Luke Gromen explains how China’s rare-earth squeeze speeds the collapse of the dollar system as gold, and now Bitcoin, replace Treasuries at the core of global reserves.
Luke Gromen argues China’s effective cutoff of rare earth inputs to U.S. defense systems marks a tipping point where material constraints collide with America’s debt-driven model and the post-1971 dollar order gives way to a new regime. He says China spent years building leverage, dominance in key supply chains, industrial capacity, and gold accumulation, while the U.S. hollowed out manufacturing and shifted to short-term financing. A hard U.S.–China “divorce,” he warns, would crack Treasuries in days, while China could endure for months. In parallel, BRICS- and Shanghai-led gold settlement is forming an alternative monetary rail; gold now functions as the primary reserve asset even if the dollar remains the primary currency. Washington’s “stablecoin gambit” is, in his view, near-cash deficit financing by another name. The U.S. needs a Manhattan-Project push for metals, refining, and skilled trades, but politics and high-time-preference culture slow everything. Practically, he urges individuals and businesses to adopt hard-money balance sheets, gold and especially Bitcoin, as a market-led path to regain sovereignty.
“There’s nothing more inflationary than an insolvent sovereign printing money to keep the nominal value of its debt high.”
“They’re done selling rare earths into U.S. weapon systems. That’s the end of the post-’71 dollar structure.”
“When the dollar system is coming to the end of its life, you’ll see the dollar and gold rise together.”
“We literally can’t go to war without Chinese components.”
“If America wants to compete, the dollar has to go down 85% against the yuan.”
“The stablecoin gambit is just printing cash to pay for deficits.”
“Deflation is the midwife of hyperinflation in highly leveraged societies.”
“The fix isn’t political, it’s monetary: Bitcoin or gold.”
Gromen’s bottom line: China’s rare-earth squeeze exposes the fragility of America’s debt-based power and accelerates a shift toward collateral-backed settlement. The dollar likely persists as unit of account, but Treasuries’ supremacy as reserve asset is fading in favor of gold, with Bitcoin emerging as the free-market challenger. Reindustrialization is necessary but slow; in the meantime, households and firms can protect purchasing power and rebuild resilience by steadily accumulating and self-custodying hard money, letting market incentives, not policy wishful thinking, drive the transition.
0:00 - Intro
0:59 - Tariffs and rare earth weaponry
9:50 - China wants recognition
13:02 - Alternative settlement in gold
18:48 - Bitkey & SLNT
20:36 - Stablecoins, reshoring
27:02 - Weimar parallels
30:10 - Obscura, Crowdhealth & Unchained
32:18 - War is not an option
39:45 - Western industry weakness
49:16 - Fixing the currency
1:00:23 - Bitcoin is fixing this
(00:00) There's nothing more inflationary than an insolvent sovereign that is printing money to keep the nominal value of its sovereign debt high. When the dollar system is coming to the end of its life, you will see the dollar and gold rise together. I think it signals that China has a lot more leverage than a lot of the Western commentators are admitting.
(00:19) They're done selling rare earths into weapon system for the US defense department. Historically, if you messed with the monetary side of the rules-based global order, US would send the military over and kick your head in. I think you'll come in and you'll see the price of gold up on every day that ends in Y. The Treasury market will blow up in 5 to 7 days.
(00:37) China probably would would be able to hunker down and and be all right for 5 to 7 months. End of the post71 structure of dollar reserve status. And I don't think it's ever going back unless Rathon was quoted in the Financial Times saying we literally can't go to war without Chinese components. If we want to compete, people say, "Well, we need to split China." Great. The dollar's got to go down 85%.
(00:59) Look, I have to I have to start by saying I can already tell that the uh the comment section is going to be elated for this catchup because this is the first one where you actually have a a mic. [Laughter] Yeah, I got a lot of feedback on that. So, yeah, the um Mrs. FFTT was finally she's uh she took care of me here.
(01:22) So, I've got I've got a very It's apparently a good one. I wouldn't know if it's a good Well, it's the same one you've got, so it must be good. So, yeah, it's um it's it's here. So, that's that's good. It's uh it's this the sound quality is is impeccable. And I think it's important that it's impeccable for this update because as you were just saying, the world is getting crazier.
(01:46) And I think we had a stark reminder of how crazy and volatile it can get. at least in markets over the last 96 hours with Trump's Friday true social post that sent markets into a tizzy and then predictable. I recorded on Friday with somebody right after the post went out and I said, "Okay, we can expect a post on Sunday morning or afternoon sort of backing off from uh his statements.
(02:14) " And that's exactly what happened. For those who are unaware, Trump uh came out and said that we're going to put 100% tariffs on China's rare earth metals um because they weren't cooperating in negotiations. And then Sunday he said, "Hey, President Xi was just not in a good state of mind. We're back into a good spot.
(02:41) " What is what is this geopolitical volatility signal to you? Um I think it I think it signals that that China has a lot more leverage than a lot of the western commentators uh are admitting. And maybe this might have been the first time where they finally admitted like oh like reading between the lines. Uh I think China retaliated for um the the the latest semiconductor high-end semiconductor related sanctions and and basically my view was like all right well we're not going to you're not going to be allowed to have this stuff.
(03:18) That was the initial read. And it's interesting, uh, Trump came out with what they said with what he said Friday, right, which is 100% tariffs and, you know, markets threw a fit. And then the Chinese came out and clarified either a Saturday or Sunday, I don't remember exactly when it was, but and it was kind of like the most Chinese statement ever.
(03:44) It was like, you know, this is not a ban, which, you know, in my experience is, you know, is it a ban or is it not a ban? You know, one of my one of my uh uh best uh one of my best sources on China, a friend of mine goes, "Is it a ban or is it not a ban?" Yes, that's the answer. That's that's how the that's how the Chinese negotiate. So, but when you really read what they said, apparently it's it's about the weapons.
(04:07) You know, it's a ban on weapons. We're not going to supply rare earth to the US Defense Department to make weapons to point missiles at us and our friends anymore. And you know the rest of and and it was interesting because the US spun it as hey they're shutting everybody off and the Chinese said no no no no and so then there was you know Trump tacoed China tacoed or China China backed or deescalated is spun as mutual deescalation um which it was and I think there is still not the recognition there was a moment of recognition in the west of oh my gosh they can shut down
(04:46) everything which yeah we've known that all along if you were honest you know if people are honest about the things and not that not that that wouldn't hurt them too it would uh but I think the most important thing is is they're done selling weapons to the US defense department they're done selling rare earth um uh selling rare earths into weapon system for the US defense department which is enormous and I think still not fully digested um you know might being digested by the gold market this morning, which is up 110 bucks as we speak, over $4,100 on the futures. Um, but that's got a lot more
(05:24) to go in my opinion to properly digest that message. So, um, I I think it's really important in terms of what just transpired because it's it's they're basically saying we're done. We're done selling rare earths into Western Defense Systems. You know, get your own rare earth. Yeah, and it seems like China feels like it is in a good position.
(05:55) It seems like there's been some coordinating in the background to get to this point where they feel confident to plant these these flags in the ground and draw these lines in the sand, if you will. And it pertains to the gold market, particularly what they've been doing with the Shanghai exchange, putting the gold on warrant. And it seems like I had a conversation with Vince Lansancy on Friday and he made a really good point is like they're essentially setting up this parallel settlement network that settles in gold and it seems like the last 6 8 months have really been uh greasing greasing the wheels getting the the slopes ready
(06:32) for that. It's on and now they can posture geopolitically from a position of strength. Yeah, I think that's exactly right. And and you know, historically, if you messed with the monetary side of the rules-based global order, the US would send the military over and kick your head in.
(06:56) Like that's that has a big part of why Saddam was invaded, a big part of of of what Gaddafi was doing, as we know from Hillary's emails um once upon a time. And the Chinese have been doing this. And so they've they've seen the the message which is when we try to change which they have to because again they're not doing it because they hate us they're doing it because they will literally have a late 1990s Southeast Asia crisis where China collapses like um like you saw Southeast Asia do uh if they don't do this and so they have understood the order of operations which is if we're going to do this we need to make it impossible for the US to come
(07:32) over here and kick our heads in and um that's what this is about and to me the rare earth card being played in April or May whenever that was and we wrote about it at the time is essentially we're done selling rare earths to the US military and that was my interpretation of it then this institutionalized it this is basically it's now in black and white and uh if that's the case then the windows wide open for the system to be reset and I think sort of you know Number one a on the list of symptoms that you would see as the system is reset in a manner uh that China, Russia, the bricks would
(08:14) like is I think you'll come in and you'll see the price of gold up on every day that ends in Y. And that's what we've been seeing over the last you know month or so. Um today no exception. So uh yeah, I think it's I think it's a huge deal. Um, you know, I do think that, you know, Trump with his tweets when he's when he is when he tweets impulsively or posts impulsively, um, he usually gives you something that he probably shouldn't either or or that, you know, that is incremental information. So, last week these are
(08:44) very serious people saying, "Hey, we're hearing she had a stroke. We're hearing she's being deposed." Well, Trump just told you that she had a bad day and and made a mistake. So she had didn't have a stroke and did not get deposed per the president of the United States and his post.
(09:03) Um and then the other thing is is we have heard chapter and verse from Trump Bessant Lutnik over and over about how we have all the leverage. That post just told us no we don't. Now again that's not a surprise per se but that takes us from denial uh of the denial stage of grief about who actually has what level what level of relative leverage into somewhere between anger and bargaining right it's you know he he he threw his fit then he's like well it'll be you know we're not we we don't want to put China in a depression and we don't want to put ourselves in a depression that's exactly right we put them both in a depression so you know
(09:39) let's let's deescalate but again I think it masks like the number one key thing which is we got to find our own rare earth for our own weapon systems. Yeah, it's that it's either that or because I I had a somebody who's very well verssed on China's lived over there for 30 years an American.
(10:05) Um and I asked him like what is the solution to this? Since the US and China gets to the table and the US basically acknowledges that China is an equal apparently from a social perspective, from a cultural perspective, that's what China wants most, just to be viewed as an equal. And I think with the leverage that you just described that China has over us, that may be sort of the necessary pride swallowing that needs to happen to try to figure this out moving forward.
(10:33) Yeah, I think it ends up being a really good thing for the world if if you know the two big powers stop fighting. Um, and you know, there's a version of this that can go really well, a version that can go really badly. Um, but I I I you know, and again, it's all it's it's not to say China won't be hurt by this.
(10:55) China would be hurt by by that as well. The challenge is that like we know the Treasury market will blow up in 5 to seven days, trading days, if there's a hard divorce, whereas China probably would would be able to hunker down and and be all right for 5 to 7 months. Um, you know, and we know that empirically because we saw it happen in April.
(11:21) Treasury market after liberation day went exactly seven trading days and then, you know, that led to the first Trump taco. So, uh, it's all about that sort of relative dynamic. We also know from May and June, after 11 days of medium inensity combat, the US chewed through 15% of its high-end air defense missiles um, uh, defending Israel from Iranian drones.
(11:45) And you know, we we've also heard that, you know, the Chinese uh can produce 4,000 cruise missile motors a week, which compares to 6,000 roughly uh reportedly Tomahawk cruise missiles in inventory total. So they can produce our entire inventory every week and a half in a very automated in very automated fashion.
(12:07) So um and with rare earths, those supplies would be run, you know, would be run out even faster. So there is a um all supply chain bottlenecks are not equal right you can look at you know what's our GDP what's their GDP what whatever those those metrics are interesting but in in the end in things like this it's all about the marginal metric right think about this there was a headline NFT yesterday saying the US is the US defense department is out buying a billion dollars worth of critical minerals people like wow that's like four times what we use every year we're good but I
(12:37) think that misses the 1 billion of critical minerals, 250 million a year of critical minerals of inputs, which the removal of that shuts down a trillion dollar a year military, most powerful military in the world, right? It's like the old poem, you know, for lack of a for lack for want of a nail, right? For want of a nail and it's the nail in this case is the critical minerals.
(13:02) Yeah. Well, moving this back to gold with the price going up too. It was another interesting thing that uh Vince Lansancy brought up on during our conversation on Friday was that there's a lot of people in the western pundit space particularly fintwit that believes in the dollar milkshake theory that everything will fail up into the dollar and the US treasury market.
(13:33) But this situation in the gold markets particularly creating this parallel settlement network via Shanghai gold exchange and other BRICS nations spinning up their vaults really throws a wrench in that thesis which is uh that can potentially not happen if you have this alternative settle settlement network that people can leverage and do you think the price going up up 110 today I many people are focusing on China specifically, but they're they're I think everybody in the geopolitical landscape is looking at what's happening right now and saying, "Okay, I got to get I got to get some gold. I got to get some silver. There's apparently um silver shortage going on right now." And
(14:13) I don't know how legitimate that is, but at least the narrative's out there. Yeah. I think like like like the Brent's milkshake theory is absolutely correct around initially gold going up with the dollar. uh something I posted a long time ago on X and and and people familiar with the FOFA blog and uh the readings of monetary theorist another and friend of another will recall that in the late 1990s um another another or friend of another said that when the dollar system is coming to the end of its life, you will see the dollar and
(14:58) gold rise together, that will be the sign that the dollars because people will be getting squeezed into the dollar at one hand, but they'll also be getting out and going into gold. And so when those two things are rising together, that's the symptom of the end of the dollar system. That was said 30 years ago, almost 25 years ago.
(15:17) Um, and so yes, the milkshake theory will see the dollar squeeze higher. I get it. And gold as well. and gold once it hits critical tipping point of price and I don't know where that price is um but you can see hints of it um you know Albert Marco on X has said hey above $3,000 on gold it starts to create a problem for the dollar was right the dollar went down to 96 says above $5,000 on gold it creates a problem for the dollar and for the treasury market he's probably going to be right and the point here or what he's saying when
(15:57) he says that is ultimately yes there is this you know we've talked about this you know $13 trillion dollar denominated uh liability out there right in terms of foreign borrowed dollar debt that when the dollar goes up it squeezes people into that uh it forces them to sell treasuries it forces them to sell US equities to raise the dollars to get that well once the price of gold gets high enough it starts to fully collateralize their dollar liability on the other side and suddenly it starts to provide the liquidity. it starts to be the sink and that is how you circumvent
(16:39) um the gold is how you get out of the dollar system and that's why another a friend of another said all those years ago when you see them go up together that means the dollar is coming to the it's its end of life. This dollar this present form of this dollar system is coming to the end of life.
(16:56) Now does it mean the dollar is going to die? No. I'd be using dollars and you know your and my grandkids and great grandkids will still be using dollars. They're just going to buy us a lot less. Um and certainly in gold terms. Uh de facto we can see gold with today's price move has overtaken treasuries in global central bank reserves.
(17:21) Right? So there are now there's now more gold in global central bank reserves than there are US treasuries. How do you sit there and argue and say, you know, it's not overtaking the dollar in the system? Like, to me, that's crazy. Now, will people still use dollars? Of course. Why? That's just Gresham's law, right? I hear people say, "Well, it's still dominant. 90% of currency usage.
(17:40) That's dollar dominance." Great. So, you're spending Yeah. You're telling me it's the bad currency, right? I will I'll spend dollars all day long because it's a terrible store of value. But if the whole change of structure we've been talking about for years and I if you watch all look all my posts all my podcasts everything I've ever said have never said end of dollar reserve status.
(18:06) It's end of the post71 structure of dollar reserve status which is dollar as primary reserve currency treasury bond as primary reserve asset. It happened. It's happened. The dollar is still primary reserve currency. But gold is now primary reserve asset as of probably this morning with the $100 move. And I don't think it's ever going back unless, you know, she suddenly decides to be, you know, Yeltson and, you know, sell off his country for pennies on the dollar to American, you know, corporate and and Washington interests.
(18:44) And Putin decides to do the same thing because we can't go to war to stop him. The rare earth thing ensures it. Sup freaks. This rip of TFTC was brought to you by our good friends at BitKey. Bit Key makes Bitcoin easy to use and hard to lose. It is a hardware wallet that natively embeds into a two or three multisig.
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(20:41) I guess I mean that begs the question like what does the US do in reaction to this? I mean there was many that were surmising in the beginning of the year we're calling gold in kind back where we were calling gold from bolts internationally into the US seeing what China was doing and others in preparation. Obviously, there was the the Genius Act getting passed here in the United States and the Trump administration and the advisers around the administration are saying this is how we're going to save the Treasury market. We're going to take advantage of the fact that the US dollar is the
(21:10) preferred currency globally and try to flood markets with it with this new technology in stable coins and stable coin issuers will have to buy treasuries. But um it seems like we we've got to also at the same time expedite this reshoring of manufacturing if we want to sort of inoculate ourselves from these external factors. Yeah.
(21:36) And and you know I think the stable coin thing can work. Um but let's call it what it is, right? This is this is like you know um Operation Iraqi Freedom, right? Well, you know or um you know the Affordable Care Act, right? or you know when when when when you whenever the government names something you should sort of like assume it's the opposite of what it is and you're usually closer to the truth.
(22:04) And so let's let's call let's call the stable coin gambit for what it is. They should have called it we can't issue bonds at the long end of the curve in sufficient amounts at prices that don't blow up our debt anymore. So we are issuing and we're refinancing all of our debt in near cash markets and that's what the stable coin thing is about.
(22:29) But of course that doesn't roll off the tongue quite as nicely as the genius act does it. So but that's what they're doing. they are issuing they are going to finance right and you can see hints of it right when you see Bessant come you know get sworn in and immediately double the pace of Treasury buybacks that Yellen was doing which only started in was it May of last year April of last year he doubles the pace of Treasury buybacks immediately relative to what she was doing and it's it is heavily skewed it's not I won't say almost always but it's heavily skewed towards issuing short-term paper to replace
(23:04) longerterm paper. So, he's bringing in duration. And then I hear credible rumblings that, you know, the plan will eventually be once if if you can get enough uh if you can get stable coins big enough, right? If you can, if this can work, then you will do some form of of of what the US did in the 50s, which is make them non make the T bills that go into stable coins non-marketable and say, eh, they're not 4%.
(23:36) All all stable coin T bills yield 50 basis points, 30 basis points, whatever. Powell will have taken control of the short end of the curve from or excuse me, Bessant will have taken control of the short end of the curve from Powell. Completely disintermediated him, but we will have we will be financing massive deficits and the cost of reshoring in near cash markets.
(24:00) Now, what would I want to own if UK if if if Bessant came out and said, "We are going to reshore and I'm just going to straight print the money to pay it." What would we see? We'd see gold up. We'd see Bitcoin up. We'd see stocks up. Um, and we might not see the long end of the curve go up because if he's not issuing any bonds at the long end, there's a mindless bid for duration.
(24:20) This, I don't know if it's 400, 500, $600 billion a year from pensions and liability matching. Like, they have to buy no matter what. And as long as he keeps issuance out there below that number, Long can be relatively well behaved as we've seen. Uh, doesn't make me want to own it. They're getting killed on a real basis.
(24:38) But if we saw that, that's how we'd react. If he said that, that's what we'd react. Well, stable coins to finance large amounts of the def, that's just like the kissing cousin of printing cash to pay for the deficit. Why is it happening? Because it has to. That's where we are in the like there's no mystery.
(24:57) You go through the history books and these great powers that get into debt and have these big se you start at the long end and you you know foreigners and then you stay at the long end and you you you plug domestic and then when you run out of that eventually you end up basically printing money to finance your deficits and we're not quite there yet but we're you know that's what the stable coin gambit is.
(25:18) Now what else can they do? Look, if he can get the price of gold up a lot, you know, at $20,000 an ounce, if if they can do things that make the market bid gold to 20,000, and you know, people used to think that was insane. But I got to tell you, at 100 bucks a day, it's looking less insane.
(25:36) Um, you know, 50 to 100 buck a day moves on the upside, it's looking a lot less insane than it was say 6 months ago. But if he can get it to $20,000 an ounce, which by the way would only put it back to 1989, excuse me, um it would only put it slightly above the long-term average uh of of gold's price relative to the foreign portion of our debt.
(25:56) The the gold the market value of US official gold relative to foreign debt. $20,000 an ounce would deposit roughly $5 trillion into the Treasury General account free and clear. It's just straight money creation using gold. It's an accounting entry. Wouldn't have to sell any gold, whatever.
(26:13) And then you could buy down a pretty big chunk of that debt. He go out into the market and say, "I'm going to, you know, either he can finance the US, you know, the long end needs with that 5 trillion for five years at least, probably more like eight years.
(26:32) " Uh, or he could just go in and immediately say, "Hey, I'm going to buy back $5 trillion worth of the 29 trillion out. That's going to take down 20% of the market. So debt to GDP is under 100 right away. Assuming a money multiplier, nominal GDP is probably going to run freaking 15 20% for a couple years. Debt to GDP will be back to 50 60% in very short period of time over the backs of you know the purchasing power of stable coin holders uh around the world.
(26:56) So they could they could do that but boy they got to hurry cuz you know treasury you know interest doesn't sleep. No it doesn't. And I was telling you, I've been watching some of your FFTT videos over the last few days and uh you were mentioning a book, I forget the name of the book, but author's first name is Tobias talking about 1931 Germany and the parallels that exist between today and then. No, that's exactly right. Yeah.
(27:29) Yeah. Yeah. And so I think I think you said it in the video like history doesn't repeat, but it certainly rhymes. And it looks like we have maybe not a playbook, but some history from 100 years ago that we could look at and say, "Hey, this is what's happening." Yeah, absolutely. And you know, it's fascinating.
(27:48) We between that book and the book Raven of Zurich, uh the memoirs of Felix Somry, uh which I own, which is which is great. Um you know, there's a great passage from like 1912. uh because Sombre's writing a lot of it is his you know him trans it's his diary as the world was completely changing right like you came into 1914 with four empires and by 198 and those four empires had run the world for like 300 years prior and within four years three of the four were gone entirely the fourth was was wounded and the British Empire you know had lost 6% of its working age men in the war,
(28:28) you know, had had lost its power basically at that point was was a debt vessel of the United States and so we overtook them as global reserve currency as global, you know, it was the first step in sort of um you know, becoming uh the global empire and but it's fascinating there's this passage where Smury says you know Europe which was full in 1912 full of of optimism and pride and power of looked at the Chinese, you know, in chi in in in uh European capitals with curiosity because they always weighed their money, the silver and the gold. They would weigh it. They
(29:08) didn't go by denomination. It went by weighing it and they thought the Chinese were five generations behind the Europeans. They thought they were sarray says, but in reality they were a generation ahead. They had the experience and the historical memory of inflation under Mongol emperors who' printed a bunch of paper billions and had to suffer through the consequences.
(29:32) And so that's why the Chinese weighed their silver and gold money in 1912. And the Europeans thought they were, you know, they were they were hillbillies. Thought they were behind when they were actually ahead. Now, stop me when this all starts to sound familiar, right? Like, uh, how often for the last 15 years have we heard how backwards the Chinese are and how they'll never catch up and this and that? Like here we are.
(29:52) The Chinese have been buying gold hand over fist for 15 plus years, 18 years. And what have the what is the American, you know, Wall Street financeers power Washington laughed at them. They're not laughing now, are they? They're not laughing at all. I think something similar is going to happen. Sup freaks. This was brought to you by our good friends at Obscura.
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(32:12) If you want a retirement plan that prioritizes sovereignty and pursing power, this is the event. Register now at unchained.comTFTC. Unchained.comTFTC. And I think the only thing you can call it is hubris, too. Is that's exactly what it is. Yeah. But like, not only from a monetary and economic perspective, but from the military perspective, we've been beating our chest like we're the biggest, strongest military that's ever existed on the planet. China will never be able to catch up. But you threw that stat stat out earlier.
(32:39) They're able to to build uh what was it 4,000 tomahawks per week and that was well not tomahawks but that's uh from David P Goldman who's a very good source on this stuff at Asia Times he wrote uh two or three years ago he said that you know that they can reportedly make 4,000 cruise missile motors a week for his missile motors but that then you look at the advancements that they've had technologically with automation uh I think many people in the United States are looking at the drone technology specifically and saying, "Oh, that's
(33:09) pretty scary." Uh, and you go back to they own the rarers, which is the raw input of everything we need. And it's it's very perplexing that we are still beating our chest in this way and not showing a bit of humility, like, okay, we messed up. And it does seem like the Trump administration uh has recognized, holy crap, we're behind uh in a lot of ways to China, but I think they're focused on um energy in AI specifically, which um rightly so.
(33:40) I think they should be, but militarily uh things aren't looking um relatively good for the US right now either as it pertains to China. And it's just like, all right, when are we going to swallow our pride? Uh, take the hard medicine and recognize like, hey, we need to show these these Chinese some respect because uh you do not want to go to the kinetic warfare route with them.
(34:06) I don't think cuz Andrew's CEO was on a podcast with um the A16Z guys last week and he was saying uh and I think he referenced this into the some of the missiles we supplied Israel earlier this year like we can if 5 days worth of of depleting missiles in war takes 2 years to build back that supply which is astonishing to me. Yeah, there's a great uh quote from US Marine Corps General uh Barrow.
(34:37) You you know, amateurs study tactics, professionals study logistics, and we've been more focused on tactics. and and they've been arguably more focused on logistics, which we can say because, you know, 2 and a half years ago, the CEO of of Rathon was quoted in the Financial Times saying, you know, we literally can't go to war without Chinese components and it will be many, many years to try to replace that. They know it.
(35:05) Who let that happen? Why did that decision happen? You start pulling on that thread, I think you're going to get some really unpleasant conversations. and that gets into politics that quite frankly I don't want to be involved in. Uh because I it um yeah, I'll I'll just leave it at that. Um but but the hints have been there. It's it you really said the right word, which is hubris.
(35:30) There was um there was a there's an author guy named Andre Martianov who was a former Soviet engineer I believe I believe he was in the Soviet military when the Soviet Union collapsed. He came here and he he advised the US military on all sorts of missile technology etc. And he began writing some books a few years back the real revolution in military affairs.
(35:56) Um and most recently he wrote one uh a year and a half ago that was published called um America's Final War. And and the overall thrust of these books was number one there is very much a there's a very much a science to military military sciences I believe is is is a thing and you know you can run a calculation of okay how much growth how much steel can you produce? How much iron ore can you produce? How much ir you know copper can you produce? What is your aggregate BTU output of your energy electrical grid? Uh how many engineers are you graduating a year? What's your manpower? All of these things, you know,
(36:34) can be put together into a calculation that gives you some level of understanding of the ability to prosecute war. It's a measure of power, hard power. And in the first book, he laid out like the Russians were so far ahead of the US in that already that it wasn't even close.
(36:58) And and I think people number one, I I don't even think he could get it published in the Western Press, so he went with an independent publisher. You can buy it on Amazon to America's credit, right? It's not it's not censored. Uh but you read that you go, "Huh, interesting." And then we got a test of that in places like Ukraine, in places like uh uh Iran and Israel. And what you find then is what he lays out in America's final war, which is America doesn't have enough of an industrial base to prosecute a major war. and the industrial base and installed capacity it has is all in the wrong things
(37:37) because the nature of war has changed. Right? Think about what technology and AI do. They allow smaller less well capitalized participants to do things just as good with just as broad a reach as big capital. You and I are sitting here talking. You know, I was laughing the whole Jimmy Kimmel thing. Like, I was looking at his numbers.
(38:05) Like, I have podcasts that had better numbers than he was getting every night. I'm like, what? Like, look at the commercial, the new Apple iPhone commercial, right? What do they have? They have an iPhone in a case with real filmmakers using it to film. This is what technology highle. And this is what and muh Andre Martanov was saying is like the Americans have all of this sunk cost into these weapons platforms that aren't the right weapons platforms. They're not going to farewell in war.
(38:37) Eric Prince, a former CEO of Blackwater, said it back in February in a speech. She said, "If we sailed a carrier, a carrier group over to Taiwan to try to blockade it, it would we would see it on the news, smoking or worse because it has changed the nation, the nature of warfare has changed. Drones, hypersonic missiles, etc.
(38:56) And they've known this for at least first time I heard about it was in 2018 at a private conference, which means they've known about this for at least 10 years at least, and probably more. But the political reality, right, like the Philadelphia shipyards, right? Historically a big naval shipyard. There's a bunch of ships being built there or that in theory could be built there that aren't the right things to build anymore, right? But you're going to go to the senator from, you know, from Pennsylvania and go, "We're going to shut down the Philly shipyards and and turn it into some sort of missile
(39:28) works or drone works." Come on. That's not how this country works. And that's the challenge is is there's this uh inertia around the installed base where the incumbent has a disadvantage. And that's what we've been watching. Yeah.
(39:50) That the Philadelphia Navyyard, the it's the headquarters of anthropology now, which is uh one of the favorite stores of uh Oh, was that right? Upper upper middle class uh white women in the United States. But uh it's a far cry from where it was. That might be the perfect metaphor for why we can't go to war. You just we used to make we used to make destroyers there and now we out cute cute dresses. It's cute dresses now.
(40:17) It's uh well with this in mind I think there there has been a recognition um and a lot of people have their thoughts about the sort of Silicon Valley tech elite but I think if you look at companies like Androl um and there there is a big focus on providing startup capital to industrialbased focused companies um there there was a company named Bass that just spun up um a factory in the center of Austin uh in the old Austin uh I forget the Austin Times um factory right right on Congress a that shut down obviously Andrew's focused on uh drone technology and anti- drone technology there's a a sort of metal
(41:02) fabricating uh startup that's based out of Michigan so it seems like um at least some part of the investment class here in the United States recognizes that we have this weakness in the private markets trying to solve these problems.
(41:21) Like on that note, like what if anything are we doing right right now and where where do you think we should be focusing in in uh sort of deploying capital to to fix these problems? Well, it's interesting. There's just uh when you I think those things are the right thing to do and I think we also need to be subsidizing in a major way uh metallurgy trades, you know, metallurgy degrees, rare earth refining degrees, which doesn't even really exist in America. I'm told 33 different Chinese universities have them.
(41:56) America has zero. um engineering degrees, skilled trades should all be being subsidized um majorly. In other words, like you don't pay to go to school and you know, you come out, you're going to be making, I don't know, more than a first year or more than a third year Wall Street banker, something like that, right? Guaranteed by the US government.
(42:16) Uh because you've got to get the labor there. There's, you know, as an American, why would I go like study really hard, not get to drink a bunch of beer when I could go into, you know, finance and come out and trade crypto and make way more money than someone who's actually helped build stuff? And I say this with being one of those guys that went to college and made the choice in 1993 to drink a bunch of beer and not have to study as hard as engineering guys and make more money. Like, that's that's the that's what the dollar system as structure does. That is 100%.
(42:48) Everybody else makes stuff and then they send the money here and we move the money around. And like that's that system is at the it's well beyond the end of its useful life. Uh and I say that because like we are doing some things right. But now again go back to the first part we talked about.
(43:07) If the Chinese aren't sending rare earth stuff here, that's like that's the hardest part. That's the hardest part and it takes a long time. um to sort of build the infrastructure for that. So, you know, we need to we need to go to like Manhattan Project speed on that in terms of because you know it would be a good question for someone to ask Palmer Lucky and Danderl the next time he's doing an interview is hey if the Chinese cut off all batteries and all magnets and all rare earth inputs to what you're doing how many things can you produce a year?
(43:38) And I I I think he's gonna I don't think people are going to like the answer, you know. And I say that because we've seen stories over the last six to nine months of like, hey, we tried to build our own batteries for these drones, not from uh Andrew specifically, but from other people in that supply chain in that world. They said we couldn't do it.
(43:55) We had to buy them from China. They weren't as good. And so it's not there. I think there needs to be some reality around, you know, this right now. I'm still seeing the bargain. Like, well, fine. We'll just do it ourselves. You know, we're America. We'll just do it ourselves. Yes. But no one, everyone's like, "We'll just take a year or two.
(44:19) " They I'm like, "So, the Chinese did this, you know, China launched, you know, we we wrote on Friday like China launched China 2025 in 2015, and most of Wall Street laughed at them. They're not laughing now, but it took the Chinese with all of the sort of things that they do that we have a hard time doing, right? Centrally planned, some level of, you know, forcing competition, massive subsidies, closed capital account, all the things you have to do to do that. And it took them 10 years.
(44:51) And we're trying to do something orders of magnitude bigger with less engineers, less workforce, and and oh, by the way, an engineering and skilled trades workforce that is like a a declining option. In other words, it's it's it's a it's a decaying asset because, you know, we got another six to eight years and the last generation that was really in engineering and skilled trades, they're going to be aging out every year.
(45:18) So like we're on the clock and we So what else can we do? We we we have recognized the problem and we are taking some steps. We aren't nearly aggressive enough. We need you know I will say we are on the right path when I'm seeing stories in the Wall Street Journal about welders making 500 $600,000 a year coming out of welding school and being able and you know what it's going to be inflationary.
(45:47) just so inflationary, which means guess what? The Fed's going to have to put the entire bond market on their books. Great. You know, that's that's that's how this has to go. That's what they have to do. And you know what's that going to do to the dollar? It's going to get way laid. Guess what? We offshored this stuff to support the dollar. Why do people think that bringing it back can be done without weighing the dollar? It's astonishing to me.
(46:10) It's the most like when you put it that way, it's very simple. Like it's very simple. It's very simple. And it's I mean as you're describing that I'm just thinking in my mind of how polarized political the landscape in the United States is here domestically and anything Trump tries, even if Trump woke up, he was like, "All right, Luke, I hear you. We're going to go do it.
(46:38) " the amount of backlash you would get and he calls for and the call calling him like an authoritarian fascist that is that's the challenge I think too right cuz this is like an this is an orthogonal multi-disiplinary problem and that's that's we you know the politics of it right like half of this you know without getting into it like we can't agree on certain scientific facts half the country thinks you know you Dr.
(47:09) what's his name is is a national treasure and half think he's not half you know half people you know the immigration situation is there there's there's no like we are so polarized um you know and if you get you know if Trump and the Republicans lose the next election it's still going to be polarized it's just be in the opposite direction and so that's the other thing too right like people say we just need to do what we did in 1940.
(47:39) 1940 you had like number one we didn't really have a bunch of foreign engagements. We didn't have a bunch of foreign influence running Washington. We had been basically like we had just kind of come on the national stage number one.
(47:56) So we didn't have a bunch of like hey you can't take that money away from the war you're supporting over here to build a factory base right there that there was no such thing. It was all focused here. Number two, you had a huge skilled trade base. And oh, by the way, 20% of them were unemployed and had been for 10 years. So like if if like they just needed the rallying cause and we were sort of a very much more unified country, you go, "Oh yeah, let's go. We can build this.
(48:25) " Now it's like apples and zebras how different all of that is on every angle, politically, domestically. So, you know, again, I think step one is, you know, okay, we admit the problem, but now you got to be realistic, right? It's like, okay, well, I'm 500 lb and I'm smoking and I have a heart condition and, you know, people like, well, we're America. We're just going to go, you know, we're going to run an Iron Man next week.
(48:47) You're like, what are you talking about? What are you talking about? Like, the first step is like, get off the couch, stop smoking, like walk to the sink, make yourself something healthy, and walk back. And then next week if you don't die of a heart attack then you walk to the mailbox and you come back.
(49:08) And I mean there's just a time aspect to this that you know again if we don't have a time machine it has the time aspect has to be paid. Yeah. And almost feels like there needs to be a propaganda campaign a good propagan propaganda campaign to really introduce the concept of low time preference. And I I think that's the very disconcerting about the current state of America is that we live in a high velocity trash economy where everything is what did you do for me yesterday? What are you doing for me today? What's your quarterly financial st saying um and basically reacting and then then it gets even more distilled to
(49:46) the 24-hour news cycle. Um, I thought that what what Besson announced about what was it six-month reporting versus quarterly like a lot of people on Wall Street, oh, here comes more fraud. And I actually thought it was a really good that's a really good idea.
(50:06) Like report every six months, report every like the amount of effort having been on the sell side for 15 years investment research. The amount of effort alone that is wasted on quarterly reporting is like mindboggling. you have like the most brilliant minds in America like reading the release, getting on the call, asking the com, hey, good quarter, guys, and then like rather than, hey, here's an idea for raising capital. Here's an idea for building a factory.
(50:25) Here's like it's insane. So, I thought like that's a good like that's a good little baby down payment, but like you know, it's like let's keep that going. Yeah. No, somebody sits on the board of a publicly traded company like the amount of sunk cost or opportunity cost that's spent focusing on quarterly financials.
(50:50) It's like you finish the financials for Q1 and then 3 weeks later it's like all right let's start let's start getting the books ready for Q2 uh earnings release. It's not conducive there. It's not conducive to like Yeah, cuz oh by the way, as an exec, you know, you go to jail if you sign something that is that is fraudulent or wrong. And so like your first like I need to make sure I don't go to jail. Okay.
(51:13) Well, if you're thinking I don't want I got to make sure I don't go to jail, you're not thinking about how do I compete to Chinese? How do I go into this market? How do I do better in in Brazil? How do I like these are the real things you got to focus on and like we just haven't been for a long time and it's all like you said it's all high time preference society which is all around the end of the day it's the currency why build a factory why plan out building a factory and how do I allocate that capital when the dollar's moving around like this and the cost of that capital you can't you can't plan a
(51:48) factory come on you got to have some sort of c a real you know a better currency No, I think you did an incredible service to the world a few weeks ago really pulling on the the debasement trade meme in sharing that chart of equities real estate uh and I believe or S&P NASDAQ and real estate priced in dollars, gold, and Bitcoin.
(52:14) And I think if we were able to really distill that message like you did and make it popular and have company execs realize like you should be storing your your company's profits in these better currencies and Bitcoin and gold. Yeah, I replied to So Senator Sanders, Bernie Sanders had something up probably about a month ago.
(52:37) You can find it on my ex feed about how you know like I don't know corporate greed and something else is you know the reason why you know since 1971 all of the profits you know all the gains from productivity have accred to the to the 1% and not to the bottom 50%. And like I tagged him about I'm like with all due respect Senator Sanders in 1963 minimum wage in this country was five silver quarters. It was a$125 minimum wage$125.
(53:05) It's five silver quarters. The melt value at $51 of those five silver quarters today is like eight bucks each. So if minimum wage in real money terms was today what it was in 1963, minimum wage would be 5* 8 bucks would be $40. What is national minimum wage? actually 7 and a quarter. You want to know who stole the money, Senator Sanders? It's you and the politicians.
(53:39) You guys change the currency system. You've been there for however many years he's been there. Change the currency system back. Nixon said it was temporary. That's where it all went. You go from having to pay people 40 bucks. You imagine if minimum wage is 40 bucks. What would wealth inequality be? Corporate profit.
(54:03) margins would be a lot lower, sure, but corporate profit dollars would be way higher because we would be running an economy that would be essentially the version of what Henry Ford did initially, right? Which was pay his workers more than the market so that they could buy the Model T's coming off the line. So like that's that's the fix that like that's the fix.
(54:26) if they ultimately unless you fix the currency, you're not going to really be able to do a whole lot. No. And it's it's mindboggling how many people don't recognize this at all. And I'm looking for a tweet. There's a guy Nikita Bear. He uh he just joined Twitter or X as some he's working on their their product. I don't know exactly what he's doing, but he tweeted out. He's like, "Oh, wow.
(54:49) these all these golden uh Bitcoin guys are are preparing for hyperinflation when AI is extremely deflationary. I saw that I saw that post. I I saw that post and it um the answer is very simple. I I think I replied to him and I think I just said deflation is the midwife of hyperinflation in highly leveraged societies. you read the book 1931.
(55:15) In 1931, Germany didn't hyperinflate again because they had experienced the hyperinflation of 1922. And so they're like, "We're not doing that again." But that was one of their choices. It was either default or hyperinflate. And like I don't think the US is going to nominally hyperinflate.
(55:35) Well, like look, the dollar collapsed 90% against oil in 2001. Between 2001 and 2008, right? Oil went from 15 bucks a barrel to 150 bucks a barrel. That's that is simply the dollar collapsing 90%. The dollar was worth onetenth as much against oil in 8 years. You know, the Chinese we say we want to compete. China can make the same or better stuff for us 85% cheaper than us.
(55:58) including things like, you know, Josh Josh um Crumb, not Josh Crumb, Josh uh Wolf testified to Congress three years ago um about nuclear power plants. So the Chinese can build a one gig nuke, you know, one gig nuke plant for 85% cheaper than the Americans. A gig is a gig. A gig of electricity is a gig of electricity.
(56:18) It's not like there's some special yuan, you know, gig of electricity that gets them more or less power. It's they abide by the same physics. So if their gig of electricity costs 85% cheaper than ours, you know what that tells me? Dollars 85% overvalued against the yuan. It's that simple. It's the same.
(56:43) It's this, you know, it's it's and that's that's where we're that's where this movie is going. Like some version of that. If we want to compete, if we want to break people say, well, we need to split China. Great. The dollar's got to go down 85%. That's it against C1. That's fine. Whatever. Good. We'll be able to compete.
(57:00) Working class is going to get paid. Fed's going to have to buy a lot of bonds. But that's where this like some version of that is where this is going. It's just it's math. It's double entry bookkeeping. It's not like it's not, you know, the only mystery is if we decide to split with China and and as as everyone's saying we're going to do, we're going to divorce China and redo this.
(57:21) I don't know if it's 85% down or if it's 40% down or it's 60% down, but it ain't freaking 10% down like we've seen this year. Not even close. No, no. It's insane. Going back to the Nikita tweets, it's like tech's been deflationary. Like we've had extreme tech deflation over the course of the last five, six decades specifically. And it's like, yes, TVs are cheaper.
(57:49) what we're doing right now is way cheaper than it would have been 20 years ago. Um, it gets good information out to people. And despite that, the cost of living is rising. And it there should there is just this disconnect between that fact and the ability of people to recognize like, oh, if we paired this with a hard currency, we would actually reap the benefits as as a global power and economy if we were able to store uh our wealth in a hard currency and we can let prices fall, but the purchasing power of our hard money is going up over time as we're being more productive throughout the economy. It's it's that simple, right? People like, "Oh, well, gold was gold wasn't so
(58:27) bad for America from 1860 to 1929. America had a pretty good freaking run." Uh, you had this huge productivity, huge technology, right? Technology is not just electric stuff, right? You had trains, you had planes, you had cars, you had all this technology.
(58:47) You had washing machines, consumer goods, massive deflation, and it was highly highly um productive and and good for America, good for Americans. Uh, we were on a gold standard. and some of it blended gold silver standard. But that's the challenge like people say this tech is deflationary and it is but in the presence of a country with you know 7% fiscal deficits at at the peak of the economic cycle and 120% debt to GDP and a hollowedout factory base.
(59:17) You know, I've said multiple times, there's nothing more inflationary than an insolvent sovereign that is printing money to keep the nominal value of its sovereign debt high, you know, to keep it keep it nominally money good. And that's that's why inflation is where it is despite all this inflationary, you know, deflationary tech, excuse me, is just they have to keep growing money units because otherwise, you know, the debt implodes. And oh, by the way, the debt imploding is very hyperinflationary because the debt backs the currency.
(59:47) So if the debt if the backing of the currency goes to zero or or is impaired, guess what happens? That's when you really get a hyperinflation of some description as people basically dump currency to just get me something that isn't backed by bonds. So yeah, Bitcoin actually does fix this. A gold standard would actually fix this.
(1:00:12) And you can make the case Bitcoin is able to be um you know all the things in Bitcoin portable and and verifiable and etc etc etc. Um yeah, you need a deflationary currency or else you know we're going to kind of continue down this path we're on. Agreed. And to wrap up, I'll say like I think the free market, Bitcoin is a creation of the free market is beginning to solve this.
(1:00:36) But I think even any Americans listening to this, you look at things like Square announced last week where anybody who's running a Square point of sale system throughout the United States will be able to automatically convert a portion of their revenues into Bitcoin right away.
(1:00:53) And when I when I think about actually solving this problem, um what is the what is the walk to the mailbox for the 500 lb smoker with heart problems? It's like, okay, just if you run a small business and you're using Square, maybe you start by funneling 5% of your revenues into Bitcoin and building a a Bitcoin treasury position for your small business.
(1:01:16) And um you see what that does for you over the course of a year, two years, 5 years, and then you go, "Huh, this is this is better money." and you you turn the dial up and eventually when it when I think about ways in which you solve this problem it's like all right let's not depend on the government officials and central bankers who sort of pushed us down this road to think that they're going to solve it themselves or feel the pressure to solve it without any external pressure uh is a bit wishful uh bit of wishful thinking in my books we need individual American citizens and businesses to adopt this better money and opt into it and I think that's how
(1:01:49) we get through this at the end of the day. Yeah, I think that's exactly what's going to happen. I think it's it's really encouraging to hear things like that square. I mean, it is it is be quickly becoming a matter of utmost importance.
(1:02:07) I won't go all the way to life and death, but you know, depending on events, it could become a matter of life and death for businesses to do exactly what you just described, which is just put a little and individuals put a little bit into into Bitcoin because you can see what you know the correlary to the genius act and and the stable coin gambit to support the treasury market that we talked about earlier is you're not going to support the stable coin marker that the stable coin market is not going to be big enough to support the treasury market with Bitcoin at 200,000 or 500,000. Like he needs like million dollar Bitcoin, $2 million
(1:02:39) Bitcoin to pull along the number of stable coins to pull along, you know, the the the T- bill issuance. It basically, you know, we wrote it as, you know, the US, the Treasury seems to be standing up Bitcoin de facto as a competing reserve asset to gold. And then they can duke it out. gold and Bitcoin can duke it out, you know, we'll see.
(1:03:04) Um, but that's exactly what has and that and that that will rebalance things, that will take things away from the financialized guys, that will take power away from the Fed, that will do all the kind of things that you need to. It's a mar to your point, it's a market, it will be a market driven incentive system. Um they'll be really it will narrow wealth inequality.
(1:03:29) It will but again the only way it narrows wealth inequality is if people start buying some every week and self-custody it because otherwise if you don't self-custody it you they're just going to rugpool you like they rug pull like you know you custody it with you know you just you just have to custody it yourself. You just you know learn you know it's so easy to do.
(1:03:51) There's very good services that'll help you do it. like just do it like just because otherwise you're just recentralizing it elsewhere and you know you it it opens up the risk for rugpull down the road. Yeah, I don't want to glaze them too much, but that's why I'm extremely happy that Square exists and they have the sort of mentality that they do and obviously Jack's been very vocal about this. Bitcoin is everyday money.
(1:04:24) we need to use it and they're supporting many different areas of the the industry with uh they have bit key which is their hardware wallet they have proto which is mining spiral which is open source development obviously square and cash app and I believe miles sudtor is the product lead um over a block a product lead over there said that you'll automatically be able to sweep funds that you accumulate via your square point of sale terminal to to self custody using pit key and other wallets.
(1:04:50) So, we need more examples of that of industry people leading and doing things the right way because like you said, it is not that hard. Uh, and it is important that we do it the right way because that's how we actually structurally fix these problems. Yeah. Oh, yeah. Like I'm a tech and so like if I can do it, anybody can do it.
(1:05:08) Like I'm I'm like, you know, the whatever the tech abduction curve, I'm usually way past the big wave. Like I'm I'm a I'm literally a tech idiot. So, like if if it's easy enough for me to do it, just about anybody can do it. Yeah. And Luke, I appreciate your time. This is a great catch up. Uh I think you've been completely valid.
(1:05:29) We've been talking on this show, I think, for probably 5 years now. Uh you've just been beating the drum consistently and it feels like we're hitting an inflection point that you've been uh you've been pointing to for for many years now. Um, so I thank thank you for your time and educating the audience here. No, I appreciate that.
(1:05:48) It's um it's it's it's been it's been it's been a great time. It's been fun. It's been, you know, it's been, you know, the the most fun work of my life. And uh you know, it's been happy to hear from from clients and friends like, hey, like this is um you know, this is good.
(1:06:08) There's there's times in this business where you don't see the ball that well and and you know those are when you're trying to work walks and you know grind out singles and you know some when you're seeing the ball well then you know those are the times when it's when it's super fun. Um and so you know hopefully we can knock on wood um you know try to try to try to try to keep it going.
(1:06:26) Yeah, highly recommend checking out Forest for the Trees. Uh we'll link to the website, the YouTube channel. I mean your your YouTube video has been great. the Q& A's. Uh if you're looking for quick hits, uh just to get a peek into what Luke is thinking from a week toeek basis, definitely go check that out as well. Appreciate it.
(1:06:45) All right, that's all we got today, freaks. Peace and love. Thank you for listening to this episode of TFTC. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there.
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