Ticking Debt Time Bomb – Part 1

All right, here we are back with another episode of Strategically Held.

We got Mark Hall over there and I generally like to surprise him with the topics, and, uh, this one's so big that I think we're gonna have to sign you up for a, a three-part podcast on this one.

So, if you're ready, here's the topic, man.

The looming debt time bomb.

This system is under pressure, and here's the meaty part of this.

This debt. is supposed to be 50 trillion by the year 2030.

You know, we, uh, our forecast for Bitcoin had Bitcoin, 290K per unit of Bitcoin that same year.

So, I figured it'd be worth covering this topic and why the debt is getting so big and what our government can do to try to stop it, but I think there's a lot of challenges ahead, so.

Are we, uh, we're gonna dive into this or what?

Let's do it.

Uh, I'll maybe kickstart some of the responses to the questions that you just teed up by saying it really comes down to irresponsibility, right?

Like our government.

Pure and simple.

This is party agnostic, right?

Both sides, who's in the White House, no matter who's in, uh, Congress, you're seeing fiscal irresponsibility, and that's, as we know very well, that's why Bitcoin really gained its momentum and popularity over the last what, 1718 years, um, and the reason is like folks recognize government printing is It's a symptom of a lack of accountability, right?

It's short-term thinking, politicians saying, I need to fulfill my constituency promises in the short term, so we'll print what it takes to give certain programs to enable other countries to get what they need and We'll kick the can down the road and here we are on the verge of, you know, a number that's so astronomical and as I understand it, you know, the interest is at a point that we, we can't keep up anymore, right?

It's 120% GDP and it, yeah, it's just, it's amazing.

So, it's a great topic.

I'm glad you posed it.

Uh, lots of thoughts, questions for you as well and reactions, but it's sad and I think there's a lot of reasons behind it, but I don't frankly see a way out.

Yeah.

How did we get here?

Maybe it's a real quick recap on that, maybe something that most, most people can look back in the nearest term of history on, and, and I'm gonna tell everybody I'm not an economist here, but like, just kind of looking back at what it was, and I was a victim of this myself, you know, we looked at You know, 2005, right?

Back when, um, you know, the, the housing crisis started to develop, it was kind of the, the cracks in the underling, and that was under politicians saying that everybody should own a home, and that is awesome, right?

Like, we do believe in that, but you kind of gotta work for it, right?

And so, no doc loans were issued, um, you know, it was policy that came to the government that allowed a loosening of financial products and the oversight where you didn't have to provide documentation of your income.

In order to get a loan or a 2nd loan or a 3rd loan or a 4th loan, and those loans built up in the system and eventually um couldn't be paid off and, you know, 2008, 2009, big pullback in the market, and that was what was the creation of Bitcoin, that was the impetus.

I mean, we might as well bring it up right here and right now is, you know, just, just not only our government and, and making things looser and trying to make people happy and almost giving away stuff.

It also broke the financial system.

So, you know, here we go, politicians, they run on favors, it almost seems, right?

Like, hey, you know, you do this, I'm gonna get this money and we're gonna, we're gonna help people out with this, that and that, and, and, and we just can't, can't cut that back.

So, here we are today, the debt goes up by $6 billion a day.

So.

Sorry to break that to you.

Um, that's pretty blunt, right?

Uh, so, that just, you, you, you look at, at, at spending and, and what's going on, and a lot of that is that interest payment that you're saying, cause that's compounding on, on what this is.

And so, this has gotta come down somehow or get inflated away, ignored.

The way I see it is there's Four ways, uh, to, our government's gonna handle this, and some of it's looking at, at past events.

And, um, the first one is Cut spending and raise taxes.

No?

Yeah, we all know that it, it's impossible for them to cut spending because that requires, you know, taking away something from someone and once entitlements go out, it's impossible to reel them back.

Taxes is never favorable to, you know, a voting block.

So, if you're planning to run in the next election, you're gonna tell people to vote for me even though I raised taxes, much harder.

So, on that one, I'll probably say less likely.

We have an example of it, California.

Look at the people moving away.

Mark Zuckerberg now to Florida, right?

Like, I mean, the list goes on prior to him.

Ken Griffin, Citadel, Florida, right?

You're looking at it going, all right, you're gonna tax me, I'm gonna move.

Businesses are just a they're just more savvy to what's going on and, and people are gonna move around and try to avoid this, but you know, you try to impose taxes, it's a bigger problem, um, entitlement spending.

So yeah, I, I agree with you.

We might see a trickle up a little bit though in taxes, right?

Over time, a slow, minor increase, which ends up being a bigger number down the road.

And more painful, uh, it also leads to why you gotta be invested, you gotta be better with your money, but cutting spending.

Doge, Elon, he got in there, he wanted to be a hero.

Give the guy a lot of credit for trying to look.

Yeah, but he realized that.

There's just a lot of humans in the way.

And you can't do anything about that.

And where's Doge now, right?

What's going on at Doge?

Uh, I'd, I'd like to hear, definitely not the coin, by the way.

Let's, let's not get people excited there cause if, if, if, if Elon comes back and says, you know, we're firing up Doge again, we don't want to see the Dogecoin on a 30% ripper.

Nothing to do with each other.

All right.

2, Well, we can default on the debt.

Not 20 for 2, yeah, not 2 head shakes.

Yeah, I think for people who've studied history and monetary policy and like what is the byproduct of default, right, it, you can do it, but it comes with the level of austerity that most Americans are too comfortable for, uh, wouldn't, we really wouldn't, uh, allow happen because I think the electorate just wouldn't have an appetite for it, right?

There is something to be said about.

A, a logical transition to a better sound money.

We could talk about that later, but I don't anticipate that being a, a, a, a reasonable choice.

Although, you know, I think it probably is one of the more rational options out there.

I don't think it's gonna be really on the table.

Yeah, it's uh It's tough, you know, you look at countries like Argentina and what they've done.

It's, it's, I, I can't say I've never lived there, so I don't, I don't know what, what that's like.

You just see headlines and are the headlines skewed to what we wanna see here because I mean that could be totally possible too, to the, to the reports that, that we would see in the future of that.

We saw our government go and, and support Japan recently, uh, and, and their currency, and why.

You know, and it's, and it's something that I think what, right, hasn't been done in 15 years, something like that.

Yeah, and, and, and why, right?

Do you want to dabble on that a little bit?

Yeah, and, and quick disclaimer like you highlighted at the beginning, I'm, I'm no macroeconomist either, but based on the little I know, it really was us giving a lifeline to ourselves, less Japan, right?

The recognition that Japan buys so much of US Treasury that we can't afford to have them.

Go through a crisis at a larger scale than they're dealing with, so really we're trying to bail ourselves out.

Uh, I think as of the time of this recording though, as I understand it, we've already seen a decent portion to the tune of 50%, uh, really go to waste in terms of, you know, the market turn in, in a way that's against everything we, we invested toward, you know, Japan.

So, it's unfortunate, right, that we, we throw a lot of darts at the board and nothing's really, you know, sticking, but It's, yeah, it's a byproduct of how far globally, right?

We're all interconnected, how far we've, we've come when a few trains get off the rail, it, it gets bad really quick.

You know, I'm glad you point that out, like we're, we're, you know, bringing it up again, we're not economists.

I think for a lot of viewers though, us saying it from our standpoint on a more basic level, the way that we interpret it is relatable and something they can understand better on their end.

What I read sold euros.

Bought Japan, bought yen.

OK.

But then what I read after was, This was kind of a signal to other institutions and pensions in Japan that there's some worry there that we didn't support what they hold and they may hit the open market and sell those.

OK, what, what happens over here?

Like what, why do we care about talking about this?

Well, if you sell those treasuries, it pushes the interest rates higher.

And here we are, if people are looking to buy a home, the thirty-year mortgage is, it just keeps going up.

Keeps going up.

And even if the Fed does a cut, there's only so much that it could do to, to bring mortgage rates back down.

And so, it's kind of a, a punishment for saving cash, right here in, in where we are.

And so you look at it and you go, oh my God, the interest rate's really high, why is this?

This doesn't make sense, you know, and then maybe we do see a rate cut or a rate hike.

The Fed seems to be losing a bit of control of what they can claim for for rates out uh out in front 10 year, 30 year, based on these moves that are going on, but the fact that they, That our government took action in this way quickly.

And, and by the way, this only, this only like moved up the value of their currency, I think like 2.4 or 2.8%.

It wasn't even like, And, and then I think it, it might have retraced, you know, I, I haven't looked at the chart recently, but like it was only a small move on a lot of capital invested in it, and it feels like now.

Back in the day, all right, what's the Fed gonna do with interest rates?

That was the whole thing.

Interest rates lower, that means more liquidity, everything's gonna go up, but now there's so many sophisticated tools.

That our government has in different departments that I think it's gonna be really hard, and I'm gonna go into this some more about like inflation and stuff like in in numbers.

I think it's gonna be really hard going into the future.

To really grasp actions that our government is taking, the data that they're going to put out.

Like, what are these, what are these departments?

Where did the money, you know, what, you know, who's holding the euros?

What's, what's, who gave them the approval to sell that? like.

Where did that all come from?

Like, like just overnight somebody decided, let's do this.

Who's that guy?

Yeah, what, what data did he use?

What metrics?

You know, with, with cryptocurrency, that's the beauty of the blockchain.

Decentralized autonomous organizations, you see everything, you vote, you know what's going on in the data, but if, if, if, then, you know, somebody comes out and says, OK, this is what we're seeing, this is what we did it, this is the data points that we did it, OK, what's the inputs for those data?

Who, who made that up, right?

Like, where is it old data, right?

Like, Comes back to the inflation numbers and, and I think that's gonna be a big part of um probably our next pod is really the numbers.

Where are the numbers, why are the numbers?

What, what does it matter with the numbers so much and, and what you can do.

To really just take matters into your own hands, because I think it's, it's just gonna be, look here, meanwhile, this hand's doing different work over here on this end.

Love what you're saying cause you're exactly right, and I, I think that the through line to all those points is lack of transparency.

A bunch of terminology and tools that the public, the average.

Citizen, average investor, average, you know, human really has no insight into and they have all these different tools, right?

And then the more you dive deeper into it, you learn, well, how does this, you know, the commercial bank relationship, overnight repos, like all these different things that each have a slight lever that moves things forward incrementally.

And you have to ask yourself, what's it all for?

And, and You know, the more time I spend in this space, the more you realize that each of these layers of complexity will likely do more harm than good because they create dependencies and all these things.

So you're right, lack of transparency, and I think what's great about the space that we love and things like Bitcoin is that it really creates transparency in a way that uh is immutable and it's clear and ultimately, it creates the right incentive structure, right?

Where With the current system we have, and, and I challenge folks who are listening, probably have no idea what the Federal Reserve is and chairman and, and some of these FOMC meetings and, and it shouldn't matter.

But the point is, back in 1913, whenever we got stood up, that's when things started changing because you have individuals who are setting rates, you're right based on data points that are highly debatable, um, very unique and custom depending on where you live, what kind of consumer you are.

But yet, the decisions they make impact everything that we all do and it shouldn't be like that, right?

It should be far more of a fair system and that's why I think both of us are big proponents around sound money, right?

It's just important for us to create or at least get closer in an ideal world to a system that is based on sound money.

Uh, so, you bring up awesome points and I think you're spot on.

So there's 2 more.

I think we're only gonna get to 1, and we'll tease the 4th 1 here at the end and cover that and the next one.

But I've heard the rumblings of um We're gonna grow our way out of it with innovation and AI.

I did a light search, and I couldn't find any time period uh where there, where, where uh uh in the industrial revolution, a technological advancement allowed us to grow so fast that You know, we, we grew out of something, right?

If somebody says, oh, you know, um, you know, the invention of the car, the railroad and stuff like that, like when we look back in the time frames, it's, it, there's, it, it seems to be pretty associated, again, we're not economists, with some other financial measures.

Sure.

That, that, you know, happened around the same time that really, really amplified it, but, um, have you heard the, the rumblings that AI is gonna grow us?

Out of this debt.

Yeah, this is, this is one of those where I, I can't, you know, shake my head no and say this is not gonna happen because I think it's an open question mark.

And here's why, again, people much, much smarter than me have opined on it, but I look at where we are, right?

AI is growing at a pace in terms of raw technology and capabilities that most of us are really unfamiliar with, right?

Um, The application is following suit.

We're seeing the use cases gradually being integrated in how enterprises work, how consumers and retailers, uh, work, shop, use, play, all those things.

So it's, it's happening.

The question is, can it happen the right way without displacing, you know, a large portion of the workforce?

And if that does happen, what needs to be true for us to avoid some You know, social unrest, you know, uprising and, and things of that nature.

I think it's an open question mark.

I think AI of all the technologies we've seen historically has the best chance of providing that growth that you're talking about.

But not only does it have to be done responsibly, but it also has to be done in a way that allows the transition, right?

When you think of industrial revolution, how that changed your workforce, it created an entirely, you know, set of sectors that we didn't know before.

Internet, same thing, right?

A lot of displacement along the way.

AI feels different.

So, that would be exciting.

I'm a, I'm an optimist by nature, so I am encouraged.

I think it's gonna provide some unlocks that we haven't seen before.

Can it grow us out of the debt we have fast enough where it just doesn't.

You know, chop our legs off.

I don't know.

Uh, it will be interesting, but at this point it feels like the only hope we have.

What are your thoughts?

Interesting.

No, I, I mean, I like AI, but I, I don't think it works.

Like, show me something tangible where the revenue generated buys down the debt.

And, and why, where does the revenue come from and why does it go to our government, right?

Like I know our government is starting to take positions in some private companies.

But they will, those are unrealized gains if they're there.

They will have to realize those gains, and if they become the biggest seller in the room.

Those games may not be there, uh, uh.

AI So I listen to AM sports radio.

I'm gonna, I'm gonna admit it in a, in a day of podcasts and everything out there.

You're one of the, one of the few left.

Well, Uh, Dan Bon Bangino, Dan Bongino, sorry if I'm, I'm missing his name.

I, I met him, he's on Rumble, uh, I had dinner with him a couple weeks ago, and we were, we were talking about this because of his platform and his mediaita, and then I made a joke that, that I, that I do this and, and why.

Um, look, my phone's got enough stuff on it already.

I need to operate efficiently and take care of our clients, right?

Number one, here, I need less distractions.

I wanna be here, I wanna be present.

I wanna be with my family when I'm off.

I don't need an app, an app, an app, an app, an app, an app, an app, an app for everything.

Um, it's pretty simple.

I go in my truck, I'm going somewhere.

It's a preset button.

I got two of them that I like.

And now these guys, you know, they do have their podcast, they are on other channels.

It's just that for some reason, it comes through on my AM. feed better.

Um, and why am I not, you know, waiting for a YouTube video?

These guys are scheduled to be on air live every day for a set block.

It's not pre-recorded.

Like we're, you know, like now, right?

This is gonna come out in a little bit.

These guys have, and they were talking in the moment and, and if there's something happening in NFL breaking news, it happens there while you're hearing it, right?

And, and a lot of these guys to compete with AI and new technology and stuff out there, they've had to get pretty aggressive.

Like the guys that are there now, um, Uh, 22 shows and a, uh, I can go into one of the shows.

But anyways, where am I going with this?

Here's where I'm going.

I started to hear ads for chat GPT on AM radio.

Come on, you know, right after the local plumber.

And that's, I, it really made me think going.

OK, I know Chat GPT wanted to go public.

They wanted a $1 trillion evaluation.

They saw what SpaceX did, but now it's not gonna go public.

There's rumblings that the valuation may not be there.

And to me, AM radio, yeah, I'm that guy, you know, I'm one of the few that listen, but it feels like it's your last reach to try to get as many customers as possible.

And what, what, what it made me think about even further is for agents that we use.

Non-client facing stuff, non-private information, just stuff to just make the, you know, our, our engagement better and to read the market, uh, is that, There was like this like there was like this hockey stick of like, let's build agents for all this stuff, and now it's starting to plateau, like, I can't, I'm not thinking of new stuff to be built all the time on it.

I'm like, OK, this is, this is where we're at, the capabilities are great.

Yeah, I, I, I, I feel like we're roughing off a bit.

And so when I think of it that way, I look at, you know, there's been, there's been a big pullback.

Intel just sold shares, right?

But they had, they were up 170% year over year.

But then they, in, in June they had a, I think like a 27, almost 30% pullback, which was bigger than Bitcoin's pullback, by the way.

Um, SpaceX.

All-time high, over a month and a half after that, all-time, after the shortly going up like that, it was down 50%.

So, um, Where does the money, like, again, how does the money just take away the debt?

I just don't see it, right?

Like that's, that's where I'm at with that one.

I'd have to see something more tangible, like a, like a, like a funnel, right?

Like money made, money goes here, it pays down the debt, and I, nobody's laid out a path like that.

Maybe I'm thinking of it too simply, so, I feel free to, to, to comment on that one.

And, uh, we're, we're here on the little over the 20 minute mark.

So what we'll cover next week or next time, if we do it next week, and we might do it after that, but, uh, Is The 4th way, and This has been done in the past, actually.

We have a history of, of the government's done this maneuver.

And it worked, um, but it's interesting the way it worked.

And I think the, the way to leave it with people is, you know, houses used to cost 100,000 back in the day.

Now they're way more.

That $100,000 purchase is now maybe a few months of mortgage payment.

So, That has to do directly with number 4, and this might be the way that we go and we'll pick it up there, uh, when we record the next one.

I'm excited to continue the conversation.

Let's go.

All right, Mark, thanks, buddy.

Take care, Brian.

Good seeing you.

This is for educational purposes only, not personalized financial advice.

All investments, including crypto, carry risk, including loss of principal and past performance does not guarantee future results.