well, you know, we can still bully this guy around. Cause you know, what do they, what do they say? It’s, you know, you know, it’s, the place is a gas station, right? I mean that’s more or less what Russia is. And, and it’s not you know, it’s, it’s, you know, the, the resources they have are badly needed by the world.

And he’s basically just said, I’m not going to play by your rules anymore. And you know, if you want the stuff I’ve got, you’ve got to pay me. And something that I know will continue to have value because I’m not going to continue to accept this, this paper that you’ve been putting out there. He also knows how out over our skis, we are in terms of how much paperwork created and how undervalued oil is and how undervalued gold is.

And so he’s, he’s got both of those. This country produces gold. His country bruised a ton of oil country produces a ton of natural gas. And so he’s, he’s just said, you know, I’m not playing by the rules. And, you know, everyone, I mean, America being arrogant thought, oh, this is no problem. I mean, you know, he’ll fall quickly.

I mean, I, I remember the wall street, I talked to some guys on wall street and they’re like, oh yeah, no, they’re, they’re, they’re grabbing all those yachts so that the oligarchs are just overthrowing. Well, he’s got great security and, you know, and they were like, he’s not going to last and he’ll fall apart all of a sudden the other, well, you know, he’s been doing reasonably well.

And I’m not saying I like the guy. I don’t think he’s a particularly good guy, but in terms of the way he’s played his hand here, you know, his cards you know, he’s not, he’s not losing you know, Germany’s in a shitload of, you know, I was feeling a shit load of pain and they’re going to feel a shitload more, you know, if they don’t start, you know, playing by his rules.

And so, you know, that he’s pointed out the cracks in the Fiat’s system. And as a result of that you know, he’s going to he’s going to change. He’s going to change the way business is done and he’s already changed. It’s going to change more. So your point about, you know, the dollar being, you know, the, the king and, and, and being the reserve currency of the world shore, I mean, 10 years ago, I think it was 95% transaction to the world.

No matter where you were, it was denominated thousand. I got down into the sixties now. I don’t have the exact statistics, but it’s fallen quite a bit. And I think it will continue to fall. I mean, they’re talking about trying to do a bricks currency. I mean, look, they haven’t done it. It’s going to be hard to do this.

You know, there are all kinds of problems associated with this, but I think it’s very safe to say that, you know, there’s been a very big question, mark thrown into the, into the global economy about the soundness of the dollar and whether that’s really the right basis on which to be doing. And so I think you’re going to see, you know, I mean, just our, sir, our grabbing his reserves was an enormous deal, right?

I mean, what do you think the Saudis are going to do? I mean, we wanna think of Indians are gonna do, what do you think Brazil is going to do? I mean, any country in the world that, you know, runs a trade surpluses, you know, and, and leaves it in the Western system is going to say to themselves, can they do that to us too?

If they don’t like our politics? You know? So, so there’s a lot of, there’s a lot of reasons why the dollar is slowly but surely losing its position, but these things don’t happen overnight. I mean, it’s going to take a few years, I think, to completely unfold. You know, the next two big trigger points in my view is Gold’s got to get through 2000 with authority and stay there.

It’s been there three times. It was there in 2011. It was there in summer of 2020, and it was there and let earlier this year, and now it’s taken a big wetback. But when it comes back up and goes through that again, it’ll be game on. And then I think it’s suspect when that happens. Bitcoin will follow soon thereafter.

And Bitcoin will go to a new all-time high. And I think those two things doing it will be your best indication. And in the same, in the same breath, I think what will have happened is the bond market will have rolled over interest rates will have continued to go up. That’ll put the fed in a very tough position where they’re probably forced to implement yield curve control, and the economy will have rolled over and the stock market will have rolled over.

And so all that lost wealth will suddenly be making 1929, you know, very comparable to the situation we’re in today. And you know, at that point in time, you know, it’s all bets are off who knows what happens. I mean, sadly in the past when these kinds of things have happened, these kind of fourth turnings and things of this level, that’s led to a war I’m hoping that won’t occur this time, but it’s probably not unrealistic to think that it would occur.

So what makes you say that that gold will sort of leave. That charge. Why, why would gold lead the charge versus ’cause it’s, it’s bigger and it’s more fully distributed. You know, it’s interesting. I, I think there’s something that Bitcoiners don’t really see because I had a, I have a couple of good friends that are, I mean, I’m very heavily Bitcoin don’t get me wrong.

I think the card wins. Okay. But, but I’m also in the gold business as well. And gold stock investing and 2018 was when gold started to move and it started to work and it could kind of smell what was coming. And so I, my fund had a really good year in 2019 when we were up 97% or something. And then in 2020, we were up 120%, but in 20, you know, but throughout that whole timeframe, if you look, go to the chart of the price of Bitcoin from 2019 and 2020, it was kind of stuck between 500.

You know, it just kind of bounced around, back and forth, back and forth. And then as you recall, in late 2020 it really took off like a, you know, like a bat out of hell. And it went from, you know, five or 10 up to 50 quickly. And, but at that point in time, gold had already made its move and gold kind of stalled out at 2050.

So my point is I think, and this is true. I’ve observed this. Having been an investor in Goldmark 20 years, gold can look around the gold smells was coming and it looks around the corner. Even before something happens. If the price of gold is going up, you know, something’s gonna happen. And so it just tends to be more fully distributed and it tends to kind of be a good leading indicator what’s going on.

And if the price of gold is going up, there’s trouble somewhere coming. It’s almost a guarantee. And so, and what I think is with the Bitcoin case, it came after the fact. So, you know, gold worked for two years, it went from 1365 into the 19 hundreds. And then 2000 in 2019 to 2020 Bitcoin was stuck for all of 2019 and the first three quarters of 2020.

And then it exploded to the upside. So I just, you know, based on Mac, you know, market patterns and the way things happen have happened in the past, I tend to think that gold is going to lead this next upturn in the sound money category. And it’s going to people in the Bitcoin community are going to go, Hey, what the hell is going on?

Gold’s working in are things not. And then eventually Gold’s going to start to slow down and go, and Bitcoin’s going to come in and just kind of blow it away. And you know, so in my view in this next leg up gold will probably go up to 2,500 to 3000 and Bitcoin was probably going to go to 200,000, but I don’t think Bitcoin is going to do the 200.

I think Bitcoin’s going to find a level around 30 or 40 sometime in the next year or two and bounce around in there for. As gold continues to March. And then at some point, Bitcoin is going to go from 40 to 200, just the way it went from 10 to 50, because that’s the pattern that seems to follow it. It you know, basically it’ll, it’ll trade sideways for quite some time.

And then suddenly, you know, everybody realizes what it is and it just takes off like crazy. And you know, there’s a fixed supply, right? That’s the bottom line, there’s a fixed supply. So that’s kind of how I see it.

[00:34:10] Q: Interesting. I just want to, sorry to cut you off, Pete. I want to remind everyone. I see a lot of people asking the chats.

We are five minutes away from the fed minutes being released, and then we will get the official word on what these rate hikes are. Please, if you are not already feel free to subscribe, press the subscribe button down below. Lawrence, I want to pose unless you have more thoughts on the gold of it all.

I wanted to pose a question now just about the possibility again, playing devil’s advocate here, not my personal belief, but the possibility that somehow the fed actually gets this right. That, you know, a broken clock is right. Twice a day and somehow drum howl. Got it. Right. And in my opinion, I kind of think this scenario, they need to get it right, is actually a world war.

Like we need to enter a full, full blown war to ramp up all of our production capabilities and in turn, revitalize the economy no different in the same way that we kind of got out of the great depression by getting so heavily involved in world war II. Do you think that’s a legitimate thing, Disney discuss?

[00:35:18] Lawrence Lepard: I don’t think that’s, I wouldn’t call it getting it right. I think that And I think, but I do think a war is a possibility. Yeah. It’s yeah. I, I wouldn’t, I wouldn’t, I, I think there’s almost no chance the fed gets it right here because I don’t think they know what they’re dealing with. And I don’t think, I really don’t think, I mean, the only way that they could quote unquote, get it right.

And the odds of this are zero is they could, they could confess to what they’ve done wrong and they could do what Roosevelt did. And they could do a monitor. They could try and have like a Plaza court. They could do a monetary reset, right. And have another Bretton woods and say, okay, look, we built up too much credit.

We’ve we’ve levered the thing up way too much. You know, the money’s on sound. We all know it. It’s all gonna fall to shit. You know, here’s what we’re gonna do. We’re gonna, we’re going to have, you know, five old dollars equals two new dollars. And the new dollar is going to be backed by a basket of gold and Bitcoin and oil or whatever.

We’re going to pick. We’re going to create a sound money standard on a go-forward basis. And we’re going to migrate to. And there would obviously be winners and losers in that, but on the other side of it we’d have a sound money which would lead to this kind of a problem, this kind of, you know, unsound money and swings and credit creation and everything that we’ve had.

It wouldn’t occur again. And so, so that’s the correct solution. The odds that they choose that, I mean, there’s zero. They’re gonna, they’re gonna run the thing into the ditch, you know, one way or the other, either through hyperinflation depression, or probably some combination of both and then perhaps yeah.

We have a war to get us out of it or to, or to end it with finality who the hell knows. I think war is a little harder. I mean, I, so, you know, there are psychopaths in the world and there’s no doubt that, you know, in a centralized world You know, psychopaths can do a lot of damage. I mean, you know, take, you know, mile or Hitler, Stalin or anything else.

I mean, I think we’ve evolved beyond that a little bit and in the sense that we have nuclear weapons, you know, and even psychopaths don’t want to blow each other up, you know, and the world is, we know it. So I, I tend to think that, and we all need each other in terms of supply lines and so on and so forth.

I mean, we couldn’t really even have a war with China right now, because half the stuff we’d need to fight it, they produce. So, and I think the Pentagon knows that. And in turn, I think, you know, they know that they they’ve got one hell of a social problem, you know, if they don’t, I mean, they’ve given their people a, a big, you know, I’ve been to China many times and they’ve given their people in an enormous increase in living standards over the past 20 or 30 years.

But those people are really appreciative of it enjoy. And if suddenly that starts to go away, you know, they’re not going to be happy campers either on the communist party is not going to have as much power as. The thing we’re seeing going on in my view is we’re going from centralized systems to decentralized systems.

I mean, that’s, you know, we reached peak centralization in the 20th century, right. Or two was the culmination of, you know, we can kill 50 million people in five years. Wow. Aren’t we great. And, and since then, you know, everything is w w you know, we we’ve seen the diseconomies of centralization and decentralization was great when Henry Ford figured out how to put people in a line having do the same thing over and over again, I can produce a ton of cars, very cheaply, right.

So, you know, centralization is bad when, you know, it gets so big. So sclerotic, so political that, you know, and so available to abuse that you can get a guy like a Hitler who can get control of a big industrial economy and decide to start killing people on mass. And so, you know, fortunately we’ve got these two decentralizing trends, which I think are going to save the world.

The first is the. And the second is Bitcoin. The internet is going to save the world because it’s made Joe Rogan more powerful than network news and the you know, the entire you know, the entire you know, mainstream media and, and it’s allowed us all to share information. And then, you know, Bitcoin is important because it’s, it’s sound money that the government can’t fuck with, you know, and, and gold money.

Gold was sound money that the government theoretically couldn’t fuck with it because it was, you know, centralized and kept involved. And because they created a paper gold you know, they, they learned how to fuck with it pretty well, because if, if gold were priced today, the way it was priced in 1971, it would be $80,000 an ounce.

And it’s two. So they’ve got a pretty good job of suppressing the gold price in order to keep, you know, their Fiat system going. And by the way, they’re going to try the same thing in Bitcoin. I mean, there’s a, there’s a futures market developing in Bitcoin. There’s no. That there are projects within all of the governments that are in the theatrical business to figure out how to, how to grab and participate as much as possible in that futures market to discourage people from, you know, from buying Bitcoin.

So, you know, it’s, it’s tricky, it’s tricky, but I, but I think, I think, you know, the thing that the people who run the system have is they’ve got a lot of the power. They got all the levers, they got a lot of money and they’re going to cheat. But the thing that we have is, is we’ve got truth on our side and there are a lot more of us than there are of them.

And, you know, the pitchforks are gonna come out. I mean, when things get pretty tough, you know, I wouldn’t want to be them I I’d much rather be us. So, you know, it it’s, I, I, I think there is a good resolution to this problem. But that’s not to suggest that it’s just going to be a walk in the park for the next five or 10 years as we solve it.

I think it’s going to be pretty fucking cool. Oh, absolutely.

[00:40:28] Q: Yeah. Sorry to interrupt you guys. I want to make this as, as timely as possible. It is now made official that the fed is going to raise rates 75 basis points. So this is in line with the market expectations. I’m keeping an eye on just, you know, the broader indices and it’s been a green day.

And my expectation quite frankly, going in today into today was to long as the market is not shocked, it will respond positively. And then tomorrow, when everyone wakes up and realizes what actually a, what a 75 basis point rate hike actually means I expect more blood in the streets tomorrow. So, Laurie earlier you mentioned a possibility of a hundred basis point rate hike.

I was kind of hoping for that, quite frankly. Where, where do you think, what are your initial thoughts hearing that it’s now

[00:41:14] Lawrence Lepard: for sure, I’m surprised. I thought he was gonna, I thought he was going to go a hundred as well. You know, you just don’t know. I mean, these guys, they, you know, and what, what will actually matter more too is, is, is the press the press conference.

So you know, that’s gonna come out half an hour. We’re going to get a little bit more color on, on what he’s thinking. I mean, if he, if he says they become data dependent, he might as well have said, you know, they’re gonna tape her very soon. In which case everything’s going to rip to the upside gold, silver, Bitcoin, you know, the market, you name it.

You know, we’ll see. I mean, the, the thing, that’s the thing that’s so tricky about this whole problem with this whole issue is it’s all iterative. I mean, they, you know, just like we do, they watch the markets and if th if they don’t get the reaction they want out of all of these different statements and moves and they send guys out a day later to start making statements, you know, that officer dovish to try and, you know, they’re, they’re trying to try to manage the markets too.

I mean, it’s all in narrative. Yeah. To your point about, you know, can they stick the landing? I mean, yeah. I mean, look, it’s, it’s theoretically possible that they can continue to kick the can down the road. I mean, they, you know, I thought it was all over in 2008, so, you know, I mean, they’ve, they’ve done a lot of canned kicking and, and they’ll probably do some more canned kicking.

I mean, we know they’re going to try but you know, with, with every, with every kick and every, you know, every problem that gets slightly larger and know as the credit gets bigger and bigger, I mean, look, we started off back in 2000 with the fed balance sheet of $800 billion, and now it’s 9 trillion, you know, and, and the next big mistake or blow up, they’re going to have, I mean, when, when something occurs here, the market falls a lot or, you know, Japan goes tits up or something else.

I mean, you know, I mean, there’s a possibility we’re going to start buying Japanese government bonds to prevent Japan from failing. So, you know, the 9 trillion is going to become 13 and then the 13 is going to become. And, you know, eventually it’s going to be a hundred trillion dollars and, you know, gasoline is going to be $15 a gallon, not five.

So, you know, you can kind of see where this is going. What you don’t really know is the slope and the steps. I mean, that’s you know, they, they, they do their best to, you know, to try and, you know, like I say, the driving a clown car on an icy road, and they’ve got the two guard rails. One’s extremely inflation, the other’s extreme deflation, and they’re just trying to keep the car on the road.

And so they’ll, you know, they’ll jump on and do whatever they have. If it looks too deflationary, you know, they’ll have a Plaza court or they’ll do a Shanghai court like they did in 2016, when oil was 30 bucks in U S shell was gonna go under, can you,

[00:43:56] Q: what was it specifically? What was the accord?

[00:43:59] Lawrence Lepard: Well, the Plaza court goes back even further, but the one I’m the one that’s really more relevant as the.

Accord in 2016. I mean, in 2016 they had serious deflation, gold was down, everything was down. And there was a real, it was really a deflationary time and they knew it and they realized that if they didn’t get some inflation going get the animal spirits going that, you know, they were going to the whole entire us shale industry was going to fail.

And so, you know, they, they basically went out. So, you know, we got a weekend, the dollar and they took all kinds of actions in the FX markets to do so collectively. And that’s the thing, the thing that we don’t see, and we don’t know is we, you know, and, and, and they have, you know, they have a lot of tools and they have a lot of off shore counts and they have all the big banks to do their bidding for them.

And so, you know, they, they basically will take steps as necessary to try and influence the markets if they think they’ve gone too far, one way or too far the other way. And so, you know, we can count on that.

[00:45:02] Q: I want to read a couple more statements coming out of the minutes. And just a reminder pal has not yet started his press conference.

That will be at 1130 Pacific, two 30 Eastern time setting up for September meetings that further interest rate hikes will be needed. As inflation still runs high, the quotas, and they anticipate that ongoing increases in the target range will be appropriate. So it looks like these rate hikes are not going to be slowing down.

There were some expectations. I know yesterday we had a conversation with Ansul lender about the possibility that they may just pause, rate hikes. They may not increase. They may not decrease from the sounds of this from their own minutes. It looks like we’re going to see a, another rate hike. We don’t need to speculate on that, but I want to just get your sense of what, what these repeated rate hikes could mean.

I mean, the last time they really tried to do anything like this was 2018 The president at the time through a little bit of a hissy fit and they reverse course very quickly. So what, what do you think is going to happen? We’re leading up to midterm elections September year, two months out from said midterm elections.

So do you think there’s going to be any influence by the president or just Congress in general to see any changes by the fed stance?

[00:46:15] Lawrence Lepard: Yeah, so, so yeah, they, they are political and I believe that, and I do think that there’s a chance that they’re going to feel pressure to do something before the election you know, to pivot or to go the other direction.

And yeah, they say, you know, they have to say, they’re going to do more rate hikes because the inflation problem really hasn’t been fully addressed, whether that really means they will do more rate hikes or not, who knows. You know, as we’ve seen, they can, they can change pretty quickly on a dime. So, you know, one of things you alluded to is that something could break.

And you know, that to me is the interesting question, is something going to break? I mean, you know, you’re already kind of seeing things break. I mean, the Italian yields is blown out. You know, the ECB had to have an emergency meeting to deal with that. Japan has had to spend huge amounts of money to do QE, to keep their bonds in a fixed place.

You know, they want to have the tenure at 25 basis points, which is ridiculous. I mean, the ECB just raise rates from minus rates to zero, you know, it’s is nuts. And the committed that they’re going to do unlimited QE is necessary. I mean, there’s really no slowing down worldwide in the printing of money.

It’s just different countries take different leads at different points in time. I mean, right now, in theory, the fed has started to have their balance sheet run off. We’ll see, there’s a delay in the closing of the mortgages. So as it started fully show up yet, but, but in turn, you know, the ECB and Japan are printing like crazy.

So, so there’s always an, the Euro market Euro dollar market is a huge market. So there’s always more money coming into the system to keep the system okay. So it’s, it’s extremely hard to see, you know, what they’re going to do next. It’s just, in fact it’s impossible and that that’s what makes it so hard for business people and others to efficiently allocate capital and do the right thing.

I mean, we live in this, you know, this matrix, which is a hall of mirrors created by them. And so, you know, to me, you know, the faster the system fails, the better, because we want to get to the other side, the other, side’s got a better system, but guys, I think I told you earlier, I’ve got a hard stop. I got to go for another call and I’m running a little bit late on.

So

[00:48:11] Q: no worries at all, Lawrence. Do you want to just quickly let everyone know where they can stay up to date with you on social? Yeah, so,

[00:48:16] Lawrence Lepard: I’m on Twitter. So at Lauren four-part on Twitter and I tweet a lot. And then if you go to my website E M a to EMA the number two dot. There’s a lot of free stuff on there.

Quarterly reports, Bitcoin papers, macro stuff, it’s all just free. It’s you know, I run a fund that invests in sound money things. So, you know, if you want to see what’s going on you know, in the fund or our views on things, it’s, you can go to the website and check it out there. So. All right. Thank you so much for joining us.

Hey, thanks guys. Really enjoyed it. I’m sorry. I couldn’t stay longer, but we’re going to ping you

[00:48:50] Q: to have you come back, but thank you and keep doing all that you do, man.

[00:48:54] Lawrence Lepard: Take care. Bye-bye adios.

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