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Pierre Rochard and Allen Farrington reflect on the ten-year anniversary of "Speculative Attack," discussing bitcoin's role in exploiting fiat currency weaknesses and its growing importance in global financial strategies.
In this episode of TFTC, we mark the ten-year anniversary of Pierre Rochard's seminal article "Speculative Attack," which explored how bitcoin could exploit fiat currency weaknesses. The discussion highlights the enduring appeal of bitcoin's fixed supply of 21 million compared to the increasing quantities of fiat currency and other assets. Over the decade, inflationary pressures and monetary policies have driven value into assets other than fiat, with bitcoin absorbing much of this monetary premium. The speculative attack concept has evolved, now incorporating diverse strategies from corporate to national levels. Rochard emphasizes the importance of understanding bitcoin's intrinsic value beyond its purchasing power, warning against premature selling. The episode also critiques government actions like the US selling seized bitcoin, showcasing a lack of recognition of bitcoin's potential in financial strategies. As macroeconomic factors shift, the urgency for adopting bitcoin becomes increasingly apparent.
The tenth anniversary of "Speculative Attack" highlights the prescient insights of Pierre Rochard and the evolving role of bitcoin in challenging traditional monetary systems. The podcast underscores bitcoin's unique attributes, including its scarcity and resilience, which are driving a shift from fiat currencies to a more decentralized financial future. The discussion emphasizes the importance of education in understanding bitcoin's intrinsic value and the mechanisms of speculative attacks. As individual actions, corporate strategies, and national policies increasingly recognize bitcoin's potential, the next decade promises significant developments in the financial landscape.
0:00 - Intro
1:21 - Speculative Attack: 10 years later
7:55 - Shorting fiat
13:09 - River & Unchained
14:25 - Spec attack season 2
18:11 - Education
23:27 - Gradually, Then Suddenly & Zaprite
25:04 - Alternatives to rebalancing
32:52 - Should institutions prioritize bitcoin?
36:08 - Speculative defense
44:19 - State bitcoin
1:02:10 - Inflation lies
1:08:58 - Wrapping up
(00:00) almost any other supposedly hard asset that you could you know have you could make your long whereas Fiat is your short will have two problems relative to bitcoin the more obvious one I guess is that it's it no matter what it is it's just not as scarce right it's equities are nowhere near as scarce real estate whatever even gold and this is like classic Bitcoin lore you know we don't need to explain that into too much more detail but the more interesting one though is realizing also in the meantime
(00:30) since Pierre wrote the first article just how much worse Fiat has gotten just how much of a monetary premium it's pushed into just about every other one of these assets which I think it's fair to interpret as a result of people speculatively attacking the dollar even if they don't you know think of what they're doing that way they think of what they're doing is saving basically because you can't save with with Fiat um the that monetary premium is now also being attacked by Bitcoin so it's not
(00:55) just that Bitcoin is better it's that it's reasonable to expect a kind of reflexivity in the monetary premium shifting and so that's what's now super exciting this rip of tftc was brought to you by river it's the best place to buy Bitcoin go to river.com tftc and enjoy this episode gentlemen we're here to discuss a Timeless piece that turns 10 years old this week speculative attack Pier how does it feel to know that this piece is now officially 10 years old yeah on a personal level it makes me
(01:39) feel old uh but at the same time I I did write it when I was young uh and uh yeah it it feels Timeless still um it reminds me of a classical song Bolero uh that has this very very long uh buildup of just the same thing over and over but louder and louder so I think that's uh that's kind of been the the pattern um and you know I I when I wrote it I thought that speculative attacks would happen much sooner much faster uh and I think that you know what I really didn't understand was how much people would
(02:20) rebalance their portfolios uh so you know they there's lots of sell pressure uh on bitcoin when the price goes up uh which we don't like to hear as Bitcoin Maxis but that's just the reality um so yeah excited to to be here and to be recognizing the 10y year anniversary well it is again a Timeless piece and one one of the first I share with people uh when when they ask why should I why should I not take out a mortgage and buy a house why should I buy Bitcoin and I I literally sent this to somebody
(02:54) three months ago um when I was back in Philly and he was like yeah I got a I got to go buy a house and I'm going to go to an 8% mortgage and I was like H maybe you should read this piece but as you mentioned the speculative attack has not happened as quickly as you may have expected when we were all younger however it has sort of U I don't want to say evolved but there there are new ways in which the speculative attack is materializing new ways to short the dollar and so how has the landscape of quaint adoption particularly by nation
(03:32) states now large corporations affected your view on how this speculative attack may play out in the long run yeah I I I I'd emphasize though that um speculative attacks have been happening continuously uh and so it really is a question of um you know is there some kind of final one where uh Bitcoin finally uh causes the dollar to hyperinflate um but I think that that that's a bigger question but when we look at how people actually use Bitcoin uh day-to-day in terms of a long-term savings vehicle speculative attacks have
(04:13) been happening continuously and that people have been leveraged uh versus the dollar and then have deleveraged themselves you know you'll hear stories about oh I paid off my parents mortgage by using Bitcoin right and so the the gains from Bitcoin have certainly um had the same Dynamic that we see in a in a classic spective attack that was initially described by Paul Krugman when he was looking at the Asian financial crisis in the 90s um but um I'm sorry what was the question again the the ways in which
(04:49) the um manifestation of speculative attack has uh has materialized like the mechanics like micro strategy come to Market El Salvador with their book volcano bonds right and so in in the piece 10 years ago I kind of Illustrated it with a uh an illustration that comes from the classic uh look at okay people are creating the weak currency by borrowing it through the commercial banking system uh and that then they are using that weak currency to trade for the strong currency uh and then waiting for it to appreciate and it's a
(05:29) reflexive feedback loop because by creating more weak currency uh they are causing its devaluation um and then repaying that loan uh with the um strong currency that has strengthened so that is kind of the the the the classic illustration of a speculative attack but it's just an illustrative example uh there's actually lots of different mechanisms by which you can have the same economic effect and uh I'll I'll let Allan speak further to that he did an excellent job digging into some further examples oh sure yeah so actually just
(06:10) just before I do that I I want to pick up on the the very first comment that both of you guys made that this makes me feel really old like I can't even imagine what it's like for Pierre I I remember reading this probably not quite 10 years ago but I want to say like 2015 at the latest or something and they I I thought of the following kind of amusing way of putting it that this article is older than my career which is now about what this article is about basically but yeah it's um I think that the proper
(06:44) obviously Pierre's not going to say this himself so I now need to embarrass him but the the proper reaction to this is to just congratulate him on on having the unbelievable foresight and and pre even uh to to have predicted that something like this was possible in 2014 I I maybe at the end we can come back to um Pierre's Reflections on I don't know I don't want to put him too much on the spot but something like how serious were you even when you wrote this because it it it now seems obvious
(07:14) but I don't think it was obvious that like I don't remember reading this nine or 10 years ago um as I I remember that I did read it but I don't remember the exact experience of reading it I'm not sure I would have taken it all that seriously I think it would have been more like H this is quite funny like maybe maybe one day this could happen I don't know I was I was completely different I read it I'm like left side the bell curve I was like this is how it's going to happen this is this is
(07:39) this is probably happening right now no anyway sorry I I don't want to um I I just want to make sure that we that we mention that I'm sure beer hears this all the time so maybe the the the 10 year anniversary is a a good time to bring this up again like well done for having written this at all uh but anyway yeah sorry you asking uh the the speculative attack has now uh broadened right the the there are many more Avenues to do it and this is what we we dig into in the in the newer piece which is really just celebrating the the
(08:09) anniversary as much as anything else um I think that you can go through individual examples like Marty you mentioned micr strategy already I think El Salvador is a super obvious one I think there will also be this will be good to get into in a minute uh this coming bull cycle there will be even more interesting ones that actually return to what individuals can can participate in because obvious I guess you could buy micro strategy stock but then that's not really the same thing as what micro strategy itself is is doing
(08:39) or like similarly you know buy El Salvador bonds and do really really well for you know as far as Emerging Market bonds go um but avenues that individuals can directly participate in other than obviously just borrowing Fiat kind of even more Sly roundabout ways um that'll be fun but I think what underpins all of these though is is the realization that Fiat is such you know the Fiat banking system is such that it creates involuntary dollar shorts everywhere right I tease that out a little bit more people might not completely appreciate
(09:18) what I mean by that um everybody is kind of speculatively attacking the dollar anyway because they have to because it's just insane to save with it so and and Pierre pointed out and is in in the first article um that you know if you're if you basically want to acquire any kind of assets uh ignore ignoring Bitcoin for you know the purposes of this analysis um it is arguably prudent to go short the dollar or go short Fiat any other even weaker Fiat is it becomes even more prudent and so what we're
(09:55) observing here though is that almost any other supposedly hard asset that you could you know have you could make your long whereas Fiat is your short will have two problems relative to bitcoin the more obvious one I guess is that it's it no matter what it is it's just not as scarce right it's equities are nowhere near a scarce real estate whatever even gold and this is like classic Bitcoin lore you know we don't need to explain that in too much more detail but the more interesting one though is realizing also in the meantime
(10:27) since Pierre wrote the first article just how much worse Fiat has gotten just how much of a monetary premium it's pushed into just about every other one of these assets which I think it's fair to interpret as a result of people speculatively attacking the dollar even if they don't you know think of what they're doing that way they think of what they're doing is saving basically because you can't save with with Fiat um the that monetary premium is now also being attacked by Bitcoin so it's not
(10:52) just that Bitcoin is better it's that it's reasonable to expect a kind of reflexivity in monetary premium shifting and so that's what's now super exciting that it you know it's not just that the the fundamentals of Bitcoin or however you want to you know pitch the case for for going long Bitcoin it's not just that they're better it's that the the circumstances of the short are arguably better as well right as well as the as well as the long and Bitcoin the the fragility of all the involuntary dollar
(11:29) shorts is now even more enticing than it was 10 years ago well oh go ahead beer oh I I was just going to respond to to to the point about uh how serious I was about it my of mind uh going into it was really about um what is the adoption mechanism for Bitcoin uh because there were lots of people who said that hey this really is about uh credit card fees and so the way that we'll see adoption play out for Bitcoin is that Merchants don't want to pay 3% in credit card fees to uh you know Fiat uh payment mechanisms and that
(12:13) uh we'll see Bitcoin gradually be adopted uh and then finally you know PE nobody will use dollars because dollars are too expensive to use and so um I I wanted to look at the monetary economics uh research or you know school not a school of thought but kind of what how how do monies dominate each other and how do they take market share um and it's really not about the cost of making coffee payments uh it really is about the strength of their monetary policy uh and the relative strength of it um and so it w it certainly was a very serious
(12:55) uh uh look at it and uh belief in in that it is the truth um it was in response to other theories that were floating around about what would be the driver of Bitcoin adoption this episode was presented by river river is the best most secure place to buy Bitcoin in the United States go to river.com tftc set up an account today you'll be able to DCA into Bitcoin without paying any fees you'll be able to give people Bitcoin via river links you'll be able to send and receive Bitcoin over the lightning
(13:27) Network and you'll be able to set limit orders if you want to buy Bitcoin at a particular price below or above where it is now you can set orders to buy Bitcoin when it hits that price go to river.com tftc set up your account today this rep was also brought to you by our good friends at Unchained Unchained is building a financial services platform for a Bitcoin standard they have over 7,000 clients that are securing over 990,000 Bitcoin with 12,000 keys on their platform their platform leverages bitcoin's native multisig properties
(13:58) their corner Stone product is their volt product a two or three multisig volt which allows you to hold two of three keys in a multisig quorum that gives you full control over your Bitcoin they also have an IRA product a lending desk and they're rolling out a bunch of other products including inheritance protocol and sound advisory so go to unchain dcom set up a call with our concierge onboarding team today tell them that tftc sent you and use the promo code tftc at checkout unchain dcom I think it's pretty incredible that or we're at
(14:29) the 10year anniversary of this piece and you guys mentioned um in the piece that we're in season two of The speculative attack and the timing could have be more perfect I mean literally last week the uh interest expense on the debt surpassed the amount that we're paying on defense spending here in the US at the same time you've had the weaponization of the treasury market over the last couple years which has forced many countries to seriously think about diversifying away from us treasuries as a reserve asset you have
(15:01) Japan losing control of their yield curve and they're the largest holder of us treasuries and that is really what gives the dollar the reserve status the reserve currency status of the world is the fact that you have so much demand for our debt and as we turn the chapter into chapter 2 it seems like that demand is waning pretty materially which could accelerate things anybody want to hop in here yes I completely agree and so I think that's yet another interpretation that I didn't even I didn't even come to I didn't want to you
(15:37) know list everything that possibly came to mind but as to why the the short is also deteriorating or or well from from the bitcoiners perspective or the speculative attackers perspective it's it's improving right and I think that's maybe the more interesting thing that um is what we're trying to draw attention to in the new piece is what I think is so impressive about the old piece but also I think most of all especially you know if your starting points just like Bitcoin Twitter where it's it's number
(16:05) go up all day long which I approve of for the for the most part but you know as as a as a meme right not less so as um kind of serious analysis I think there's space for much more serious analysis on the short side I think it's it's almost more intellectually interesting in a way it's kind of scary in a way too because you you start realizing just how much is likely to implode I guess you know which is another way saying to how many Avenues there are for now speculatively attacking rather than just borrowing
(16:36) Fiat again is realizing that there is so much borrowed Fiat that's just you know doesn't realize yet that it's looking for Bitcoin it'll find Bitcoin and that's that's I think by comparison that's far more straightforward in terms of how that plays out what uh scary interesting uncertain I guess um yeah more worthy of analysis I think is well what happens to all these shorts I I I I frankly have have no idea I mean I can speculate on it but um yeah that's uh I think I think that's the that's the
(17:11) essence of the the speculative attack the the number go up part is fine like that that'll take care of itself it's what happens to everything else I mean look at the world right now the US real estate market you have mortgage rates around 7 8% all-time high prices maybe it's leveling out and then look over to equities it seems like Nvidia is the one stock holding up the US Financial system and arguably the Global Financial system uh people are looking with baited breath to see if Nvidia rolls over and what that does for
(17:48) are you suggesting that that valuation is not justified what is it it's like a 49 don't you believe in AI Marty come on but I mean it's it's indicative of it feels like I guess this is the question is how much how can the speculative attack how much education how much um how much uh education around Bitcoin is needed to accelerate this like how like people's understanding of Bitcoin um obviously we understand it very well and that's why we're here talking about this you wrote this piece
(18:26) 10 years ago but just looking post covid the explosion of um flows into equities housing um treasuries even to some extent uh or hard assets like gold as opposed to treasuries excuse me um and Bitcoin we're sitting at $61,000 right now um many people think it should be higher like is there a catalyst whether it being equities in the housing market where people sort of wake up they're like holy crap this is not the store value that I thought it was and what will it take in terms of information um around Bitcoin knowledge
(19:05) around Bitcoin to drive those flows into Bitcoin and what is like the aha moment that that pushes everybody towards Bitcoin yeah I'd say that first it's a a momentum play so uh they don't really need any education Beyond just looking at the price chart um and I think that the financial press has done a great job of uh educating people about about bitcoin's price uh which which sounds weird but um you know they they they're constantly showing charts uh I think the ETFs help with that as well so now you
(19:39) can very easily uh see how bitcoin's performing relative to other assets so that's where it starts uh then the real education challenge comes from uh when they want to rebalance right of okay well I I looked at bitcoin's chart it went up uh I made money so now I'm going to sell and I'm going to um you know convert back into dollars and that I think is really where the education is critical of you're going back onto the Titanic right you're actually you don't understand what you're selling so
(20:16) understanding that there's intrinsic value to holding your own keys to running your own node uh I I think that education it's not so much helping people to uh understand they should buy Bitcoin but really helping them understand why they shouldn't sell Bitcoin and why there's no second best why there is no alternative uh that is the education piece that uh is it's it's not just needed today uh but I think it'll be needed forever uh in that uh future Generations will constantly have
(20:52) to relearn uh why Bitcoin has value you know beyond just its purchasing power because if they only understand the purchasing power then they go out and spend it uh if they understand why you want to hold it uh that's I think takes education and and will take education forever um and you know that's why I'm excited about what Michael Goldstein bit Stein is doing with the Nakamoto Institute and many others including this podcast are are doing to to help on that education front yeah also not to any way knock
(21:30) what we all obviously mean by education but um I think that probably the best education on this front is just going to be getting wrecked right selling out Bitcoin because as Pierre says you know you've seen the number go up you like the chart you want to rebalance uh you don't realize what Bitcoin really is you think it's just you know yet another financial asset that's done well within your portfolio or whatever um and essentially this is an interesting way of putting it actually that in that position you maybe
(22:01) haven't really realized that you are speculatively attacking in the first place because if you understand that so this is going back not only to to Pierre's original article but you know the the concept that he was borrowing just in in in FX and in general you don't stop a speculative attack you don't sell out like you don't think to yourself okay cool I've made enough money now you do it in the first place because you realize the currency is completely going to [ __ ] so if people and again I think the ETFs play into
(22:30) this massively there's there's a a good side and a bad side to that entirely in general but even even restricted to this that it makes it obviously makes it a lot easier to buy but it the other side of that coin I think is that people will a lot of that buying almost by definition wouldn't have otherwise but not just for the structural reasons also for exactly these educational reasons right so there there will have been insufficient education behind the initial purchase and then the real education will be when they eventually
(23:06) realize that they they screwed up their speculative attack right they they could have followed it through but they didn't they rebalanced instead um hopefully then they seek some you know real education then then they can find um they can find the original article they can they can find everything else from uh from the Nakamoto Institute but I think getting wrecked is probably going to be the most important first step for a lot of people quick break here freaks this rip is brought to you by gradually then suddenly a framework for
(23:32) understanding Bitcoin is money by Parker Lewis I wrote the forward to the book I'm honored to have done so because it's the best 0o to1 primer if you're looking for a logical explanation of why Bitcoin obsoletes all other money buy one for yourself and maybe a few for your friends go to the saafe house.
(23:48) com gradually that's theaf house.com safe spelled Saif the safe house.com gradually use the promo code tftc for $5 off a check Che out Buy It Now freaks the price of Bitcoin is going up you need to understand it this is the best 0 to1 primer this rip was also brought to you by a good friends at zaap right if you're a bitcoiner and run a business or an independent contractor you should be accepting Bitcoin as payment if not you then who if we believe that Fiat is systemically fragile and is a risk the rails that that currency runs on are
(24:21) risk as well you need to begin accepting Bitcoin as soon as possible invest in the future of your business create a redundant rail by accepting Bitcoin as payment using zap rate and reduce risk for your business I've done this for my business here at tftc we use zap rate it allows you to easily create invoices payment links or connect e-commerce stores connect your wallets or custodial accounts and be set up in minutes we can also connect our bank accounts our stripe accounts or Square accounts to accept Fiat as well the time is now
(24:50) freaks the Fiat system is fragile inves in the infrastructure that dris the future invest in yourself Bitcoin payments with zap rate go to zap.com tftc to get $40 off their annual subscription zap.com tftc $40 off what are the low hang of fruit alternatives to rebalancing for individuals who are thinking about it um really comes down to managing your cost and making sure that you can you can hold Bitcoin obv see number one yeah so I why to this earlier I'm glad that we were able to get onto it that one of the things
(25:27) that's exciting me the most I don't know exactly what time Horizon I expect this to play out over I think it will become more popular in the next let's say three to four years you know this this cycle it'll become a lot more normalized is and again I think this is also yet another way of widening The Avenues to speculatively attack significantly more purposefully than what I just describe with somebody buying an ETF let's say is the uh the model which I think is probably fairly credited to Unchained at
(25:58) least at first of the over collateralized loan and all the you know nice assurances that both parties get with that I'm increasingly seeing I'm sure probably both of you are as well increasingly seeing uh ways of basically generalizing that model to different kinds of Fiat payments such that anybody who holds Bitcoin uh will I think increasingly easily be able to find uh let's say trustworthy enough counterparties to do something similar to well it will be an over collateralized loan but may not necessarily feel that way um so two two
(26:43) points I want to make there so one is that I realized as I was saying it right in terms of like trusted counterparties and so on this is very much not you know defi that's that's not what I'm I'm promoting here at all um it's it's impossible to do defi with Fiat because it's centralized so you you need to have some trust ideally more in the mechanism and and the Bitcoin side of it can be you know as transparent as as everybody is willing to allow but you will need to trust some or other counterparty for
(27:12) this to even be possible in the first place the second though is that the I I don't mean not all to be like throwing Unchained under the bus I mean they they may may well end up being involved in exactly the kind of thing I'm describing but at least the initial model that they had I think people conceive of that being for big purchases basically and I don't know if that's a question of like how it was marketed or just the you know the the size of the loan that was necessary to make it economical to to
(27:40) bootstrap this model but you know it could be for like a down payment on a on a house or something or I think Pier even mentioned that before right that um you know people realizing Bitcoin gains to pay off their mortgage or something to that effect or or a card or or whatever you know something big um but what I'm excited about is generalizing this to enable things like uh credit cards where the custodian of the Bitcoin is basically as uh basically acting as an issuing bank and are giving you rather than one big loan they're issuing
(28:16) you a revolving line of credit in exactly the same way that credit cards work with Fiat Banks as people just don't really think about it that much because they they kind of imagine it as as one-off payments um but which also provides this Avenue of attack because again this is going back to something that Pierre mentioned in in the first article that and that we you know we do our best to pick up on in in the more recent one that if you're ever deciding not to buy Bitcoin you're effectively leveraged right whether you're whether
(28:45) you conceive of it that way or not this is you know this is uh itself presents a an obvious Avenue for carrying out like a micro speculative attack right um I think the only this this probably no I mean this definitely was significantly harder to actually execute 10 years ago but this is exactly what I'm now excited about I think it's going to become easier and easier because so much infrastructure has been built in the meantime to enable people to effectively be borrowing against Bitcoin to spend dollars or or spend Fiat um not even
(29:22) necessarily because you know they want to like they won't even need to think of it as a speculative attack right they won't be doing it they could if they wanted to but I think what's really cool about it is they don't need to it just if anything this is kind of the what's so nice about the entire theory is that at a certain point it just becomes rational to do this you don't even really need to be able to articulate why like the the financial in ins and outs or you know explain your
(29:49) own personal financial decision- making in terms of Longs and shorts in a portfolio and all that it's just obviously rational to not spend Bitcoin to borrow dollars and to create this position uh and you know in doing so contribute to the to the overall speculative attack by just kind of chipping away at the edges well got well so I think that in terms of uh helping people not rebalance one way to do it is to just make it really inconvenient to uh spend your Bitcoin so put it into a multisig that's in several
(30:28) different locations and uh maybe even have one of the keys be with um your Maxi friend who will make fun of you for uh selling your Bitcoin um so that's one the other is really it's it's at the heart of the stack SATs uh and stay humble part of you know Matt Odell's uh meme which is the humility of uh not not wanting to uh indulge in materialism and uh finding other ways to be happy I think that uh that that helps with avoiding the lambo uh syndrome and uh then the the other piece of it is continuing to work right so uh not
(31:11) retiring uh is a critical part of not having to sell your Bitcoin and uh finding ways to uh you know work in a way that you love that it doesn't feel like drudgery uh so those are uh important the the in terms of borrowing we have to be careful because of bitcoin's volatility right so uh and it's also the case that you have to be careful with drawing down on your Bitcoin because of the volatility so you don't want to be you know having to spend all your Bitcoin in a bare Market because you had an
(31:47) unexpected medical expense like that you know so um there's lots of reasons to be cautious with a speculative attack especially at a personal level um and I'd argue that it's it's better to let the Michael Sailors of the world who you know have a limited liability legal entity that is doing the speculative attack uh at scale uh rather than trying to leverage up your own balance sheet to the hilt and finding yourself uh getting liquidated in a bare Market um so there's you know there's a spectrum of
(32:23) speculative attack of how leveraged are you uh and there's ways to do it uh rather safely on a personal level and then there's ways that are are pretty reckless so I think in to to not be forced to sell we have to caution people there as well yeah and to your point about micro strategy and the fact that they're probably in a better position to do this since they're a corporation and have um some protections uh that an individual does not and to your point earlier Allan um what you were just describing like do
(32:56) you think we're reaching a point where particularly at the publicly traded corporate level and even private privately held companies it's becoming a fiduciary responsibility to acquire as much Bitcoin on your balance sheet and potentially um pre prevent yourself from selling that Bitcoin by taking out US dollar denominated debt like are we are we reach reaching that point I want to say yes I think we all agree at least of the the rationale there I Think It's Tricky I mean this this exactly goes back to I I mentioned this before in a
(33:29) different context that that that side of the trade seems far more intrinsically uncertain and this is one way in which it I think it's manifested quite well that it's highly highly reflexive whether or not people have the attitude that would lend that having would lend to to performing the attack in in that way and what I mean by that is that we we we're probably all familiar with this to some extent on the personal level it's it's just it's kind of a different Calculus if you're like
(34:04) the CFO of a publicly traded company that you're if it goes [Music] wrong it's going to be far worse for you if nobody else did it but if many people did it or eventually if everybody else did it it gets less and less bad for you personally but obviously you know this in advance so it's almost like um uh how how would you how would you describe I was going to say it's like a game of chicken but it's almost like the inverse of that in a way it's like nobody nobody really wants to go first but as soon as
(34:37) somebody does everybody else then has to which is maybe what makes it a bit disappointing that I think a lot of people expected this last cycle it it felt like once micro strategy did what they did or even telegraphed that they were going to do what they then did that others ought to follow so I think that the fact that it didn't happen there really is for public companies at least it really is just micro strategy still um or for I should say for for large US public companies we've seen one or two more popping up in the past couple of
(35:08) months um but they tend to be quite small um the fact that it didn't happened the way that we would have wanted to or as quickly as we would have wanted to is giving me a bit of pause that uh it's not even that I think it will take longer necessarily it's that I'm I'm trying to I'm trying to be humble right I just don't know it feels like it's it's inev it will happen at some point um I think you just don't want to be too uh you don't want to be too aggressive in your in your
(35:37) predictions which is probably just wise for anything to do with bitcoin's price I guess yeah perhaps the imitators will will really jump in uh when the results are there that are undeniable um I would argue that the results are already undeniable that uh you know micr strategy market cap has tremendously grown uh the shareholders the employees everyone has benefited um but you know when Bitcoin continues to rip that that'll really uh put the nail in the uh in it and now the the other part of it I think that is underexplored uh in in the
(36:17) piece is speculative defense so I outline uh two ways that there's a possibility of defending the currency which is one um raising interest rates and they they have raised interest rates but not nearly enough to counteract uh the you know bitcoin's uh kager right its uh average returns are still far greater than uh 7% or whatever the interest rate currently is um but that has been effective for other asset classes right so in Austin we're already seeing real estate prices starting to come down so so uh it it's raising
(37:00) interest rates is effective as long as the expected Return of the asset is lower than where interest rates go um but the other part of it that is is the capital controls and this is really what Saab 121 was about is how do we limit how much debt can be created to uh by Bitcoin and uh that it seems like they're going to have a tough time in the United States implementing Capital controls um in sustainably uh they've been able to do it in the short term by violating the Constitution and uh you know we're seeing coinbase actually just
(37:42) announced that they are suing the FDIC and the SEC uh over these stealth Capital controls uh that are about debank uh the uh Bitcoin economy uh to to prevent C spective tax through that vector but that'll fall apart and what what I think though the third prong of a speculative defense would be uh simply to buy Bitcoin uh it really is about capitulating and uh backing the currency by uh buying Bitcoin much in the way that micro strategy is backing uh the shares by diluting the shareholders to buy more Bitcoin and
(38:25) that could very well be uh highly effective way of Defending a currency is dilute the currency by buying more Bitcoin uh or or to buy more Bitcoin and the net effect is actually to strengthen the currency it's not to weaken it because you've improved the balance sheet of the currency issuer so that I think will be a a trend that you know El Salvador can't do it because El Salvador does not have its own currency uh but Argentina could do it although it seems like Malay is too Orthodox to to adopt
(39:00) that approach perhaps we'll see Trump be persuaded uh to to do it uh but again you know there there's lots of Education to be done and I think we'll be surprised uh when it does happen that you know it's not who we expect to do it but um it's it is inevitable I believe yeah just to to follow up on that it it is this really odd mix of on the one hand it being very difficult to predict any or I mean basically impossible to predict the timing of any of this but also exactly as Pierre says it just feeling completely inevitable in
(39:38) the in the longer and longer run I think I wouldn't just repeat everything Pierre just said but but one or two of those points are worth emphasizing around um how yeah just how how inevitable it seems in terms of there basically being no way out to to actually stop at the very least Bitcoin price Rising I I agree the the the ways of trying to defend against it are interesting but none of them really harm Bitcoin in any way and and again I think in the longer and longer run they obviously benefit Bitcoin right so the
(40:12) the third one that Pier mentioned if they just put Bitcoin on their own balance sheet then obviously that's buying pressure that's great that's that's probably the most straightforward one uh Pier's first point though around uh raising interest rates I think that's quite kind of exciting in or almost tantalizing in a way that that is pointing to something I mentioned uh an answer or two ago around the you know the dollar shorts that are just waiting to implode so you could easily imagine
(40:41) uh really like if this if this really gets going and there needs to be a public policy level defense against it hiking interest rates in such a way that just causes widespread bank failures and then everybody thinks oh [ __ ] like what you know what even is it dollar I need I need Bitcoin now so it's yeah it's it's fun thinking thinking all this through I mean again it's kind of scary it depends it depends on your exposure I suppose but uh for us it's fun for probably for people listening to this it's fun
(41:14) well he's dealing P's dealing with something he's still there but to your point Allan I think I mean one of the big uh thesis right now is that we're going to have 1970s like um w Wes of inflation were uh in the middle of the first and second wave and the idea is that if um the FED brings rates down again that'll bring inflation roaring back and then will they need to have um uh will they need to basically Jack rates up even higher than they have right now can they even do that without creating the um the bank failures that
(41:54) you described and if you couple that with what we discussed earlier which is a falling demand for the treasuries which is what really drives the federal government and the fed's ability to bail out or facilitate the financial system I I know we don't I know we've been saying you can't um predict the timing but it seems like again moving into season 2 chapter 2 whatever you want to call it the Coalition of events and macroeconomic factors as we head into the second half of 2024 um are really interesting like if we get
(42:31) Echo inflation um lack of demand for treasuries it's like what does the fed and the US government do yeah I I think I've said this on tftc before by the way so I I won't I won't spend too much time on this but what all of this makes me think like what kind of instinctively comes to me even even more so than I don't know intellectually is it's basically just like thank goodness for Bitcoin like but or more more specifically though that bitcoin's mere existence gives an excellent reason to
(43:04) not have to think about this too hard or or rather that maybe more in keeping with exactly how this conversation has gone if you do think about it it can be fun right it can be kind of it could be intellectually interesting rather than just terrifying and I I have thought about this before too that it must have been it must have just been so depressing thinking about this stuff I don't know more I guess more than 15 years ago right like like if you if you were let's say educated enough or or probably contrary enough more to the
(43:35) point to to have all of the concerns that that we are discussing now again other than other than Bitcoin purely the the short side of all of this concerns about the Fiat system the the you could have exactly the same conversation but the tone would just be completely completely different it would be utterly terrifying and and your I guess one way of thinking about it your avenues for specul attack would be significantly worse and and riskier in and of themselves so yeah I'm I'm glad I basically don't need to take this
(44:07) too seriously I can just this entire conversation can can basically just be sport that's great it's great for us but that's um and you well this gets into another interesting part of the speculative attack is the the um the public and governments at large getting the causality wrong um and pointing the finger at bitcoiners and saying you destroyed all these currencies by doing what you did but I think we would all argue bitcoiners are simply making the rational decision that they notice what the governments are
(44:47) doing to their currencies they see Bitcoin jux opposed to that and they say I'm going to adopt the better currency but if a speculative attack is successful and a lot of people are left on the sidelines that is something we have to deal with and again going back to education how do we communicate this to people well if if people have uh lots of Bitcoin exposure even indirectly by holding S&P 500 that has you know micro strategy in it then um you know it Bitcoin would actually be pretty widely distributed uh and so it wouldn't really
(45:25) be um hugely disruptive uh hopefully I think the the best way to get it the most widely distributed uh again is is to have governments uh buying Bitcoin by printing more money uh and that that is how you get Bitcoin into the most hands uh even though it goes completely counter to the purest uh kind of uh you know Satoshi white paper anarco um Cipher Punk ethos pragmatically it's how you uh diffuse the bomb it's how how you make this not be an issue for The Wider public where to them it's more of like
(46:06) an upgrade uh rather than some kind of catastrophe so um hopefully that's that that's the approach the policy makers take uh but that I I I think that it also depends on the government approach which is is it democratic government or is it authoritarian government uh in a democratic government uh you know Bitcoin is popular and so people will vote for politicians that want to adopt Bitcoin and that helps things be orderly uh in in transitioning to a post Fiat economy but in authoritarian or uh regimes where they're only nominally
(46:50) Democratic but in reality uh you know they are authoritarian then that will C a delay in adopting Bitcoin that could cause a lot of no coiners to be very disgruntled and so uh I think that is a very real risk and I think that it also shows why bitcoiners should be involved in politics because ultimately we want governments to U make this a soft Landing rather than uh creating all sorts of you know poverty or unnecessary harm uh for for people German and US governments this week though dumping all their Bitcoin you
(47:32) hate to say it here is it's awful it's it's it's it's really to me it's the worst policy move of the Biden Administration it eclipses even you know uh the SEC or uh the uh Department of energy coming after Bitcoin miners all of those things are they're they're almost cosmetic right theatrics but selling Bitcoin that were seized it's wrong on two levels one it's wrong on on the financial level of okay they should be holding the Bitcoin because they can print dollars so
(48:06) there's no reason to be buying dollars on the market um but two on the moral level of well what if the asset forfeiture gets reversed what if a court says actually you have to give the Bitcoin to soand so uh and so then the government would have to go out and buy the Bitcoin uh which you know or they would have to pay the person in some kind of dollar amount that is not reflective of uh the bitcoin's value so even for people who say oh the government should not seize Bitcoin and therefore the government should sell
(48:42) seized Bitcoin that's illogical because if you think the government should not seize Bitcoin then you should also believe that the government should return the seized Bitcoin not sell it uh and so at the very least they should hold it until they're in a position to return it um the it's a it's a policy decision that in many ways will be irreversible uh so as bitcoin's value increases um and that really is unforgivable um but uh we'll see if the ne next Administration has a a wiser approach to it and I'm not sure exactly
(49:23) which portion of the se's Bitcoin they're selling this week I forget from which asset seizure it is but I think in the case of bitfinex where the US government sees Bitcoin from the person that stole Bitcoin from The Exchange like bitfinex should get their Bitcoin back if we live in a just Society I I think they did uh but um I don't know about the specific details I thought the coins they were selling was related to um Silk Road still but still Silk Road yeah yeah I want to be clear I don't know if they're selling B fenix's
(49:57) coins but they're still holding them they should give them back to bitfenix they they should yeah it's uh and how much is what what would you guys put the lik obviously we have El Salvador we're seeing these movements of the bricks countries diversifying away from treasuries we've seen China buy a lot of gold what I mean Al Salvador again obviously uh big moment in Bitcoin country making a legal tender uh staying humbled stacking SATs month in and month out but what what do you think it would do to accelerate the
(50:39) speculative attack if one of the bigger Nations got in and what would the two of you put the likelihood of a larger Nation outside the US getting into Bitcoin um going into the next two three years yeah yeah I think the it it it may be driven through the Bitcoin coin mining industry that uh Nations that are abundant in energy um you know at first it's the private sector that's mining Bitcoin uh and then you have a politicians say oh we should mine all of the Bitcoin here uh and then they realize that would be very expensive uh
(51:15) relative to buying Bitcoin and so that's how you would end up um kind of walking the through the maze uh to end up uh buying Bitcoin is from the energy angle um obviously the the Middle East stands out in its energy abundance uh but there's lots of other places around the world um I I think that's the highest probability uh but I still think that's uh low probability compared to um El Salvador continuing to be the standout just like micro strategy is the standout uh and that El Salvador could attract a
(51:53) tremendous amount of economic activity had Kathy Wood saying they're 10x or GDP um and so really it might end up being that micro strategy and El Salvador continue to grow uh rather than uh other competitors trying to imitate them in the short run at least yeah I I completely agree I think mining is the most obvious uh first step for for nation state not even sure I call it adoption necessary involvement nation state involvement the the one thing I'd add to to Pierre's comments though is that I think this isn't really
(52:31) addressing your question Marty sorry I don't I'm not sure how likely I think this is it's more just whenever this does happen I think it will be kept secret for a long time for basically as long as whoever's doing it can get away with it so it could be that it's happening now maybe that kind of answers the question a little bit it could be happening right now and we won't know for for several years purely had recent I was gonna say we have had recent confirmation of the strategy you're
(52:55) describing with the kingdom of Bhutan which has been which was quietly accumulating Bitcoin since early 2020 but uh due to the fact that they got swept up in some bankruptcy proceedings it was I actually I don't know the details there all that much but that's oh you didn't know that the uh the kingom Bhutan had to come out and admit like yes we've been mining Bitcoin accumulating I they I didn't know why because they got caught up in the Celsius and blockfi um ah bankruptcy proceedings and so it got made public
(53:23) that they were doing this that's unfortunate for them I guess well but then that's even back to like they need education right like they I I told you they're going to get wrecked they're they're going to learn by getting wrecked and they should have just gone on Nakamoto Institute from from day one um but yeah I think we'll see a lot more of that and it to to try to bring it back to your question again without because I have no idea on probability sorry that's kind of my answer to all
(53:49) this is like that's it's also what makes it exciting I just absolutely have no idea uh except that it gets more likely in in the longer and longer run but um the the rationale for keeping it secret I think that's the most interesting part because it's basically you want to you want to front run people as much as possible right it's it's it's in and again we we have experience of this from the individual level that the incentives are not exactly the same but they're similar enough to recognize that
(54:17) the longer the price stays down or you know relative to not not at any absolute level but just less than like shooting up when you're still trying to buy the better that is for you if you know that I guess on the one hand at the individual level what's more relatable is you know you have a Fiat salary so you know what your buying schedule is going to be uh with mining it's it's maybe even more straightforward is like you know you obviously can't it's it's physics you can't accelerate that you've
(54:45) got you got to actually do the work over time so if you can just do it secretly for as long as possible then then that's great maybe borrow in dollars to fund it as well just to round out the link here well I've had that idea for quite a while as Bitcoin mining permanent funds where whether at the state level or the municipality level you issue immunity bonds to raise cash to acquire energy assets or as6 and then roll the revenue into a Bitcoin Permanent Fund pay off the bond holders and then just keep
(55:17) rolling the revenue rents and repeat spec of attack fee so that's that's super interesting I think I I I want Pierre's comment on this as well but my interpretation of that is it's in the spirit of what Pier's described earlier of actually the best way to fend this off is just for states to buy Bitcoin themselves but it's not quite as clean as what Pierre was putting forward and in fact is more in keeping with what we're describing in terms of the Avenues for attack widening because it's it's
(55:46) channeling it through the excesses in capital markets right the involuntary shorts that are looking for a long well the long is I mean it's really it's mining iess yes but it you know that's obviously just a proxy for eventual Bitcoin yeah the the limiting factor there is access to energy uh at at what price um and so when we look at El Salvador for example electricity is relatively expensive in El Salvador uh you know despite the the geothermal that is developed there and so um for for them it really does make sense to just
(56:22) go out and buy the Bitcoin uh the perhaps you know the the the suggestion I'd have for President Bali would be to uh issue more bonds uh and to further inbt the country uh to buy more Bitcoin uh but you know that's uh ultimately he he Rules by Democratic legitimacy and so uh perhaps his his people would not you know want that they don't want the country to be overleveraged uh but I think that that would be um a a wise move uh even though you know I'm sure he's got he's got other priorities going
(57:01) on as well well the there's a natural and and almost cute in a way counter to the question of the uh you know the the Democratic accountability that that you obviously have to keep in the back of your mind that I think that actually that strategy lends itself to in how would I what's the best way of putting this normalizing the argument that it it is in fact responsible if anything you you potentially have a fiduciary responsibility to do this kind of thing because as we know I mean there's like half a sentence or
(57:34) something in the newer piece but since they've done this their bonds have been like unbelievable performers again within the scheme of how well an Emerging Market Bond can perform um but it's it's it's just really interesting again this this Avenue of of tapping all these excesses in in capital markets uh becoming self fulfilling and probably in the longer and longer run uh lending itself to not only making your own individual trade or country's trade I guess not like bu's personal trade but that trade
(58:12) looking more responsible but normalizing the idea of that trade being responsible that's uh that's also really fun to see playing out yeah go ahead P I'm sending well so I I was thinking about um you know with one of the advantages that sailor has is that he can issue a convertible bond that converts into Equity that a sovereign does not have um now maybe though there would be a way for uh belli to develop some Equity uh in the the government of El Salvador uh which you know really becomes very very
(58:51) Colonial very quick um but the the other option is really look look at it uh from the perspective of uh what other ways are there of securing the bond and so um it might just be a question of him having a credible way of custody the Bitcoin where it's still transparent but it would give the Creditor some level of uh confidence that there's some recourse if things go south if somebody else gets elected in El Salvador uh that they would still get repaid uh using the Bitcoin as collateral and so um yeah hopefully
(59:30) that's that's something on his radar I I might be misremembering this maybe one one of you two can can uh fill in this Gap but I swear I I have actually heard a proposal like this I maybe it just wasn't entirely serious I guess from from the government of El Salvador but they would have a bond which was in part and it's basically approximating a a convertible into Equity as best you can with a country where what it converts into is some proportion of the bitcoin's appreciation does this sound familiar I
(1:00:01) I'm pretty sure I'm not making this up I have heard something like this before yeah I I think that that it was it was structured in a way that was uh like too creative in a sense and so um you know because if you're trying to tap into the the excesses of the bond market you have to have something that's pretty vanilla that you know a a bond portfolio manager could just buy uh without getting a lot of scrutiny um and so I uh I I I also am not familiar with the details of their IMF uh negotiations so
(1:00:36) uh perhaps they've got other limitations that you know are more opaque it would I mean would be a smart move though and we're seeing um we're seeing strategies like that at the individual air like we've got companies in our portfolio at 1031 that want to restructure um traditional credit products of the commercial real estate energy and dual collateralize with the asset where it's the commercial real estate property where the energy asset and Bitcoin and have the lender and the borrower um participate in the
(1:01:11) appreciation of the Bitcoin um that in my way this is an incredible vehicle to manifest the soft Landing that drone pal Janet Yellen everybody in the government would uh like to see happen but you're really not going to going to do without restructuring a lot of the credit the debt that exists out there dual collateralizing with Bitcoin and the other underlying assets my mind yeah yeah that's a great example of um again something I mentioned earlier I I I was thinking the the example that came to mind for me was the kind of pseudo
(1:01:44) credit card one but yeah I'm familiar with exactly what you're you're talking about Marty that um again interestingly this is relatively new right you need quite a lot of infrastructure built out to facilitate these kinds of financial products um but I guess underlying all of it is is number go up creating a pretty obvious incentive to try to do that yeah and um I know we're coming up on time here um but I wanted to I was on my phone CU I was sending Logan this tweet and bringing it back to the
(1:02:16) individual level um the level of the individual and driving urgency for them to understand that they should be speculative attacking the dollar um the government lies about inflation statistics uh so and data and so they'll tell you that inflation has been tamed and they'll tell you not to believe Your Lying Eyes and try to quell you into a sedative state where you don't act to protect your wealth by accumulating Bitcoin and we had a great example of that uh on Twitter yesterday this gentleman um went uh to reorder
(1:02:54) something on Walmart that he ordered to two years ago and uh he came to find that the the price of his basket of goods that he bought from from Walmart tripled in just two years we play this feel like I'm going to be sick I just like look through my Walmart history and I found this like um Walmart order from 2 years ago for the whole month worth of groceries 45 items cost $126 a whole month of groceries just for me basically but I did notice this reorder all button and I wanted to see how much it would cost now now this
(1:03:38) order of 45 items for one month would have cost $414 that is four times more how the [ __ ] how like what so the government would let lead you believe that inflation is not 329 over the last two years but this Walmart basket of goods that's a pretty diverse basket of goods 53 items um I'm kind of straining this interpretation but I think the comic effect is worth it that's him getting wrecked right that's what you're watching there he's long dollar and you're watching him realize how wrecked
(1:04:20) he is so get him on Nakamoto Institute as well that would be by far the most helpful comment that could be left on that Tik Tok well if you were to price that that basket of goods and Bitcoin it would be worth less sets today yeah there was an interview with Janet Yellen where the interviewer asked her if she had sticker shock going to the superm market and her response was no so they're they're very dishonest I mean or she's scile it's like which which one is it um and I I I think that the level of
(1:04:54) denial will continue uh they clearly to them it's enough to say oh well we got inflation back to 2% but people are going to continue to have the reaction that that guy had of wait hold on even if even if inflation today is actually 2% nevertheless over the past five years you know it's it's 400% so uh it's an arbitrary time frame to say oh only annualized uh CPI is relevant um people have longer memories than that right people have memories going back decades so you're essentially attacking
(1:05:34) people's memories uh and trying to Gaslight them into thinking that uh this is okay uh but really they they've stolen a tremendous amount of wealth and redistributed it in a way that um there will never be accountability for no is your duty as an individual to protect yourself your family your business from this overt theft via inflation and again they're they're they're literally telling us not to believe our Lying Eyes don't it's not it's only 3% inflation it's not 329 per. looking Walmart it's becoming so
(1:06:14) blatant that I feel like we're quite we might be there already but we're certainly pretty close to the narrative switching to uh okay there is inflation and it's a good thing and and like here's the reasons why so you should be really happy about this well I recorded always been the Fiat or you know mainstream economics argument anyway but I think it's it'll be quite entertaining watching them try to popularize that Beyond The Academy let's say beyond the kind of thing that we we make fun of on
(1:06:45) bitcoin Twitter and actually become something normal people talk about well I think despite of um despite how they try to frame it like all right there's no inflation to inflation good what really matters is how people act like this gentleman like freaking out that the basket of goods went up significantly and I had a discussion with Peter sandre earlier this week and he said something um that I never heard and was interesting and makes sense to me he said there are accounting bodies that Define hyperinflation is 20% um many economists
(1:07:15) will say it has to be over 50 or some astronomically High number in the thousands of of percent per year but this accounting board has essentially identified 20% as the level at which people will act differently once dollars hit their bank account when they get paid they'll go and they'll they'll buy Goods right away they'll do something um that they otherwise would not have if they weren't um aware of the the high rates of inflation so again going back to the government's telling you not to
(1:07:43) believe Your Lying Eyes and is misreporting the amount of inflation like that that is something that people listening to this episode particularly under the context of speculative attack and and how you should approach your Bitcoin accumulation strategy and um basically benchmarking it to what's happening in the Fiat world like we I annualized over the last four years inflation real inflation is likely over 15 20% um and is that like are we living to the beginning of a hyperinflationary event here in the
(1:08:21) United States potentially especially if we have 1970s like Echo inflation um on the back end of of this decade and so seriously consider the the ideas put forth in the original specul of attack and uh the the follow-up decade later version that that Allen and and Pierre have written there's anything we didn't touch on you think the freak should be aware of no I think we covered a lot of ground today yeah gentlemen it's always a pleasure Pierre uh you are humble you are monest uh don't want to blow smoke up your ass but
(1:09:05) I'm about to one of my favorite pieces one of the most formative pieces I read in the early days um and still go back and reread year in and year out and send to people um like you said earlier Allan short but gets right to the point and I was and still am left side of the bell curve I was like oh this is how it's going to happen and despite the fact it may not be happening as quickly as uh we all imagined a decade ago I think it certainly is happening to some degree and I do think it will accelerate and is
(1:09:37) in the process of accelerating right now like I said the timing of the 10 year anniversary and the follow-up piece that YouTu wrote I think could to be more precient with everything that's going on in the world of Fiat let's do this again in 10 years yeah season three season three gosh just one one teenagers at that point you're mentioning you you go back and reread it and you go and send it to people um I'm not sure if I even told Pierre this maybe I did right at the start when I first pitched it to him but for me
(1:10:11) literally the idea that we should write this and that we should update it was me rereading the original and realizing holy crap it's that was nearly 10 years ago like the actual 10y year anniversary is is coming up that be that would be cool and then it kind of snowballed from there like it'd be cool if we you know if we did an update blah blah blah but but that yeah that in itself I think is the is the best Testament of all that you know I I only realized that in the first place because every now and then I go back and
(1:10:39) read it probably done that going on 10 times I would say and I'm very grateful Alan that you reached out because I I always felt like there needed to be an update to it um especially after we saw Michael sailor uh with his spin on a speculative attack and so uh now now that is accomplished and in a very timely manner go forth and speculative attack the dollar stay humble stack SATs peace and love freaks
