Bitcoin is NOT an Inflation Hedge

Every passage, on the record.

1. 00:01Claim

   the inflation hedge narrative completely imploded, inflation is at an all-time high even if you're looking at the CPI numbers which are completely cooked, we have never experienced inflation like this, that is the official narrative that is going around, and this is one of my favorite times to be a Bitcoiner because in bear markets not everybody is a genius

2. 00:01Quote

   there are rumors in the mainstream news that Bitcoin is dead for the 50th time and that it's never coming back

3. 00:01Claim

   in bull markets everything is going up, any narrative that you can come up with it doesn't matter how foolish it is, doesn't matter how wrong it is, you're just riding that to new highs and everybody looks like a genius, in bear markets this is where the narrative that will spring the market to the next high is built because we have to examine what went wrong

4. 01:31Claim

   you spend a hundred hours just to scratch the surface of what Bitcoin is, that's sort of the minimum that people agree on, is a hundred hours just on how the system works, why it's actually not going away and how it's going to take over the world

5. 03:02Claim

   the Fed is in charge of the US dollar, the Fed is in charge of the global monetary system as it stands now, and the narrative has been we must end the Fed, we must fight the Fed... when in fact that just isn't the truth, the Fed is not in charge of the US dollar, the Fed hasn't been in charge of the US dollar since the 1960s, it was out competed by a different system, and that is actually bullish for Bitcoin

6. 03:02Quote

   the Fed is not in charge of the US dollar the Fed hasn't been in charge of the US dollar since the 1960s

7. 04:32Reference

   came back to Triffin's dilemma, you just couldn't have a global reserve asset that was tied to a commodity because eventually the claims that would go out on that commodity... there's just going to be too many claims out there

8. 04:32Event · condensed

   under Bretton Woods, too many dollar claims built up against too little gold, people started pulling and claiming those reserves, and thanks to the French it ends up happening and Richard Nixon has to eventually close it down in 1971

9. 04:32Reference

   there was a hole in the market that a separate system was able to identify... and that is the idea of the euro dollar market, this is dollars that are held offshore, US dollar denominated time deposits offshore held by banks

10. 06:02Claim

    inside of the United States all of the different laws that onshore banks were forced into complying with, because they didn't have these laws they could hold dollar deposits outside of the United States, essentially creating them from thin air, these dollar deposits based on a certain type of collateral

11. 07:32Claim

    it's going to take thousands of hours, and that was designed by a single entity with a white paper with only nine pages, understanding how this euro dollar system works takes an enormous amount of time, right, takes orders of magnitude more than understanding what is happening in the Bitcoin system

12. 09:03Reference

    is Jeff Snyder, Emil Kalanowski, who do the euro dollar University, there is no podcast better, there is no blog at Alhambra investments better at laying out the ideas

13. 09:03Reference

    is Jeff Snyder, Emil Kalanowski, who do the euro dollar University, there is no podcast better, there is no blog at Alhambra investments better at laying out the ideas

14. 09:03Reference

    there is no podcast better, there is no blog at Alhambra investments better at laying out the ideas... so everything that we're gonna talk about here is basically a way to rephrase the work that Jeff Snyder is doing with the podcast euro dollar University and also the YouTube channel

15. 09:03Quote

    they say don't trust verify, they say look at the numbers yourself, look at how things add up

16. 09:03Claim

    the bond market is always correct, every single time, it doesn't matter what the Fed does, because these financial institutions that make up the euro dollar network, right, the euro dollar network runs on trust and collateral, and the collateral is the US Treasury market, and it's the US Treasury market not because of the solvency of the US government but because it's the largest, therefore most safe and liquid market

17. 10:33Claim

    this is now going on 50 years of the euro dollar system being in place, nobody knows or very few people even understand that a transfer happened, a transfer happened between the central bank system to the euro dollar system, that exact same thing is the blueprint for how this is going to work

18. 10:33Claim

    if it's more efficient that means at the end of the day it will allow for the transformation of more energy to occur, and if more energy is transformed that is better for everyone, everyone adopts that system because the people that do earliest are going to see the most outsized return... because they have access to enter more energy reserves with the same amount of input

19. 10:33Prediction

    the most liquidity is where the reserve will become, and that's what's eventually going to happen to Bitcoin... this is just a different transformation, this is the next step, the next evolution into a system that is more efficient

20. 12:03Reference

    when we are talking about inflation I'm talking about the true definition of the word which is always and everywhere a monetary function, right, that's what Milton Friedman said, we're talking about inflation in the money supply

21. 12:03Claim

    we're talking about the inflation of the money not the inflation of asset prices, right, asset prices rising, supply shortages, those things are a result of something, that is not the inflation that we're going to be talking about today when we go into quantitative easing

22. 12:03Claim · condensed

    the backbone of the Bitcoin argument has been that central banks have gone crazy with the money printer, through a quantitative easing program they buy short-term treasuries, that brings down interest rates, that leads to more borrowing, that bids up asset prices, fewer dollars chasing fewer goods, and that leads to inflation, and that just is completely wrong, it couldn't be more backwards

23. 13:33Idea

    everything that you know, everything that you think you know about interest rates is wrong, right, the interest rate fallacy, low interest rates are not a sign of loose monetary environments, low interest rates are a product of tight monetary environments

24. 13:33Quote

    low interest rates are not a sign of loose monetary environments, low interest rates are a product of tight monetary environments

25. 13:33Claim

    in the system that we currently have, banks are responsible for the creation of credit, right, we work in a credit-based system, new money is only created through new loans

26. 13:33Claim

    post 2007, when the banks got completely over their skis, they realized that no one was coming to bail them out, right, that they could be the next Lehman brothers, they could go to zero, and the key thing if you're involved in the zero dollar game is to not go to zero

27. 15:03Reference

    they realized that no one was coming to bail them out, right, that they could be the next Lehman brothers, they could go to zero

28. 15:03Quote

    the key thing if you're involved in the zero dollar game is to not go to zero

29. 15:03Claim

    it has to do something in order to make the returns that it has promised, it has assets and liabilities on its balance sheet and those things have to be squared, so what it does is it searches for the most safe and liquid collateral that it can get its hands on to stay above water, and that is short-term US Treasuries

30. 16:34Claim

    in a low interest rate environment like we have been in for the past 12 years, there is less incentive on the banking side to make smaller, more frequent loans to smaller players, you want to only create credit for the most trustworthy institutions, which is why a Fortune 500 or S&P 500 company can get access to credit all day long at incredibly cheap rates, so they take it, buy back shares, and bid up the price of the stock

31. 18:04Claim · condensed

    it's estimated anywhere between 60 and 70 percent of all transactions are in the US dollar, so people all over the world need to trade in dollars if they're going to be part of this globalized world, and the petrodollar is only the tip of the iceberg of that

32. 18:04Analogy

    you've heard about the petrodollar, right... that's only the tip of the iceberg, right, that's like just looking at the tippy top, underneath is this euro dollar market, underneath is this constant desire for US dollars

33. 19:34Quote

    the Fed put is a narrative constructed for control

34. 19:34Claim

    when the FOMC meets, all those minutes are recorded, you can go and read the transcripts and you can hear them talking to each other in their own words behind closed doors saying we don't know what money is, we don't know how to track any of this stuff, we are basically throwing things at the wall hoping that they're going to work

35. 21:05Analogy

    this is like if you were in the mafia and you were the head of the mafia, would it make sense to go out and announce that you were the head of the mafia... you would want a puppet, a figurehead to say that, no, actually the system actually works completely differently, it's actually run by that person over there, so me and my friends, this cartel that operates this distributed ledger that actually creates the money, we could have free reign and no one would ever know we existed

36. 21:05Analogy

    the Federal Reserve is just expectation management, if people think that it is believable they will be believable, like they will do what you want them to do, it's like the placebo effect, and if the Fed does have this placebo effect

37. 21:05Claim

    what they're doing is there's a number of primary banks that have direct access to the Fed... they'll do an asset swap, the Federal Reserve will create bank reserves out of nothing, they print a few trillion of these things and then they can give those bank reserves to these primary dealers who have to buy the treasuries in the open market, the Federal Reserve gets the Treasury, the bank gets the bank reserve

38. 22:35Claim

    a bank reserve cannot be used as money like we think about it, right, it's not like a US dollar, you can't go down to the gas station and use a bank reserve to buy anything, it's an interbank token, it can only be used for very specific purposes, and one of them is not creating new money

39. 24:05Claim

    the Federal Reserve is actually taking that supply out of the market, out of the banks' hands, that collateral, those treasuries, are the plumbing in the system that makes it work, we need those things so that they can be rehypothecated on and used to make new loans, that new loans creates the dollars

40. 24:05Quote

    the Federal Reserve actually makes the problem worse by coming at the marketplace and removing the collateral that is needed to make those loans in the first place

41. 24:05Claim

    there's no statistics on this euro dollar system, right, there's no stats that are keeping track, you have to sort of infer that it exists by making sense of a couple things that, if the system worked like it supposedly works, just wouldn't be this way

42. 25:36Quote

    the Fed has actually no purpose outside of expectation management

43. 25:36Idea

    we won't look foolish by having an inflation hedge idea blow up in our face, right, it's theft protection there, we, Bitcoin doesn't allow for rent-seeking by these institutions that run the euro dollar system

44. 27:06Event

    the Fed has recently come out and raised that target interest rate 75 basis points, the most in the last 20 years, we've never had a raise that big, so now that benchmark target is anywhere between 150 and 175 basis points

45. 28:37Claim · condensed

    if you're a bank you can lend excess reserves to the Fed overnight via reverse repo and get 150 basis points, that should technically be the most risk-free trade, the benchmark you cannot go below, but the four-week Treasury bill is currently trading at 95 basis points, why would there be so much demand for it if the benchmark rate is set at 150

46. 31:38Claim · condensed

    the eight-week Treasury today is trading at 137 basis points, again below the RRP, and implied in that 137 is another potential rate increase of 75 or 50 basis points, so if you buy that eight-week Treasury at 137 with the baseline about to raise another 50, you're leaving money on the table

47. 31:38Prediction

    just like in June it was raised 75 basis points by the Federal Reserve, they're not gonna stop that rise, in fact they're talking about being even more hawkish, we're going to have another 50 or 75 basis point increase

48. 33:08Claim

    the three month currently is trading at 159, nine basis points above 150, but that has two potential rate hikes baked in, so the people that actually have skin in the game, the people that run the global monetary system, they don't believe the Fed, they're saying we want to de-risk, we don't believe you are going to do those two rate hikes, or even if you do they are so unintelligent and will lead to such ruin that we are going to shore up ourselves first

49. 34:38Reference

    it's not that it's not that the cantillon effect doesn't exist, it's that the cantillon, the power is in the banks, and they don't want you to know that

50. 34:38Claim

    it's not that the cantillon effect doesn't exist, it's that the power is in the banks and they don't want you to know that, and they certainly don't want you to know that it's all happening offshore

51. 34:38Claim

    the US dollar is continually getting stronger, right, it is going up in value relative to all of the other currencies out there, because there is a dollar shortage, right, it is the amount of loans that are outstanding, the amount of money that has to be paid back, that is so high

52. 36:08Claim

    in tight times you're going to have to sell anything that you can to get your hands on US dollars, you're going to do that first with the risky stuff, not the safest stuff, because the safest stuff you want for yourself, so you see your corporate debt, your high-yield, your junk stuff selling off first, and as soon as those markets lock up it has a cascading effect where everyone needs to go down to the next level of collateral

53. 36:08Event · condensed

    everybody had these crazy valuations that they were using as collateral for, mortgage-backed securities, this is what happened in 2007, and overnight everyone just said, well, it's not actually worth what we thought it was worth, and it all crumbles down until you get to that very base level, which is short-term treasuries

54. 37:38Idea

    where is that money coming from, well, what is money but a representation, a claim on energy that has already previously been formed, right, we have beaten that horse to death on this podcast

55. 37:38Claim

    nobody cares about the solvency of the United States, about the full faith and credit that goes into it, they are just interested in the fact that it just so happens to be the US Treasury, and the government benefits because it can go into the marketplace, knowing there is a shortage of these things required for collateral, and continue to run up crazy amounts of deficit

56. 39:08Idea

    the people that are actually transforming energy in the real world positively, which is everybody outside of the government, they're getting squeezed on both sides, just squeezed in from, they can't get access to credit, right, to be able to bid up asset prices

57. 39:08Claim

    there is no corporation, there is no entity more irresponsible or more inefficient with the way that it spends money, so if every dollar spent by the government is returning less, at the same time it's getting larger and taking advantage of the system to run up more deficits, it's able to confiscate energy that was produced in the real world and spend it and get less, essentially sending it into the ground, wasting it

58. 40:38Quote

    the narrative now should not be that Bitcoin is an inflation hedge because it's not an inflation hedge because inflation isn't happening

59. 40:38Claim

    are there more dollars in the system now than there were yesterday, no, your dollars are being stolen more, but that doesn't mean that there's more dollars in the system, in fact there's actually less in the system, it's deflationary

60. 40:38Claim

    the narrative is that Bitcoin wins because you cannot steal it, right, there can be no rent-seeking in an open transparent system where you can take possession of your own energy reserves at any time, that is the main ability of Bitcoin, that now trust is hard-coded into the system

61. 42:09Prediction

    Bitcoin will defeat the euro dollar system for the same reason that the euro dollar system defeated the central bank system, right, it's going to out compete it

62. 42:09Quote

    you don't actually have to move physical bearer assets around to make sure that no one is cheating

63. 42:09Analogy

    you can think of it like a banking cartel, right, it's not a free and open system like Bitcoin where anyone can join in, anyone can participate, because you don't have to go through the trust process, this banking cartel was built up and they want to make sure that no one else can get into the system

64. 42:09Claim

    Bitcoin, the trust is hard-coded into the network via proof of work, right, you cannot cheat the system, the only way that the Bitcoin can move is if you have the private keys to move the Bitcoin, so if you don't have those things you don't have the Bitcoin

65. 43:39Claim

    any efficiency gains anywhere inside of the system can be adopted by everyone, rather than having this banking cartel where they are trading on the asymmetry of information that they have access to, that is how they continue to keep up this rent-seeking operation

66. 45:09Open question

    the crazy bit, or I guess the positive thing, is depending on how many people end up realizing this and end up questioning the inflation hedge narrative in the Bitcoin world, either way Bitcoin wins, you don't have to know that Bitcoin is fighting the euro dollar system in order to beat it

67. 45:09Analogy

    it's like dark matter, right, we know that matter exists, we know that dark matter exists and it's five times as big as what we can see, as what we can measure, we can't see and measure the euro dollar system, you have to infer that it is there by looking at what is actually happening in the real market and in the real economy

68. 46:41Quote

    they are a cheerleader who deals in placebo effects

69. 46:41Claim

    if anything Bitcoiners should pride themselves on being able to cut through the bullshit and to actually verify for themselves what is happening in the marketplace

70. 48:12Claim

    everything that they do over at Eurodollar University you can verify it for yourself, all of the charts are there, there's no, oh you have to trust us here, you just have to go on the website and click on the links and see the graphs and the auctions for yourself

71. 48:12Quote · condensed

    stack sats