Episode 281

The Froth of Grift

In this episode, Jacob Shapiro sits down with Matt Pines, who somehow manages to be both a national security thinker and a Bitcoin whisperer, to talk through the Trump administration’s pivot toward crypto, why Bitcoin has suddenly gone strategic, and what it tells us about where the global economy might be headed. They dig into the politics, the policy confusion, and the deeper structural shifts behind the headlines. From U.S.-China competition to financial fragmentation, Matt breaks it down without hype - and helps us try to make sense of how a meme coin presidency ended up building a Bitcoin embassy. It’s a wild, smart ride.

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Timestamps:

(00:00) - Introduction

(00:37) - Welcoming Matt Pines

(01:27) - Matt's Career Journey

(02:45) - Bitcoin Policy Institute

(06:21) - Consulting Industry Insights

(12:31) - Trump's Shift on Bitcoin

(19:16) - Strategic Importance of Bitcoin

(26:56) - US-China Relations and Bitcoin

(35:53) - Lutnick vs. Bass: A Clash of Personalities

(37:13) - Liberation Day and Strategic Shifts

(39:38) - The Trade War's Financial Fallout

(41:41) - Bitcoin's Role in a Changing World

(43:49) - US Strategy and Bitcoin Integration

(47:01) - Global Power Dynamics and Bitcoin

(57:31) - The Deep State and Elite Civil Wars

(01:05:42) - Conclusion and Final Thoughts

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Referenced in the Show:

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Jacob Shapiro Site: jacobshapiro.com

Jacob Twitter: x.com/JacobShap

CI Site: cognitive.investments

Subscribe to the Newsletter: bit.ly/weekly-sitrep

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The Jacob Shapiro Show is produced and edited by Audiographies LLC. More information at audiographies.com

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Jacob Shapiro is a speaker, consultant, author, and researcher covering global politics and affairs, economics, markets, technology, history, and culture. He speaks to audiences of all sizes around the world, helps global multinationals make strategic decisions about political risks and opportunities, and works directly with investors to grow and protect their assets in today’s volatile global environment. His insights help audiences across industries like finance, agriculture, and energy make sense of the world.

Cognitive Investments is an investment advisory firm, founded in 2019 that provides clients with a nuanced array of financial planning, investment advisory and wealth management services. We aim to grow both our clients’ material wealth (i.e. their existing financial assets) and their human wealth (i.e. their ability to make good strategic decisions for their business, family, and career).

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This podcast uses the following third-party services for analysis:

Podtrac - https://analytics.podtrac.com/privacy-policy-gdrp
Transcript
Jacob Smulian:

Hello, and welcome to another episode

Jacob Smulian:

of the Jacob Shapiro podcast.

Jacob Smulian:

I am producer Jacob.

Jacob Smulian:

Uh, I really don't have much for y'all today.

Jacob Smulian:

This is a fantastic conversation between Jacob Shapiro and our friend Matt Pines.

Jacob Smulian:

Um, they talk about what's happening in the markets.

Jacob Smulian:

They talk about market opportunities.

Jacob Smulian:

They talk about doomsday, they talk about China, they talk about agriculture.

Jacob Smulian:

It's a good conversation.

Jacob Smulian:

Um, I got nothing else.

Jacob Smulian:

Stay safe out there.

Jacob Smulian:

Get offline.

Jacob Smulian:

Go touch some grass.

Jacob Shapiro:

Uh, Matt, you're a, you're a fan favorite and you're one of my

Jacob Shapiro:

favorite guests to have on the podcast.

Jacob Shapiro:

I have to say this to all guests, but like, you're actually one of

Jacob Shapiro:

my favorites to have on the podcast 'cause A, I like you, and B uh, I

Jacob Shapiro:

always learn something from you.

Jacob Shapiro:

So thanks for coming back on.

Jacob Shapiro:

I appreciate it.

Matt Pines:

Well, you're one of my favorite podcast hosts, and I'm not,

Matt Pines:

I'm not just saying to butter you up.

Matt Pines:

Well, that's nice.

Jacob Shapiro:

Uh, listeners, a lot of you probably can't see this,

Jacob Shapiro:

but I was warning, Matt, that I, I have to, there's a whole long story

Jacob Shapiro:

of why I'm in this office today.

Jacob Shapiro:

My daughter has a stomach bug and she had to stay home, and

Jacob Shapiro:

then my wife had to go anyway.

Jacob Shapiro:

It's not, it's boring, but like I can only record from this very

Jacob Shapiro:

specific place in my office right now.

Jacob Shapiro:

And the sun is like, sort of like when it peeps through the clouds,

Jacob Shapiro:

it's beating down into my face.

Jacob Shapiro:

So I've already apologized to Matt, and if you watch this on YouTube, at

Jacob Shapiro:

certain points, I may put sunglasses on.

Jacob Shapiro:

It's not 'cause I'm a douche bag.

Jacob Shapiro:

It's just 'cause literally, I can't see, I don't put sunglasses on in

Jacob Shapiro:

the context of this conversation.

Jacob Shapiro:

Um, Matt, the last time you, you, you were on the podcast, you had a

Jacob Shapiro:

different role, a different position.

Jacob Shapiro:

So why don't we, uh, just start off, first tell people about the Bitcoin

Jacob Shapiro:

Policy Institute and, uh, tell us a little bit about why you made such

Jacob Shapiro:

a, I mean, it seems like a pretty big shift in your professional life.

Matt Pines:

It seems like that in retrospect, but you know, in

Matt Pines:

retrospect it was inevitable.

Matt Pines:

Um, yeah, so I've, my, my whole professional career has been a series

Matt Pines:

of these sort of, uh, step function hard turns, uh, 'cause I did physics

Matt Pines:

and philosophy undergrad, decided not to do PhD. Sort of went to London to

Matt Pines:

do a Master's in public policy, came back to the states, worked at the

Matt Pines:

National Science Foundation, thought maybe I would go to law school.

Matt Pines:

Hard pivoted into international security consulting for the

Matt Pines:

government for about 10 plus years.

Matt Pines:

Really looking at kind of, um, worst case scenario planning, uh,

Matt Pines:

horizon scanning technology, um, assessment and experimentation.

Matt Pines:

Then went over into sort of private sector consulting.

Matt Pines:

Joined a boutique, uh, firm doing sort of geopolitical and cybersecurity, uh,

Matt Pines:

risk advisory for mostly multinationals critical technology companies.

Matt Pines:

Uh, some venture private equity firms where I was director of intelligence

Matt Pines:

and then that firm was acquired by a publicly traded cybersecurity company.

Matt Pines:

And so that was kind of the last era, the last epic.

Matt Pines:

Um, but along the last five years I've had this interest in Bitcoin and,

Matt Pines:

and the intersection of Bitcoin with these strategic kind of, uh, national

Matt Pines:

security and geopolitical questions.

Matt Pines:

And so I got involved with a think tank that got started, um, in 2021,

Matt Pines:

dedicated to that objective, which is to provide kind of a serious, you

Matt Pines:

know, peer review, quality research and analysis that's objective,

Matt Pines:

independent, non-partisan, that can sort of speak the language of dc Right.

Matt Pines:

Sort of translate kind of the in-group kind of, uh, economical lore and sort of

Matt Pines:

the, the weird, uh, shibas of Bitcoin, uh, to policy makers, uh, on the

Matt Pines:

assumption that at some point it will become strategically relevant and it

Matt Pines:

will intersect with a lot of these other.

Matt Pines:

Instruments of national power.

Matt Pines:

And so I was, you know, a contributing fellow early on to that think tank.

Matt Pines:

The first national security fellow wrote the first white paper on Bitcoin and

Matt Pines:

national security, and then progressively engaged more and more, you know, as a

Matt Pines:

quote, influencer in the Bitcoin space.

Matt Pines:

Um, but because I'm based in DC I would also brief policy makers and contribute

Matt Pines:

to the think tank's activities and, and, uh, you know, and sort of quote

Matt Pines:

thought leadership, yada, yada, yada.

Matt Pines:

Um, but obviously things have changed, uh, in the overall external environment,

Matt Pines:

uh, and the policy relevance of Bitcoin.

Matt Pines:

Uh, and so after the election, I was paying close attention to whether

Matt Pines:

the incoming administration would, um, make good on some of these

Matt Pines:

rhetorical commitments, right?

Matt Pines:

Whether their pro Bitcoin policy was just a kind of a patronizing pat on the head to

Matt Pines:

their campaign supporters, or whether this marked a more structural shift that would

Matt Pines:

translate down through the bureaucracies.

Matt Pines:

Um.

Matt Pines:

And the ship of state being turned decisively in appropriate coin

Matt Pines:

direction, uh, you know, was a, was a, was a key question in my mind.

Matt Pines:

And so I was assessing that over the course of the winter time.

Matt Pines:

And then BPIs, I think Tank took a hockey stick up in terms of its ability to,

Matt Pines:

to influence policymakers and our, our, our, our overall, um, sort of impact.

Matt Pines:

And so, so the timing was right to sort of jump in as executive director, where

Matt Pines:

I feel like the leverage points to kind of shape good outcomes long term now that

Matt Pines:

the government, at least at a rhetorical level is committed to these things.

Matt Pines:

How to sort of maximize the, uh, strategic upside and

Matt Pines:

minimize the downside risk here.

Matt Pines:

Um, and I'd also just like working with a small team.

Matt Pines:

You know, the vibes are immaculate.

Matt Pines:

We're, you know, building something from scratch.

Matt Pines:

We have downtown offices.

Matt Pines:

We're gonna be, you know, kind of building like essentially a Bitcoin embassy.

Matt Pines:

Um, and uh, it's just fun, right?

Matt Pines:

It's just really fun to kind of engage in these things and, and not have

Matt Pines:

to be a PowerPoint monkey delivering the same China bad briefing to, uh.

Matt Pines:

Corporate C-suites that increasingly don't care.

Matt Pines:

So, um, that, so that's been fun.

Matt Pines:

Uh, and then along the way as my life, you know, increasingly took, uh, um,

Matt Pines:

you know, weird twists and turns, uh, almost the same week, I decided to

Matt Pines:

kind of jump in as a executive director at the Bitcoin Policy Institute.

Matt Pines:

I was approached by folks that were starting essentially a, um,

Matt Pines:

a, uh, a, a very serious effort to try to collect, uh, data on

Matt Pines:

unidentified num almost phenomenon.

Matt Pines:

So I joined as a strategic advisor to a Sky watcher, uh, which is

Matt Pines:

staffed by folks with very relevant professional experiences and background

Matt Pines:

in these sorts of activities.

Matt Pines:

Um, and, uh, so that's been a whole separate thing, right?

Matt Pines:

Which is, uh, the more exotic flavors of my professional

Matt Pines:

interests, uh, now converging.

Matt Pines:

Um, and, uh, yeah, so that's what I'm doing now.

Matt Pines:

Uh, it's, uh, never a dull moment.

Jacob Shapiro:

I, I believe it's never a dull moment.

Jacob Shapiro:

I would've, by the way, the vibes are immaculate.

Jacob Shapiro:

I'm gonna fight with the podcast producer to make that the title of the podcast.

Jacob Shapiro:

It doesn't get much better than that.

Jacob Shapiro:

Um, I would imagine though, like at least in, in.

Jacob Shapiro:

That there would be demand for the types of old briefings that you were doing,

Jacob Shapiro:

because, I mean, China's never been batter from the US perspective, or maybe not.

Jacob Shapiro:

Maybe there's gonna be a US China trade deal in three months.

Jacob Shapiro:

'cause apparently Trump is talking to Xi, he's not talking to xi, things like that.

Jacob Shapiro:

So, I mean, I assume your, your old colleagues are also

Jacob Shapiro:

up to their ears in this stuff.

Jacob Shapiro:

Is that correct?

Matt Pines:

Yeah, no, I still talk with them, uh, quite regularly.

Matt Pines:

And, um, you know, though, I would say one observation that, that I had, you

Matt Pines:

know, leading into this, this, this year is just the demand for specific types of

Matt Pines:

consulting services that require C-Suites to, um, you know, change their budget

Matt Pines:

outlays on consulting services are, um, just like the market for those services

Matt Pines:

you would think would be on a bull trend.

Matt Pines:

But it's actually, I think then more on a bear trend.

Matt Pines:

Um, I think there's, there's pockets where you can still demonstrate value, but.

Matt Pines:

At the end of the day, right?

Matt Pines:

Like nobody knows what the heck is happening.

Matt Pines:

And so everyone is just coming in there with their kind of

Matt Pines:

like, you know, BS essentially.

Matt Pines:

Uh, and there's not really sufficient.

Matt Pines:

You have that.

Matt Pines:

You need to have that like ideal, uh, middle ground where, um, there's

Matt Pines:

enough chaos to motivate action and motivate, uh, a willingness to

Matt Pines:

pay, uh, for something like this.

Matt Pines:

But it can't be too chaotic that nobody knows, you know,

Matt Pines:

how to even get started, right?

Matt Pines:

Um, and so there was this kind of sweet spot post Russia invasion Ukraine, where

Matt Pines:

when I was doing this, um, there was like, uh, acute demand kind of in that

Matt Pines:

sweet spot across lots of companies to sort of reassess their mental models

Matt Pines:

of globalization, reassess their supply chain fragility, reassess the intersection

Matt Pines:

between geopolitical risk and disruption, and kind of the typical more like,

Matt Pines:

uh, technical risk from cybersecurity.

Matt Pines:

You know, where are these countries exposed in terms of the network

Matt Pines:

architecture, IP theft, um, et cetera.

Matt Pines:

And so those kind of.

Matt Pines:

There was like a window where that was like acute and people were taking pocket

Matt Pines:

money out of, you know, the CEO's, um, discretionary budget to fund these sort

Matt Pines:

of high impact strategic assessments.

Matt Pines:

Um, but I think over, over time it kind of just get leveled down

Matt Pines:

to, uh, to the CISO's office.

Matt Pines:

And then my overall observation of cybersecurity in general is going through

Matt Pines:

a massive consolidation phase, um, where a lot of these boutique firms are

Matt Pines:

getting gobbled up and then even specific verticals are now being sort of stacked

Matt Pines:

in with the major cloud service providers.

Matt Pines:

And effectively there's converging to become a wrapper on ai.

Matt Pines:

Right.

Matt Pines:

And in general, like I saw this coming, like, you know, tightening budgets at

Matt Pines:

the C-suite level, especially on cyber and it spend, um, combined with the fact

Matt Pines:

that everyone's basically converging, converging to kind of like a wrapper

Matt Pines:

around, uh, frontier AI models that are gonna be, uh, dominated by a handful

Matt Pines:

of the major cloud companies anyways.

Matt Pines:

And then what I do is essentially just interpret events and slap it

Matt Pines:

down to PowerPoint and be a smart guy to like, you know, jibber jabber to

Matt Pines:

the senior leadership of companies.

Matt Pines:

And that was fun.

Matt Pines:

But, uh.

Matt Pines:

I don't know.

Matt Pines:

It just, you know, doing the same sort of thing and then seeing like the marginal

Matt Pines:

impact or the marginal uptake of that, um, of that analysis kind of falling,

Matt Pines:

falling down, just didn't, didn't, didn't get me up in the morning anymore.

Matt Pines:

Uh, so, you know,

Jacob Shapiro:

yeah, I think it's, I relate to that.

Jacob Shapiro:

I relate to that deeply and also like answering the same question

Jacob Shapiro:

over and over and over again.

Jacob Shapiro:

Like, how many times can we discuss whether China's gonna invade Taiwan and

Jacob Shapiro:

how many times can I give the same answer?

Jacob Shapiro:

And how many times is it like, no, but this, you know what I mean?

Matt Pines:

Yeah.

Matt Pines:

And also I think my assessment of what were the truly defining disruptions

Matt Pines:

coming down the pike were not the things that are I. Salient or politically

Matt Pines:

acceptable for most c-suites to like seriously consider, right?

Matt Pines:

They're sort of outside the over two window of what they can like

Matt Pines:

legitimately hire a consultant to discuss.

Matt Pines:

And so they've sort of bounded themselves in this box of like the

Matt Pines:

safe questions to analyze the things that they can safely justify briefings

Matt Pines:

on and, you know, consultant on.

Matt Pines:

And so that creates a sort of self looking ice cream cone

Matt Pines:

where consultants know that.

Matt Pines:

And so they all focus on these like highly salient risk questions and

Matt Pines:

they all just kind of like parsing out their minor little hot take

Matt Pines:

divergences of opinion or they're kind of going against consensus wisdom.

Matt Pines:

And, you know, that's, that generates sort of transient demand for your

Matt Pines:

services if you're really compelling and, and, um, and, and, uh, coherent,

Matt Pines:

uh, sort of expository, uh, you know, avatar of that type of position.

Matt Pines:

But that's like a, that seems like a never ending game.

Matt Pines:

And I was just like progressively more interested and now exposed to these

Matt Pines:

like coming outta the left field Overton window kind of breaking things and I

Matt Pines:

just couldn't ignore those anymore.

Matt Pines:

It's like that's, that's what's gonna happen.

Matt Pines:

Like that.

Matt Pines:

Those are the things that are gonna.

Matt Pines:

Smack you in the face in a few years.

Matt Pines:

Uh, and, but I can't put those in a PowerPoint presentation for

Matt Pines:

the C-suite of whatever company.

Matt Pines:

Right.

Matt Pines:

They're just, they're not, they're not there yet.

Matt Pines:

Right.

Matt Pines:

So just go.

Matt Pines:

Yeah.

Matt Pines:

I

Jacob Shapiro:

mean, this is, this is the whole tetlock foxes and hedgehogs thing

Jacob Shapiro:

where like the fox can bring you the stuff that's actually happening, but people keep

Jacob Shapiro:

paying the hedgehogs and listening to the hedgehogs because, you know, they have the

Jacob Shapiro:

point that they actually want, like, you know, if you're thinking outside the box,

Jacob Shapiro:

people actually don't want to hear that, or that's not the thing that people can,

Jacob Shapiro:

they don't have the brains to process sort of things changing in that amount of time.

Jacob Shapiro:

And it's funny you say that about budgets tighten, I mean, tightening,

Jacob Shapiro:

I mean, I remember I'm much more in the investment world now, but still do

Jacob Shapiro:

some consulting and you know, how to, how to pass and consulting as well.

Jacob Shapiro:

And it, the, the last couple of months have reminded me a bit of covid in the

Jacob Shapiro:

sense that after, after Covid, like in the initial first phase is after the,

Jacob Shapiro:

after the lockdowns, everybody wanted to talk and nobody wanted to pay.

Jacob Shapiro:

So there was like more interest than ever, but no checks worth coming.

Jacob Shapiro:

And then there was a nice sweet spot in the middle, and I've noticed the

Jacob Shapiro:

last couple of months, everybody wants to talk, but everybody's

Jacob Shapiro:

completely paralyzed by the level of uncertainty or the volatility.

Jacob Shapiro:

Like nobody can sort of make strategic decisions.

Jacob Shapiro:

So they wanna talk, but they're not sure like what exactly they wanna do and

Jacob Shapiro:

where they wanna put their resources.

Jacob Shapiro:

And I sympathize for them like big departments and big companies are,

Jacob Shapiro:

you know, trying to navigate changes and communicate with their C-suite.

Jacob Shapiro:

And the C-suites, to your point, are listening to the

Jacob Shapiro:

hedgehogs that they trust.

Jacob Shapiro:

And then it's like this whole never ending circle jerk.

Jacob Shapiro:

So,

Matt Pines:

yeah.

Matt Pines:

And also like, I, I, I was a consultant basically in various forms and

Matt Pines:

consultants have clients, right?

Matt Pines:

And fundamentally there's this asymmetry where you have to make sure

Matt Pines:

the client's happy and you wanna like, you know, yada yada yada with them.

Matt Pines:

And, you know, at a certain point you have to like intellectually, um, you

Matt Pines:

know, muzzle yourself or kind of bracket how you present your views because you

Matt Pines:

wanna make sure you got, you wanna push them a little bit further, but you don't

Matt Pines:

wanna like completely, you know, um, you know, confuse them or, or overwhelm them.

Matt Pines:

Uh, and you know.

Matt Pines:

I'm done with that.

Matt Pines:

Like I don't, that's don't wanna have, have to like, you know, contort

Matt Pines:

my intellectual and analytical, um, models to, to sort of keep the, keep

Matt Pines:

the, keep the contracts flowing in.

Matt Pines:

Um,

Jacob Shapiro:

yeah.

Jacob Shapiro:

So, well, well you seem unburdened, so congratulations on making the

Jacob Shapiro:

shift and let's, um, get into some more interesting stuff.

Jacob Shapiro:

I mean, that's sort of inside baseball, but it's interesting to me.

Jacob Shapiro:

Um, okay, well let's do a little, uh, how it started and how it's going.

Jacob Shapiro:

So, um.

Jacob Shapiro:

Here is a tweet from July 11th, 2019 from President Donald Trump.

Jacob Shapiro:

Quote, I am not a fan of Bitcoin and other cryptocurrencies, which are not money, and

Jacob Shapiro:

whose value is highly volatile and based on thin air, unregulated crypto assets

Jacob Shapiro:

can facilitate unlawful behavior including drug trade and other illegal activity.

Jacob Shapiro:

Sent it a civilized 7:15 PM in the evening, not normal for his, uh,

Jacob Shapiro:

usual, uh, social media policy.

Jacob Shapiro:

Uh, then let's go to March 6th, 2025, uh, an executive action from the White House.

Jacob Shapiro:

It is the policy of the United States to establish a strategic bitcoin reserve.

Jacob Shapiro:

It is further the policy of the United States to establish a United States

Jacob Shapiro:

digital asset stockpile that can serve as a secure account for orderly and

Jacob Shapiro:

strategic management of the United States' other digital asset holdings.

Jacob Shapiro:

Uh, so first question.

Jacob Shapiro:

What the f like what, what, what is the shift here?

Jacob Shapiro:

Like why did President Trump go from sounding like just about any other

Jacob Shapiro:

boomer talking about cryptocurrency to embracing it wholeheartedly and

Jacob Shapiro:

using every single power at his disposal to, to seem to put the White

Jacob Shapiro:

House fully in, not just Bitcoin, but cryptocurrencies corner in general.

Matt Pines:

Yeah.

Matt Pines:

I mean, I think there's a political economy story to, to explain that,

Matt Pines:

and then there's like a structural kind of, um, reinforcement to that.

Matt Pines:

Uh, the first is just the fact that, um, the broader crypto industry

Matt Pines:

has felt, uh, you know, in the last few years, uh, under acute attack,

Matt Pines:

almost under existential threat.

Matt Pines:

And so, you know, not being a very well organized group, they kind of got their

Matt Pines:

issue together in 2024 and decided to fund large political campaign, um, activities.

Matt Pines:

And those were quite successful on, you know, not just at the top of

Matt Pines:

the ticket, but down, down range.

Matt Pines:

They kind of finally self organized and decided to pick a side.

Matt Pines:

Um, and that was not inevitable.

Matt Pines:

I know there were folks, um, you know, in the course of the spring and the summer

Matt Pines:

that were approaching the Kamala, uh, campaign, um, and they basically said

Matt Pines:

like, we, we, we can bundle you like a hundred million dollars, uh, but all you

Matt Pines:

have to do is just commit not to like, keep up the attacks on the industry.

Matt Pines:

And they said, no, we'll take your money, um, but we won't commit to that.

Matt Pines:

Uh, and so it was like, okay, well I guess those a hundred million

Matt Pines:

dollars are not gonna go to you.

Matt Pines:

They might go somewhere else.

Matt Pines:

Um, and, uh, they were just maybe confident or they, you know,

Matt Pines:

for whatever reason, they didn't wanna, um, go that direction.

Matt Pines:

Uh, so this is just like a political economy, right?

Matt Pines:

Like every election is spent, uh, every election is, is,

Matt Pines:

is a function of spending.

Matt Pines:

And this is the first election cycle where, where, um, you know, there was

Matt Pines:

like now this new, new source of capital that was highly politically motivated.

Matt Pines:

Um, and, uh, the, the two candidates took very opposing, um, views on, on

Matt Pines:

what they, you know, would, would, uh, pursue in terms of policies.

Matt Pines:

And that's, you know.

Matt Pines:

That's just how politics works in America, right?

Matt Pines:

So there was that kind of just like, why did Trump trade just mind?

Matt Pines:

He wants to win.

Matt Pines:

And he is like, all right, there's folks out there that are gonna, you know, gimme

Matt Pines:

$200 million to help fund my campaign.

Matt Pines:

Like done.

Matt Pines:

Right.

Matt Pines:

Uh, it's, I don't think it's as complicated as that.

Matt Pines:

Um, Becca, you know, in the, it's, so that's, that's like the

Matt Pines:

politic, the political economy, uh, you know, explanation.

Matt Pines:

Um, that's probably the first order, but I think there's a second order trend

Matt Pines:

underway by elements you could say of like the security apparatus that was

Matt Pines:

taking a look at, um, the shifting.

Matt Pines:

Geo-economic system.

Matt Pines:

And this has been my sort of main analytical focus for the last few years,

Matt Pines:

making this kind of case to like, we need to kind of like, you know, keep

Matt Pines:

Bitcoin as a live option on the table for America over the long term, uh, for

Matt Pines:

a number of strategic, uh, reasons that we have an asymmetric advantage for.

Matt Pines:

Uh, and those voices were kind of, you know, tucked behind the curtain

Matt Pines:

folks in various, you know, bunkers writing, writing internal memos.

Matt Pines:

Um, but, but you know, there was a sense that, uh, things were gonna come to a

Matt Pines:

head pretty soon, especially us China and, you know, part of the Trump, uh,

Matt Pines:

campaign and their sort of increasing, um, as they kinda got staffed up with

Matt Pines:

kinda their policy team and the sort of formulate what was gonna be their

Matt Pines:

strategic vision in 2025 into the, into the, um, the rest of their term.

Matt Pines:

Uh, there was, you know, already an accreting consensus that

Matt Pines:

they were gonna shake things up.

Matt Pines:

I mean, this was coming, going back to, to Beston, um, speech

Matt Pines:

of the Manhattan Institute, you know, earlier, earlier in 2024.

Matt Pines:

And then, you know, kind of the, the seeds being planted about.

Matt Pines:

They were gonna do some pretty dramatic things in 2025.

Matt Pines:

Um, it's exactly the scope and scale and how effectively those be implemented.

Matt Pines:

Um, TBD, but like, it was very clear they were telegraphing like the status

Matt Pines:

quo is not gonna not gonna endure.

Matt Pines:

Um, and so they were gonna like flip, flip the table over essentially on

Matt Pines:

the global economic monetary system.

Matt Pines:

Uh, and so in that regime, you know, you're like, okay, the, the, the, the, the

Matt Pines:

cies and assumptions around the structure of the global monetary, uh, arrangement,

Matt Pines:

treasury security as the global reserve asset, the kind of foundational collateral

Matt Pines:

and the offshore dollar system, the combined with the fact that we're

Matt Pines:

running structural peacetime deficits.

Matt Pines:

The fact that China's now, you know, climbing value change is now aggressively

Matt Pines:

to competing, um, uh, you know, higher up, higher up the, the strategic ladder,

Matt Pines:

uh, on lots of these different domains.

Matt Pines:

It's like there's a sense that like lots of things are gonna have to

Matt Pines:

change and now the options on the table that would've never been previously

Matt Pines:

considered are now on the table.

Matt Pines:

Um, and so that's like where Bitcoin kind of found its way in right, is just

Matt Pines:

the, the, the, the parameter space.

Matt Pines:

The aperture of policies, um, that could now be considered once you basically

Matt Pines:

make the strategic decision that we're gonna change things, we're gonna break

Matt Pines:

things, and there's gonna be this massive complex phase transition to some sort

Matt Pines:

of new arrangement, um, that provides a door for other things that would normally

Matt Pines:

not, you know, be allowed into the discussion to come into the discussion.

Matt Pines:

And so I think the combination of the political economy shifts as well as just

Matt Pines:

the strategic, um, aperture being opened up, allowed kind of Bitcoin to flow in.

Matt Pines:

And then of course, just the general cycle of Bitcoin kind of doing its thing and

Matt Pines:

just, you know, overall, um, you know, movements of ETFs and kind of the, the,

Matt Pines:

the legitimization of it as a global asset class, Larry f and basically a bunch

Matt Pines:

of these elites kind of getting orange.

Matt Pines:

Um, and then that sort of filtering down.

Matt Pines:

Uh, so I think it's like multi causal, right?

Matt Pines:

It's no like single, um, you know, point of, of explanation.

Matt Pines:

But, uh, it's, it's been a clear kind of strategic shift in how

Matt Pines:

the US government views bitcoin.

Jacob Shapiro:

And is it just Bitcoin?

Jacob Shapiro:

And, and I'm trying to get to Trump's like real intentions here because

Jacob Shapiro:

you know, Trump has also talked about Ether and Solana and Carano.

Jacob Shapiro:

Um, he has a mean coin of his own, the Trump token, um, which, you know, just

Jacob Shapiro:

reeks of corruption and things like that.

Jacob Shapiro:

So like, do you think it's just, oh, I see an opportunity for money and I grab here.

Jacob Shapiro:

Do you think that there's been some like actual internal change

Jacob Shapiro:

that No, it's crypto in general.

Jacob Shapiro:

That, that, uh, executive statement I read, um, you know, Trump has

Jacob Shapiro:

talked about some of these other, um, cryptocurrencies that are out there.

Jacob Shapiro:

Like the executive order says, no, no, no, Bitcoin is the original cryptocurrency.

Jacob Shapiro:

It is the one that like we need to focus on.

Jacob Shapiro:

So how, how do we think about Bitcoin versus some of the others that he

Jacob Shapiro:

has raised and then backed off on?

Jacob Shapiro:

And it's not really clear like where all these fit in.

Matt Pines:

I know it's been my view and, and DPI's view that like

Matt Pines:

there's one really serious thing here and that's Bitcoin, um, and

Matt Pines:

that that's the true strategic asset.

Matt Pines:

But of course there's a lot of money floating around crypto and those

Matt Pines:

folks can, you know, donate money to get a lunch and get a tweet, right?

Matt Pines:

Uh, and so that's kind the system we exist in is this superposition of like serious

Matt Pines:

strategic kind of, um, undercurrents as well as like, you know, the froth of

Matt Pines:

grift and uh, you know, just sort of the traditional transactional politics inside.

Matt Pines:

Inside DC so that it's like both are happening at the same time.

Matt Pines:

Um, and that makes it hard to kind of discern like signal to noise here, right?

Matt Pines:

It's very easy to kind of look at these things and be like, oh, this is

Matt Pines:

just this kind of rifting operation, self-enrichment sort of court

Matt Pines:

politics, kind of elite, sort of, you know, filling each other's pockets.

Matt Pines:

And of course that is happening, uh, that happens in like every elite SY system.

Matt Pines:

Um, uh, it's just now it's sort of the norms are down and so

Matt Pines:

like it's more visible, right?

Matt Pines:

Um, like it was always a function of our American political system.

Matt Pines:

It's just there are ways of kind of obscuring it from public view or we had

Matt Pines:

norms about not doing it so brazenly.

Matt Pines:

Um, uh, but I mean, I think so that those are, those are things

Matt Pines:

that are clearly occurring.

Matt Pines:

Um, but I think underlying this, uh, and I think the executive order demonstrated

Matt Pines:

this, like you kind of, kind of can see it in how it's written is like we

Matt Pines:

kind of have to kind of pay us, so to the crypto people, we're gonna give

Matt Pines:

them this digital asset stockpile, but we make no commitment not to sell it.

Matt Pines:

Right.

Matt Pines:

Whereas the Bitcoin strategic reserve, we, we explicitly commit not to sell it.

Matt Pines:

And we have a decisive instruction to the commerce and treasury departments to find

Matt Pines:

budget neutral ways of acquiring more at no incremental cost to the taxpayer.

Matt Pines:

So those reflect kind of a very different valence and strategic attitude

Matt Pines:

to Bitcoin and then everything else.

Matt Pines:

And so everything else had to be in there, but it was kind of given the

Matt Pines:

bare minimum kind of like lip service.

Matt Pines:

Then all this strategic attention you can kind of see is

Matt Pines:

shifting back towards Bitcoin.

Matt Pines:

Now, seeing, you know, I'm in DC Bitcoin Policy Institute, we're kind

Matt Pines:

of a relatively new think tank kind of now, like jockeying with these

Matt Pines:

existing institutions and advocacy groups and lobbyists, et cetera, that

Matt Pines:

for many, many years have been sort of funded by the crypto industry, right?

Matt Pines:

Bitcoin is a leaderless, decentralized peer, you know, open

Matt Pines:

source software project, right?

Matt Pines:

There's no inherent leader or kind of corporate board or, you know,

Matt Pines:

it can't hire lobbyists, right?

Matt Pines:

Whereas there's like crypto VC firms and token, uh, you know, issuers and

Matt Pines:

exchanges, uh, and miners, those, those are incorporated entities.

Matt Pines:

Um, and, and the most incorporated entities, you know, by like political, uh,

Matt Pines:

capital and also by incentive structure are on the sort of the crypto side.

Matt Pines:

So they've been heavily pushing, uh, certain legislative priorities

Matt Pines:

on market structure legislation and stablecoin legislation.

Matt Pines:

And then, you know, Bitcoin is kind of this kind of, oh, yeah, yeah, Bitcoin's

Matt Pines:

important, but it's, it's not directly relevant to the business model of most

Matt Pines:

of the, of the digital assets industry.

Matt Pines:

And so, BPI kind of exists to kind of represent kind of like the, the lump

Matt Pines:

in proletariat of digital assets.

Matt Pines:

It's like just Bitcoin as this project, as this like open source, um, kind

Matt Pines:

of, uh, you know, emerging technology.

Matt Pines:

And it has industries attached to, it has bitcoin mining, it has custodians,

Matt Pines:

it has, um, you know, major investors, uh, you know, companies now using

Matt Pines:

Bitcoin as a treasury reserve asset.

Matt Pines:

So there's a lot of like actual entities that have, you know, vertically integrated

Matt Pines:

control structures, you know, that can advocate for themselves inside dc.

Matt Pines:

Um, but we're, we're not an industry association, so we're there to kinda

Matt Pines:

like rebalance the, the scales, right?

Matt Pines:

If roughly speaking, you know, Bitcoin is 60 to 70% of the total market cap.

Matt Pines:

If you actually throw out a lot of other junk, it's probably more like 80 to 90%.

Matt Pines:

But if you actually look like the total amount of spend by like,

Matt Pines:

advocacy groups and lobbying groups on digital assets in dc like 89% of

Matt Pines:

it's spent on like non Bitcoin stuff, stablecoin stuff, market structure

Matt Pines:

stuff, token, you know, security, you know, sort of designation stuff.

Matt Pines:

Um, and so that's, I think you see that reflected in the political economy.

Matt Pines:

That's kind of b you BPIs sort of raise on debt is sort of, you know,

Matt Pines:

try to try to at least rebalance things so that the advocacy in the

Matt Pines:

industry is at least market weighted.

Matt Pines:

Um, so yeah, that's, that's where we're now, but uh, it remains to be seen, right?

Matt Pines:

Like how we're gonna, um, see these different trend lines,

Matt Pines:

uh, start, to, start to, uh, diverge potentially is, you know.

Matt Pines:

Bitcoin is a global asset now, right?

Matt Pines:

And so I view this as a lens.

Matt Pines:

I, I view this through the lens of what's really strategic, going on,

Matt Pines:

trying to filter out the noise here.

Matt Pines:

And I see Bitcoin and stable coins, right?

Matt Pines:

And then in a global system where now gold is increasingly being, you know,

Matt Pines:

rem monetized and brought in, in the global, um, kind of competitive dynamic

Matt Pines:

between major capital pools that are being weaponized by these, you know,

Matt Pines:

uh, confronting hegemons, um, aspiring in Asia, and then the legacy in in, in

Matt Pines:

sort of, uh, the West Oceanic system.

Matt Pines:

And we're all kind of looking at these emerging tools, um,

Matt Pines:

and, and assets, stable coins in particular Bitcoin and gold.

Matt Pines:

Um, and that's a, that's the most important strategic dynamic

Matt Pines:

I see playing out right now.

Matt Pines:

Um, so yeah.

Matt Pines:

Mm-hmm.

Jacob Shapiro:

Are there, to your knowledge, like is there a, is

Jacob Shapiro:

there an Ether Policy Institute or a Carano Policy Institute?

Jacob Shapiro:

Like is anybody making the argument that you guys are making about

Jacob Shapiro:

Bitcoin, about some of these others?

Jacob Shapiro:

Or is it almost like self um, self-segregating in the sense that like,

Jacob Shapiro:

Bitcoin is the only one that's serious, that is serious enough to create this

Jacob Shapiro:

kind of, I don't know, intellectual, strategic ecosystem behind it?

Matt Pines:

Yeah, I mean, there are, I mean, it was kind of funny, like

Matt Pines:

literally like a month ago, um, there was a, a new thing, creative Cut

Matt Pines:

called the Solana Policy Institute.

Matt Pines:

And like, like, like branding and everything was kind of

Matt Pines:

like very close to ours.

Matt Pines:

And it was like donated.

Matt Pines:

It was funded by one guy and it was just kind of this, you know, thing.

Matt Pines:

I, I never actually met anyone from them.

Matt Pines:

Um, uh, but they exist.

Matt Pines:

They exist now.

Matt Pines:

Um, like Ripple, right?

Matt Pines:

The sort of, um.

Matt Pines:

You know, I won't get into the details of that, but like they, they committed

Matt Pines:

like $40 million to spend on like marketing campaigns essentially.

Matt Pines:

Um, and, uh, but there's some legacy institutions that we

Matt Pines:

work, uh, collaboratively.

Matt Pines:

You know, where we're, we're, we're, you know, we're friendly

Matt Pines:

as the blockchain association, the Chamber of Digital Commerce.

Matt Pines:

Um, they've been around for a long time, so they, you know, we're

Matt Pines:

the sort of vanguard for this sort of stuff for, for many years.

Matt Pines:

Um, but they're more like industry associations, right?

Matt Pines:

So they're, they're explicitly there to kind of represent the

Matt Pines:

digital assets industry, right?

Matt Pines:

But we are the only, and we are the only, um, you know,

Matt Pines:

significant think tank, right?

Matt Pines:

Um, that's dedicated to, to these open monetary networks.

Matt Pines:

Um, there's one, it's called Coin Center, which is really good.

Matt Pines:

They're small, but they're most mostly focused on like, um, civil rights sort of

Matt Pines:

advocacy, sort of litigation protecting open, so open source software developers.

Matt Pines:

Um, but, uh, but yeah, I mean, I would say, you know, we,

Matt Pines:

we do the think tank thing.

Matt Pines:

We put on events, we wear, put on white papers, but our main focus

Matt Pines:

is trying to understand like, and try to shape, uh, the, the, the.

Matt Pines:

The system of government, right?

Matt Pines:

And the international structures associated with these, with these changes.

Matt Pines:

Um, and we're finding that like there are a lot of folks inside what you call the

Matt Pines:

deep state, right, that have been paying attention to Bitcoin for a long time,

Matt Pines:

that are now very serious about Bitcoin.

Matt Pines:

I would just note that there is a interesting statement made just yesterday

Matt Pines:

by the deputy director of the CIA where basically he said Bitcoin is here to stay.

Matt Pines:

Like more and more institutions are adopting it.

Matt Pines:

That's a great trend.

Matt Pines:

It's another area of technological competition where we need to make sure

Matt Pines:

the United States is like well positioned against China and other adversaries.

Matt Pines:

And he said, I think we need to make sure we are a leader in these fields

Matt Pines:

internationally and not a laggard.

Matt Pines:

Um, which is kind of an interesting statement for like the deputy of the CI

Matt Pines:

doesn't come out and like talk very much and to have him like just come in harder,

Matt Pines:

the paint and say we Bitcoin is critical to technology competition with China.

Matt Pines:

Um, I was, I was like, oh, that's interesting.

Matt Pines:

Um.

Matt Pines:

So I think there's, sometimes it's hard to filter out signal of noise here, but I'll

Matt Pines:

tell you, I've had lots of conversations with folks like DARPA inside the

Matt Pines:

intelligence community, inside the Defense Department, um, and Bitcoin is like, uh,

Matt Pines:

squarely on, on their, on their agenda.

Matt Pines:

Um, I'll just point out the crossover with, with China, um,

Matt Pines:

Emerald Papapa, who's the, uh, four star Indo-Pacific commander.

Matt Pines:

Uh, he's responsible for, you know, planning to fight

Matt Pines:

and win our war with China.

Matt Pines:

But of course, he has a lot of, you know, sub-threshold responsibilities

Matt Pines:

as well for economic warfare.

Matt Pines:

You know, operational preparation of the, of, of, of the battlefield, you

Matt Pines:

know, shaping activities, um, in that, in that theater that involve a lot of,

Matt Pines:

you know, economic statecraft, financial warfare, um, et cetera, et cetera.

Matt Pines:

He's a, like, raging Bitcoin, uh, like he is, he is not like

Matt Pines:

a, you know, a casual guy.

Matt Pines:

Like he is very pro Bitcoin and is advocating inside the administration.

Matt Pines:

So that's a, these are just, these are, these are shifts that are not as visible

Matt Pines:

to the outside where it's like we're Liberty Financial and the Trump token and,

Matt Pines:

you know, all the sort of crypto stuff.

Matt Pines:

Right?

Matt Pines:

And, and I mean it might even be like a clever ploy to like have that

Matt Pines:

as kind of be the, the, the screen.

Matt Pines:

Um, and one of my colleagues was just in Hong Kong, uh, recently and um, you

Matt Pines:

know, was invited to have meetings with a number of senior, senior officials there.

Matt Pines:

And, uh, they were one extremely well read up on like the ins and outs of the policy

Matt Pines:

dynamics that I pay attention to, like the ideas of gold certificate revaluation

Matt Pines:

and the reconciliation process, you know, different means of financing and

Matt Pines:

funding the strategic Bitcoin reserve.

Matt Pines:

These are like super inside baseball things in, in DC that, like I

Matt Pines:

talked to a lot of people even in the crypto policy industry.

Matt Pines:

And like the folks in China had like a much better read on what

Matt Pines:

was happening than most of the folks that like we talked to in dc.

Matt Pines:

So that was, that was a, that was a clue, right?

Matt Pines:

Like, these guys are paying attention to what really matters.

Matt Pines:

Um, and, uh, they're sussing out, you know, what is the

Matt Pines:

government really doing here?

Matt Pines:

Like, are they preparing some sort of like, you know, big pivot, right?

Matt Pines:

And, and, and there's a lot of chaos, a lot of noise.

Matt Pines:

Um, but if you wanna try to see where things are going in this kind of phase

Matt Pines:

transition, then you can't ignore the policy moves happening on Bitcoin.

Jacob Shapiro:

That reminds me of a, a funny story.

Jacob Shapiro:

I might've said this on the podcast before, so apologies to listeners if

Jacob Shapiro:

this is, if you heard this story before.

Jacob Shapiro:

But I was in Moscow, I was like the token US guy, uh, speaking at the

Jacob Shapiro:

conference of a bunch of Russian analyst.

Jacob Shapiro:

This is before the Russian Ukraine war.

Jacob Shapiro:

I remember I got cornered by this one, like he was the us,

Jacob Shapiro:

the Russian US analyst, and there was some election happening in

Jacob Shapiro:

Alabama for some congressional seat that I'd never heard of.

Jacob Shapiro:

And he was like, tell me what do you think about the, the potential

Jacob Shapiro:

implication of the US government, of this Alabama congressional seat?

Jacob Shapiro:

And I was like, I have no clue what you're talking about.

Jacob Shapiro:

Like, I don't care about Alabama.

Jacob Shapiro:

Like, like the, the nitty gritty, granular focus.

Jacob Shapiro:

It just kind of reminds me, um, of that well, okay.

Jacob Shapiro:

That, that all makes sense to me.

Jacob Shapiro:

So maybe let's back into sort of a, a bigger question, which is, um, I think

Jacob Shapiro:

even some of President Trump's most ardent supporters are coming around

Jacob Shapiro:

to the notion of even if he had the right strategic goal in mind, the way

Jacob Shapiro:

that he is implementing and executing policy has become self-defeating.

Jacob Shapiro:

Just the level of volatility.

Jacob Shapiro:

It's tariffs one day, no tariffs the next day.

Jacob Shapiro:

Like all of these different things.

Jacob Shapiro:

Um, it's, it's, it's defeating the purpose and you actually see like countries

Jacob Shapiro:

losing faith in the United States, even the countries that the United States

Jacob Shapiro:

says that it wants to do business with.

Jacob Shapiro:

So, okay.

Jacob Shapiro:

The drug administration has followed through on many of its promises on the

Jacob Shapiro:

campaign trail to the crypto industry.

Jacob Shapiro:

Um, is that good for Bitcoin going forward?

Jacob Shapiro:

Is it, is it bad in the sense that maybe the implementation or execution, like

Jacob Shapiro:

with tariffs has been all over the place?

Jacob Shapiro:

Is it actually better for Bitcoin that the dollars value continues to go down

Jacob Shapiro:

and that yields continue to go up and that the deficit fingers continue to go up?

Jacob Shapiro:

Because that just underscores the argument for Bitcoin in the first place, sort of

Jacob Shapiro:

map on sort of crypto policy versus what I would call the haphazard implementation

Jacob Shapiro:

of a lot of the other sectors of Trump's policy towards the economy.

Matt Pines:

Yeah, and I, I kind of, I have, I have.

Matt Pines:

Different perspectives, but I think my view as executive director

Matt Pines:

BPI is, um, trying to find policy paths that are win-win, right?

Matt Pines:

That are good for Bitcoin, because I think Bitcoin is a good thing and

Matt Pines:

good for American strategic interest, good for the American society, right?

Matt Pines:

Over the long term.

Matt Pines:

Um, and so there's a, you know, a multi-level thing isn't just advocating

Matt Pines:

for like, number go up, right?

Matt Pines:

It is advocating for a vision of, uh, technology and financial networks

Matt Pines:

in the 21st century that are funnily aligned to our values, right?

Matt Pines:

If we're in this battle between open and closed systems, between, you

Matt Pines:

know, concentrated, um, elite, uh, kind of gated capital markets and,

Matt Pines:

you know, open particip participatory markets where, you know, individual,

Matt Pines:

um, autonomy is reinforced.

Matt Pines:

I think ultimately, like my, my like ethical and political attitude is,

Matt Pines:

is much more like classical liberal.

Matt Pines:

And, and if we're in a world system that's, um, being driven by geopolitical

Matt Pines:

competition and technological acceleration, it's gonna be naturally

Matt Pines:

centralizing of authority, right?

Matt Pines:

Both in terms of just the access to say frontier AI models.

Matt Pines:

And then when states start to fight, right, they tend to wanna a, a

Matt Pines:

arrogate more authority to themselves.

Matt Pines:

They wanna gate their economies, they want to sort of put up the put up more,

Matt Pines:

basically more, uh, more clubs and fences.

Matt Pines:

Um, that's implicitly gonna mean us, you know, uh, I come,

Matt Pines:

I come at the cost of, you know, individual spheres of, of autonomy.

Matt Pines:

It's like my, like overall political view is to try to, um, you know,

Matt Pines:

steer our, our policies in a way that like keep to our core values.

Matt Pines:

And that we don't try to become more like China in order to defeat China.

Matt Pines:

Right?

Matt Pines:

Uh, and that's, that's an inherent tension, right?

Matt Pines:

That's exists at the, at, at the government level.

Matt Pines:

So that's like 0.1, right?

Matt Pines:

And I think Bitcoin is fundamentally, um, more on the side of classical

Matt Pines:

liberalism versus sort of closed authoritarian surveillance systems.

Matt Pines:

Um, and I think just, I think we wanna fight against that and we wanna use

Matt Pines:

technology and tools to like reinforce the sphere of freedom for individuals

Matt Pines:

in, in, in the next few, next few, uh, next few years and, and decades.

Matt Pines:

Um, now on the economic side, right?

Matt Pines:

Like when you, um, I think you try to assess my, my sort of model, what was

Matt Pines:

happening in the last few weeks and months, the Trump administration is,

Matt Pines:

there were like two major factions, right?

Matt Pines:

And this is not, this is banal at this point, but there was the sort

Matt Pines:

of technocratic faction, Bessett Moran, and they had a vision and

Matt Pines:

they were telegraphing this, it kind of, um, won forward guidance

Matt Pines:

when it comes, uh, uh, to tariffs that would be geopolitically gated.

Matt Pines:

So there'd be, you know, red, yellow, green, and they would start off

Matt Pines:

at a certain level and they would, you know, incrementally rise at

Matt Pines:

different, at different levels, right?

Matt Pines:

For whether you're, you know, a rival, whether you're a balancing power, whether

Matt Pines:

you're, you know, whether you're an ally.

Matt Pines:

And the objective there was to like more explicitly demarcate the boundaries

Matt Pines:

around the American monetary and security tech trade zone that they see

Matt Pines:

that the global commons has essentially been exploited by free riders.

Matt Pines:

The Merc list policies in Asia as well as, you know, defense free riding in Europe.

Matt Pines:

And there's all these conflicts that are draining our, our national, um,

Matt Pines:

morale and our national capital.

Matt Pines:

We have lots of debt.

Matt Pines:

We need to kind of like re-underwrite the security zone, uh, and we have a

Matt Pines:

certain set of advantages to do so, right?

Matt Pines:

We essentially can do a bunch of levered bargains, if not like shakedowns, um, to

Matt Pines:

sort of force folks to pick a side, right?

Matt Pines:

And to sort of now re-underwrite the, the fiscal health of the,

Matt Pines:

of the hegemon in this sort of, um, imperial dollar system now.

Matt Pines:

Um, and so that was their plan was to kind of come out with these kind of different

Matt Pines:

tiers and it kind of then ratchet it up and then pull, pull our allies into this

Matt Pines:

circle and lock 'em in, and then, you know, do a variety of different swaps and

Matt Pines:

exchanges to, you know, extend out our debt, uh, force them to buy century bonds.

Matt Pines:

Uh, and we would, you know, leverage the fact that, hey, well do you want access?

Matt Pines:

Do you want, you know, not get hit with export controls on, on, on GPUs?

Matt Pines:

Do you want, you know, us to, you know, impose more restrictions

Matt Pines:

and access to, you know, open ai, you know, frontier models?

Matt Pines:

Um, do you want not to be hit with a, a large tariff increase to kind

Matt Pines:

of force people inside the club and they have to pay an entry fee?

Matt Pines:

So that was like the technocratic kind of like, oh, this is the master plan,

Matt Pines:

you know, idea where a bunch of, you know, sort of gig, a brainin hedge

Matt Pines:

fund PhD folks like Moran and, and Bessett kind of come up with this idea.

Matt Pines:

And then there's like the Lunik Navarro idea where, and, and maybe some folks

Matt Pines:

on the, um, you know, the heritage side, which is just like, no, no, we need to

Matt Pines:

punch on one of the face throw chaos.

Matt Pines:

And, uh, and then also some like, like an idea that we'll actually make

Matt Pines:

revenue right from, from tariffs.

Matt Pines:

So we'll actually like, be able to like fund our budget and we'll

Matt Pines:

go back to like the McKinley era.

Matt Pines:

Uh, but the problem with the, and I think, um, you know, you've had, you've

Matt Pines:

had cousin Marco on this, and he's made this point, like in the McKinley

Matt Pines:

era we're, you know, we, primary governor of expenditure, uh, was like

Matt Pines:

two, was like two to 3%, um, of GDP.

Matt Pines:

Now it's like 30 to 35% of GDP.

Matt Pines:

So you just, sorry, that dog won't, won't hunt now, right?

Matt Pines:

And they just, just weren't looking at the macro models of the fiscal balance

Matt Pines:

sheet and the fragility of the treasury market and then just tried this move.

Matt Pines:

And I think I, I also had lutnick versus bass at the Oval Office kind of pitching

Matt Pines:

and, you know, Bassett's a bit of an egghead, a bit of a, kind of a Dante.

Matt Pines:

He kind of, you know, um, not the most articulate guy, not the most, doesn't

Matt Pines:

like exude confidence when he talks.

Matt Pines:

Whereas Lutnick is, he is not,

Jacob Shapiro:

he is not charismatic, he's not charisma, he's not charismatic.

Matt Pines:

Whereas Lutnick is just like.

Matt Pines:

You know, telling Trump, oh, like, of course, like they're gonna take it.

Matt Pines:

You know, we're America, we're like, you know, we're, we're a superpower.

Jacob Shapiro:

Well, I'm, I'm glad you I'm, I'm glad you brought that up.

Jacob Shapiro:

'cause, um, just to, just to pause for a second, um, like maybe

Jacob Shapiro:

Lutnick has charisma, but he is, the things he says are so stupid.

Jacob Shapiro:

Like, he seems like such a moron to me.

Jacob Shapiro:

I'm, I'm not saying that pejoratively.

Jacob Shapiro:

I just literally, I, I listened to him talk and I'm like, did you take

Jacob Shapiro:

like an economics class in college?

Jacob Shapiro:

Did you finish high school?

Jacob Shapiro:

Like, do you know basic arithmetic like this?

Jacob Shapiro:

Like, it, it, like, it blows my mind.

Jacob Shapiro:

Like, I don't know what's there.

Jacob Shapiro:

Is it just the, is this, it is, and he must be successful 'cause

Jacob Shapiro:

he is gotten to where he is.

Jacob Shapiro:

He is more successful than I am in my career.

Jacob Shapiro:

So like, I'm, I'm, I'm in this weird like twilight zone where I'm like,

Jacob Shapiro:

how is this, like, this guy is in this position doing I, I don't know.

Jacob Shapiro:

Uh, anyway, take it any direction you want.

Matt Pines:

Yeah.

Matt Pines:

I mean, I, I mean, I don't know his, his, you know, I,

Matt Pines:

again, how much of this is, um.

Matt Pines:

Intentional chaos.

Matt Pines:

How much of this is just the bumbling mm-hmm.

Matt Pines:

Clown show, right.

Matt Pines:

And I think it's a mix of both.

Matt Pines:

Right.

Matt Pines:

Um, but now they did it right?

Matt Pines:

So they did Liberation Day.

Matt Pines:

Right.

Matt Pines:

And I think Bestin was, you know, able to come back and sort of take the wheel

Matt Pines:

on that Sunday, you know, flew down to Mar-a-Lago and convinced Trump to

Matt Pines:

ship, pivot away from this idea that we were gonna like literally go full

Matt Pines:

McKinley and more back to the try to steer things back to the original play.

Matt Pines:

But, but you know, they had, it wasn't as, you know, it was like, oh, they're in

Matt Pines:

the middle of the, of the, of the storm.

Matt Pines:

Now you gotta gotta like now scramble to get to get Japan and scramble to get South

Matt Pines:

Korea and send JD over to, to to to India.

Matt Pines:

You know, try to like do things in a much more haphazard way with

Matt Pines:

a bit more urgency than I think they were originally planning.

Matt Pines:

Um, and I think this is also where the tension with the Fed came in.

Matt Pines:

'cause the bond market started revolting and they're like, oh crap, we're gonna get

Matt Pines:

Liz trust and uh, we need to stop that.

Matt Pines:

And so there was this like acute sense of, um, of, of.

Matt Pines:

We need to like dial things back a bit.

Matt Pines:

Uh, and that's it.

Matt Pines:

I think that's generally speaking of the story of the last few, few weeks.

Matt Pines:

And so I think they've been mostly focusing just firefighting

Matt Pines:

because of a strategic policy era.

Matt Pines:

Uh, and now, you know, the, the ambition by the best folks is that maybe they've

Matt Pines:

gotten more valent control of the policy apparatus here to a certain extent.

Matt Pines:

And they can try to, you know, the chaos and volatility has been somewhat dampened.

Matt Pines:

They can try to steer things back.

Matt Pines:

Um, but there was never a plan to like have full certainty, right?

Matt Pines:

It was, you know, forward guidance, but it would be kind of geopolitically tiered.

Matt Pines:

And now I think you're seeing the, the contours of the original plan kind of

Matt Pines:

come back into, into form where it's very clear that they wanna get, you know,

Matt Pines:

their allies into a zone that's like tightly locked so that they have free

Matt Pines:

trade agreements with us, but they have high tariff barriers with, with China.

Matt Pines:

This goes back to like versions of the British Imperial Preference System,

Matt Pines:

the European continental system.

Matt Pines:

Even has flavors of the, uh, you know, cold War co, you know, you know,

Matt Pines:

coordinating committee, uh, system where if you have like a, you know, a block

Matt Pines:

effectively that, uh, can, um, you know, reinforce, you know, a certain hegemons

Matt Pines:

power and have like preferential trade as well as now technology exchange,

Matt Pines:

um, maybe you can hold a line against an ascendant China that has a lot of

Matt Pines:

power, has a lot of capability to sort of challenge your, your, your, um,

Matt Pines:

your position in various, various ways.

Matt Pines:

So there's this, I think this acute anxiety driving this inside

Matt Pines:

the security apparatus that if we do nothing, China will just

Matt Pines:

like, like run over us basically.

Matt Pines:

Um, but I also think the trade war trade wars are slow to play out, you

Matt Pines:

know, to actually change business investment and, you know, reshore and

Matt Pines:

do the currency adjustments over time.

Matt Pines:

It's taken a long time.

Matt Pines:

But what, what the declaration of a trade war does is that immediately

Matt Pines:

triggers, you know, a financial and supply chain war, right?

Matt Pines:

Uh, because we effectively embargo China.

Matt Pines:

No more purchases of, of, of goods, right?

Matt Pines:

Means less, much less dollars flowing into the Chinese system that, uh, destabilizing

Matt Pines:

a lot of the financing, uh, you know, balance sheets, uh, that they have in

Matt Pines:

a highly leveraged domestic economy.

Matt Pines:

Um, and then they can retaliate, right?

Matt Pines:

By pulling capital out of our asset markets.

Matt Pines:

And, you know, you wield different instruments to try to put stress

Matt Pines:

on, on the sort of shadow bank, um, and dealers that intermediate,

Matt Pines:

uh, the treasury market.

Matt Pines:

So there's like, there's been I think a trade war that turned

Matt Pines:

into a sort of financial and capital war and supply chain war.

Matt Pines:

And because the system is so highly leveraged just in time, it's like

Matt Pines:

we have just in time repo and just in time delivery, right?

Matt Pines:

That, like, I think we both realized as soon as we flipped into this

Matt Pines:

regime, like the wheels will start to come off the global economics,

Matt Pines:

you know, uh, car pretty quickly.

Matt Pines:

Um, and that everyone is basically mutually assure economic

Matt Pines:

destruction at that point.

Matt Pines:

So I think that's now, you know, there was a lag in that, 'cause obviously you had

Matt Pines:

a lot of inertia in the trading system.

Matt Pines:

You know, invoice is still being paid and, you know, ship's already in motion.

Matt Pines:

But I think you, you're, you're pointing at data and I think you talked about, it's

Matt Pines:

like there's like a, a that's like once that stops then it's like, you know, you

Matt Pines:

know the why, the coyote moment, right?

Matt Pines:

And, and maybe that's why both, both sides are now trying to change their

Matt Pines:

tune about being a bit more, uh, conci in their, in their conversations.

Matt Pines:

Um, that's a bit more tactical.

Matt Pines:

So.

Jacob Shapiro:

Yeah, and I mean, I mean we've already seen initial sign, whether

Jacob Shapiro:

it's, you know, Walmart and Home Depot going to the White House, and then you

Jacob Shapiro:

see some purchases starting to begin and China exempting some things from tariffs.

Jacob Shapiro:

Like, you know, there's a little bit of motion.

Jacob Shapiro:

I, I still think like a recession, like it's already in, like you probably

Jacob Shapiro:

saw the GD print, GP print from yesterday, the first quarter was down.

Jacob Shapiro:

But how, so how does that, where does Bitcoin intersect with that?

Jacob Shapiro:

Like would you say that, um, bitcoin is, was, was sort of neutral

Jacob Shapiro:

relative to the events of the last couple of weeks and months?

Jacob Shapiro:

Did it negatively affect US strategy towards Bitcoin?

Jacob Shapiro:

Was it sort of unintentionally positive because it just underscored the

Jacob Shapiro:

argument for Bitcoin in the first place?

Jacob Shapiro:

Like how, how is your world reading what's happened in the last couple of weeks

Jacob Shapiro:

and months and where we go from here?

Matt Pines:

Yeah, obviously there was, like, we, we were, there was a lot of

Matt Pines:

meetings lined up before Liberation Day that all got canceled, right?

Matt Pines:

Because it was just chaos.

Matt Pines:

It was chaos and every, all the principles and all the decision makers and everyone

Matt Pines:

was just like, what the heck is happening?

Matt Pines:

And so Bitcoin was just pushed on the back burn, right?

Matt Pines:

Um, now it's coming back in to the policy conversation.

Matt Pines:

There's like, just like inside baseball is, there was an executive order sign.

Matt Pines:

It instructed them to come with these budget neutral ways of acquiring Bitcoin.

Matt Pines:

Then they did this, this 180 day report due, due in the

Matt Pines:

summer, uh, by the president's working group and digital assets.

Matt Pines:

So that machine is, is turning and it's, it's very high level, right?

Matt Pines:

It's got the, you know, two, two principles on it.

Matt Pines:

And now you have the ci, the CI deputy director making public comments on it.

Matt Pines:

So there's a lot, been a lot more public, um, engagement on Bitcoin and just in

Matt Pines:

the last week it's sort of turned back up as like a salient priority issue.

Matt Pines:

Um, I'd say the macro dimension is just kind of obvious.

Matt Pines:

Like when, when hegemons start fighting, right?

Matt Pines:

Uh, in that acute, like when the sumo wrestlers come and smack into each

Matt Pines:

other, the uncertainty and the chaos, the shock leads to people's margin calls

Matt Pines:

and just, you wanna just dash for cash.

Matt Pines:

People become very bearish on, on, on risk, on assets.

Matt Pines:

You saw bitcoin kind of, you know, crash essentially 20, 25%.

Matt Pines:

From, its kind of, you know, euphoric peaks, you know, post-election.

Matt Pines:

But I think what people are now pricing in, it's been an interesting, you know,

Matt Pines:

turn is, um, you know, there's been a bit of a premium now attached to Bitcoin.

Matt Pines:

Beyond it sort of just sort of a NASDAQ correlation, it's now

Matt Pines:

trading a bit more like gold.

Matt Pines:

In some ways it's maybe 20% like gold, 80% like nasdaq.

Matt Pines:

I think that ratio is shifting from being 5% like gold, 95, not 95% like Nasdaq to

Matt Pines:

being more, like more and more like gold.

Matt Pines:

I think that's because institutional portfolios, sovereign wealth funds, major

Matt Pines:

pools of capital are now reappraising.

Matt Pines:

This, and then the overall regulatory environment is dramatically changing.

Matt Pines:

Right.

Matt Pines:

So banks are now able to custody, uh, Bitcoin.

Matt Pines:

You're gonna be able to start, uh, buy and trade spot Bitcoin in Charles

Matt Pines:

Schwab accounts, and that's gonna unlock huge amounts of, of, of capital.

Matt Pines:

Just people just mechanically, you know, investing in their brokerage that, so

Matt Pines:

there's like regulatory, under the hood, institutional changes that just funnily

Matt Pines:

de-risk Bitcoin from being a speculative kind of fringe dark web money asset to now

Matt Pines:

being institutional assets that, you know, is high vol, high risk, but essentially in

Matt Pines:

a balanced portfolio can optimize returns.

Matt Pines:

And that's in BlackRock's pitch.

Matt Pines:

They're going around the world telling cyber wealth bonds.

Matt Pines:

You need to have two to 5% in Bitcoin.

Matt Pines:

And, uh, like they're doing that, it's like it's happening.

Matt Pines:

Uh, and so we are in this sort of a gradual shift where the financial markets,

Matt Pines:

uh, you know, are now integrating Bitcoin is just an asset class, while at the

Matt Pines:

same time looking ahead to this chaotic dynamic unfolding between great powers

Matt Pines:

where the assurities of the stability of.

Matt Pines:

The treasury market, the global trading system, the financial networks are

Matt Pines:

being, um, weaponized and fragmented.

Matt Pines:

Uh, and so inside money, essentially the inside money of globalization, the

Matt Pines:

inside collateral of globalization, which was the US treasury market,

Matt Pines:

um, is now being politicized and securitized and fragmented.

Matt Pines:

And so in that process, right, people are turning to outside monies as a

Matt Pines:

hedge and also as a, a way to sort of, uh, potentially posture for

Matt Pines:

whatever system comes next, right?

Matt Pines:

But we're in this phase transition where there's high uncertainty and

Matt Pines:

people just looking for hedges.

Matt Pines:

But our pricing in, you know, contours of what a future post-transition system

Matt Pines:

is, whatever the, when we squash the beef in, in the Eurasian periphery,

Matt Pines:

when, you know, we make some sort of, you know, grand bargain with China.

Matt Pines:

And you know what, what sort of resettled the balance of how the US demarcates

Matt Pines:

its security monetary zone and forces financial oppression on its allies.

Matt Pines:

Ultimately the upshot is probably higher inflation, probably like more devaluation

Matt Pines:

of currencies, like a coordinated devaluation, whether it's explicit

Matt Pines:

or implicit against harder assets.

Matt Pines:

And so I just in general, right, the mechanical upshot of this

Matt Pines:

is Bitcoin will go higher.

Matt Pines:

Um, my argument inside DC has been if you're, if you're doing this

Matt Pines:

intentionally right, sort of upsetting the global economic monetary order,

Matt Pines:

like what's your plan to maximize upside and minimize downside?

Matt Pines:

Because like we have a glass draw here, it's called the treasury market.

Matt Pines:

And we saw that, uh, acutely on, on that weekend.

Matt Pines:

Um, so you would wanna find ways of kind of shoring up the treasury market

Matt Pines:

and there's like technocratic ways of doing it and forcing our allies to buy.

Matt Pines:

Buy long bonds and swap their gold or, or, or short term, uh, reserves for,

Matt Pines:

for those things, you know, force Japan to take 150 billion out of the FEMA

Matt Pines:

repo facility to buy 30 year bonds.

Matt Pines:

Those take a lot of political capital and geopolitical capital.

Matt Pines:

I have to actually twist elbows to force them to fund our

Matt Pines:

deficit and term out our debt.

Matt Pines:

That's, well, that's not costless.

Matt Pines:

Right.

Matt Pines:

Um, and people are gonna respond to that by being like, I don't wanna have to be, I

Matt Pines:

don't wanna be in a position of coercion.

Matt Pines:

Uh, I wanna, I wanna have more, you know, marginal exposure to these harder assets.

Matt Pines:

'cause I know the government's preparing to kind of like inflate their dead aways,

Matt Pines:

which is what indebted hegemons always do.

Matt Pines:

Yeah.

Matt Pines:

Especially where they get into great power conflict.

Matt Pines:

Right.

Matt Pines:

It's like, sorry, you know, like financial markets take a backseat to strategic

Matt Pines:

prior pres and, you know, domestic pools of capital are now like, you pull capital

Matt Pines:

into your country and then you just, you know, force it to take it in the teeth.

Matt Pines:

Uh, that's just what we've done for hundreds of years.

Matt Pines:

This is what we're gonna do again.

Matt Pines:

And so people are looking for outside monies, uh, like scarce art

Matt Pines:

or gold or Bitcoin increasingly.

Matt Pines:

If you're in that, if you're intentionally, you know, pushing the

Matt Pines:

world system into that era, well, if gold re monetizes, you know,

Matt Pines:

that's, I think marginally gonna benefit our, our rivals, right?

Matt Pines:

The authoritarians and Eurasia that have aggressively accumulated

Matt Pines:

gold, um, and then have kicked Bitcoin out to a certain extent.

Matt Pines:

They still Bitcoin miners under the table there with some arms, you know,

Matt Pines:

sort of shadow shadow activities there.

Matt Pines:

But officially you're not really allowed to transact there.

Matt Pines:

Um, um, uh, unless you're doing it kind of in the Hong Kong sort of,

Matt Pines:

you know, sort of interstitials.

Matt Pines:

Uh, whereas we have probably, if you do the numbers, eight to 10% of the above

Matt Pines:

ground gold stock held by the government, uh, gold ETFs and American citizens,

Matt Pines:

just jewelry, et cetera, gold coins.

Matt Pines:

If you do the same analysis for Bitcoin, we have maybe 30, upwards of

Matt Pines:

40% of the, of the available Bitcoin supply held by American custodians,

Matt Pines:

Americans, uh, American companies, and the American government and

Matt Pines:

the, uh, street Bitcoin reserve.

Matt Pines:

So just if you assume in a world where hard assets are gonna be

Matt Pines:

increasingly, um, you know, more valuable relative to fiat currencies,

Matt Pines:

uh, which is probably the safer bet.

Matt Pines:

And then on a structural trend, uh, Bitcoin appreciating at the same rate

Matt Pines:

as, as gold Kase has, has a four to one asymmetric upside for the us But

Matt Pines:

Bitcoin, because it's a much smaller asset, it's about, you know, 15th or

Matt Pines:

you know, the size of, of, of gold.

Matt Pines:

It, it'll, it'll much, it'll move much faster.

Matt Pines:

Um, so I think it just makes more sense, right, for the US to kind of hedge itself

Matt Pines:

pretty low cost weight with a significant Bitcoin exposure, uh, as it's gonna

Matt Pines:

sort of allow this evaluation to happen.

Matt Pines:

Um, which it's right, it's gonna bring the Dixie down dramatically.

Matt Pines:

Um, they're gonna do crash domestic techno industrial reinvestment to meet the energy

Matt Pines:

objectives that they have for, for, to, to beat, um, China in the a GI race.

Matt Pines:

So all these things are inter, are, are, are interdependent and they have a vision.

Matt Pines:

Of remaking the global order.

Matt Pines:

It's gonna be expensive.

Matt Pines:

Uh, and someone's gonna have to pay for it.

Matt Pines:

It's likely gonna be the bond market.

Matt Pines:

And, uh, you know, the first, for the first person to eat it is gonna be the

Matt Pines:

foreign, the foreign sort of allies like Taiwan, South Korea, Japan, the,

Matt Pines:

the Norwegian, uh, cyber wealth fund, you know, the Australian Pension Fund.

Matt Pines:

Like, we're gonna like, force them to like, eat the losts.

Matt Pines:

Um, now they could, they could be like, screw you.

Matt Pines:

Like I'm turning to China side.

Matt Pines:

And that's, that's a high risk move, right?

Matt Pines:

If you're gonna like, you know, like the mafia enforcer who goes around

Matt Pines:

the neighborhood and says, you know, sorry, the rake has just gone up.

Matt Pines:

Right?

Matt Pines:

Uh, and everyone's like, well actually there's a new mob boss down the street

Matt Pines:

who's maybe more credible providing protection to me, isn't as aggressive,

Matt Pines:

you know, has like good, good, good EVs that I can buy, you know, cheap

Matt Pines:

goods that support my domestic economy.

Matt Pines:

Like what exactly are you offering here except for like a thuggish,

Matt Pines:

you know, um, you know, uh, implicit threat and, you know, security

Matt Pines:

protection from big bag China.

Matt Pines:

Uh.

Matt Pines:

That's kind of what it is, right?

Matt Pines:

It's like competing mafia is going around and being like, okay,

Matt Pines:

now everyone has to pick a side.

Matt Pines:

Um, and uh, ultimately it's about perceptions of who's still, still got the,

Matt Pines:

still got the juice, uh, and then who's, whose, you know, coercive or inducement.

Matt Pines:

Um, you know, tools of statecraft are gonna be more compelling,

Matt Pines:

but I think in that era, Bitcoin is now this tool on the table.

Matt Pines:

Um, one, it just will continue to run.

Matt Pines:

And I think the strategic implications for us is, you know, Bitcoin when it,

Matt Pines:

it's, it's usually does nothing for a, a, a, a certain period of time and

Matt Pines:

then it just like goes crazy, right?

Matt Pines:

Most of the positive upside for Bitcoin and like a trailing 12 month basis

Matt Pines:

happens in like nine trading days, right?

Matt Pines:

So like, you know, you can be lulled into complacency and then

Matt Pines:

all of a sudden boom, right?

Matt Pines:

It's now double.

Matt Pines:

Right?

Matt Pines:

And that was fine when Bitcoin was like a hundred billion

Matt Pines:

dollars, $200 billion asset.

Matt Pines:

Now it's a 2 trillion asset.

Matt Pines:

So that going.

Matt Pines:

Like meaningfully towards parody with gold, which is not implausible scenario.

Matt Pines:

I'm not saying it's like my base case, but it's not implausible

Matt Pines:

by the end of the decade.

Matt Pines:

Bitcoin could reach, you know, some measure of, you know, start to eat into

Matt Pines:

gold, maybe even reach parity with gold.

Matt Pines:

That would be a strategic shift in how we think about the function of

Matt Pines:

reserve assets in the global system.

Matt Pines:

And I think most people don't even think about that as a scenario.

Matt Pines:

Right?

Matt Pines:

If I say you folks inside the US government are very much thinking about

Matt Pines:

that as a scenario and, uh, I don't know, like update your update up, update

Matt Pines:

your mental models is what I would say.

Jacob Shapiro:

Are they also thinking about it in terms of, um, you, you

Jacob Shapiro:

mentioned, you mentioned gold and about, uh, eight to 10% of above ground gold.

Jacob Shapiro:

I had Will Freeman on the podcast maybe six months ago now, and he dropped

Jacob Shapiro:

the statistic that I wasn't aware of.

Jacob Shapiro:

It's something like 15% of the gold that's mined every year is mined illegally.

Jacob Shapiro:

Smuggled and pirated and, and sort of other things like that.

Jacob Shapiro:

And that, you know, gold is not traceable in that sense where you can

Jacob Shapiro:

make it hard to trace so that different criminal groups or non-governmental

Jacob Shapiro:

groups that wanna hide from, or even governments that wanna hide from

Jacob Shapiro:

sanctions, like this is a way for them to.

Jacob Shapiro:

Sort of transact.

Jacob Shapiro:

Um, isn't that sort of also true of what we're talking about here?

Jacob Shapiro:

Like we have the rise, uh, I just recorded a podcast yesterday.

Jacob Shapiro:

It's, it's not out quite yet, but I was talking with, um, ELO Menard on the

Jacob Shapiro:

podcast about, um, the attack on French prisons a couple weeks ago by these, uh,

Jacob Shapiro:

you know, basically gangs that have had a surge of, uh, money and power because

Jacob Shapiro:

of the increased cocaine trade from South America, strong enough that they're

Jacob Shapiro:

literally attacking French prisons in daylight to break out, you know, some

Jacob Shapiro:

of their bros who were in the prisons.

Jacob Shapiro:

So is there any concern in your mind that actually the, like, if you

Jacob Shapiro:

as policy does push some of these allies away, and by the way, early

Jacob Shapiro:

returns are not good, like Japan.

Jacob Shapiro:

If you look at Japanese behavior and statements in the context of what you're

Jacob Shapiro:

talking about with the mafia boss coming by, you would expect them to be like bend

Jacob Shapiro:

the, they're not bending the knee at all.

Jacob Shapiro:

They're saying, oh, we're not gonna do anything to jeopardize

Jacob Shapiro:

our relationship with China.

Jacob Shapiro:

Thank you very much.

Jacob Shapiro:

We will like take an alternate path.

Jacob Shapiro:

So if that's the approach, not very good, but, so is there a world in which, um,

Jacob Shapiro:

if like, this is actually challenging to us hegemonic order, because right now the

Jacob Shapiro:

dollar, you can use the dollar in lots of different ways to achieve different,

Jacob Shapiro:

you know, national security goals.

Jacob Shapiro:

But to your point, like the US government can't use Bitcoin.

Jacob Shapiro:

That's, in some ways that's the point.

Jacob Shapiro:

So help me with the tension that I'm, I'm struggling with there.

Matt Pines:

Yeah, I mean this is Bitcoin as an asset is what we've

Matt Pines:

mostly talking about as a digital goal, just as a fixed supply asset.

Matt Pines:

But of course, Bitcoin, the network is this global permission,

Matt Pines:

peer, peer payment system, right?

Matt Pines:

There's no choke point, you know, surveillance.

Matt Pines:

There's no choke point ability on Bitcoin.

Matt Pines:

There's a large surveillance ability on Bitcoin, right?

Matt Pines:

You can track all these.

Matt Pines:

Yeah.

Matt Pines:

That's the whole function of it, right?

Matt Pines:

You can see exactly which Bitcoin is moving where, and it's been a.

Matt Pines:

Large investment by the US government and private sector in, uh, chain

Matt Pines:

analysis to be able to track, uh, flows on, on the blockchain.

Matt Pines:

They're really good at it.

Matt Pines:

Um, so if you're a criminal trying to fund operations with

Matt Pines:

Bitcoin, it's not a great idea.

Matt Pines:

There are other protocols and other ways of kind of getting around

Matt Pines:

that stable coins have become very useful, uh, you know, kind of in

Matt Pines:

gray markets around the world.

Matt Pines:

And I'd say the US government has kind of approached this in the same way they

Matt Pines:

kind of approach the proliferation of the, the original Euro dollar market, right?

Matt Pines:

Which is a way for the Soviets to kind of get, uh, you know, to kind

Matt Pines:

of recycle their dollar surpluses.

Matt Pines:

'cause they were still in the global trading system, but they were officially,

Matt Pines:

you know, not allowed to like, engage.

Matt Pines:

Um, and so, you know, there was this sort of market response to create

Matt Pines:

dollar IOUs and offshore balance sheets to sort of intermediate, you

Matt Pines:

know, this kind of gray trade, right?

Matt Pines:

Um, and the US government had kind of a mixed view of that, right?

Matt Pines:

One was like, oh, well it's the bad guys, right?

Matt Pines:

Taking advantage of the dollar system.

Matt Pines:

Uh, but you know, we also have ways of kind of taking advantage of that, right?

Matt Pines:

Right.

Matt Pines:

Like that's actually, it spreads the dollar now all these dollar, now

Matt Pines:

all these, uh, your dollar banks.

Matt Pines:

Have to kind of, you know, buy our debt, right?

Matt Pines:

And also they can become means of our own sort of covert finance activities.

Matt Pines:

And I think the same is true with like Tether, right?

Matt Pines:

It's like, you know, a thing that's used by criminals isn't necessarily always a

Matt Pines:

bad thing for the US government, right?

Matt Pines:

It's like one, we can now see where the criminals are doing their

Matt Pines:

business and we can get close to them.

Matt Pines:

And the US government likes doing things offshore in ways that are deniable, right?

Matt Pines:

So I'd say it's a, it's a, it's a, you know, it's always a mixed opinion, right?

Matt Pines:

Um, the US government doesn't want the global system to be

Matt Pines:

entirely transparent, right?

Matt Pines:

It wants it to be maximally transparent to itself while

Matt Pines:

minimally transparent to its rivals.

Matt Pines:

And that's, those are not like perfect objectives.

Matt Pines:

You have to make compromises.

Matt Pines:

Uh, and so the question is alternatives on the table.

Matt Pines:

Would you rather.

Matt Pines:

Have those countries be increasingly bluely, um, uh, ensnared by a Chinese

Matt Pines:

techno authoritarian and digital currency stack that has WeChat, Alipay, the

Matt Pines:

DCEP project, Enbridge, uh, you know, sort of ion ZTE, uh, you know, Huawei

Matt Pines:

phones and their AI models, you know, where now most of the global south

Matt Pines:

and increasing the large, large parts of, of Eurasia are now in this sort

Matt Pines:

of techno authoritarian stack that's fundamentally, you know, controlled,

Matt Pines:

has, you know, root access by China, uh, and has a payment system that you know

Matt Pines:

is fundamentally, um, uh, you know, has a network, a topology that's entirely

Matt Pines:

independent of the network topology that cans to the US sort of financial networks.

Matt Pines:

So stable coins are kind of like a natural kind of, okay,

Matt Pines:

you don't get perfect control.

Matt Pines:

You have to give up some things.

Matt Pines:

You have to accept the fact that rogue bad actors are on the

Matt Pines:

margin, are gonna exploit it.

Matt Pines:

Um, but that's just the nature of open, right?

Matt Pines:

If you wanna have full control, then you gotta accept, you

Matt Pines:

wanna just become China, right?

Matt Pines:

Just totalitarian lockdown and everything gets surveilled and controlled, right?

Matt Pines:

In a free society, you have to accept.

Matt Pines:

Criminal activity, right?

Matt Pines:

Uh, it's just like the compromise we make in a, in a democracy.

Matt Pines:

'cause you don't wanna have the big daddy government looking over your

Matt Pines:

shoulder, everything you do all day.

Matt Pines:

Um, so just, you know, those are trade offs in, in, in, in reality.

Matt Pines:

But the strategic advantage is those countries get essentially

Matt Pines:

semi dollarized and they're, you know, they're properly regulated.

Matt Pines:

You expand stablecoin balance sheets.

Matt Pines:

Well, that's a marginal, extra buyer of US debt.

Matt Pines:

Um, and there's this synergistic flywheel between adoption of

Matt Pines:

Bitcoin as a hard asset, uh, in this increasingly fragmenting world

Matt Pines:

system where the treasury market gets essentially financially repressed.

Matt Pines:

And, uh, the dollar price of Bitcoin being intermediated by stable coins.

Matt Pines:

More demand for stable coins, more demand for stable coins equals more

Matt Pines:

demand for US treasury debt at the property regulated and reserved.

Matt Pines:

Then, you know, you can sort of expand the dollar network, uh,

Matt Pines:

while competing against China.

Matt Pines:

So that's kinda been the pitch here.

Matt Pines:

There's no, there's no, and it's always gonna be a cat, cat, cat and mouse game

Matt Pines:

when it comes to counter threat finance, um, sanctions, evasion, et cetera.

Matt Pines:

Um, but I'll say like, doing things on an open blockchain is not as

Matt Pines:

ideal from a criminal's perspective.

Matt Pines:

It's, it's fast and it's uh, it's efficient.

Matt Pines:

Um, but they're, they're exposing themselves.

Matt Pines:

Um, you know, most serious money laundering still happens, you

Matt Pines:

know, you know, not on crypto.

Matt Pines:

It happens with offshore LLCs and, and the Caymans are not really Caymans

Matt Pines:

anymore, but, um, used to be, uh, in, in, in other, in other locales and

Matt Pines:

gold bars are still, you know, very, very serious things that are, um,

Matt Pines:

you know, being, being weaponized.

Matt Pines:

Uh, but I would say so one other point I would, most folks, when they model

Matt Pines:

geoeconomics and the monetary system and, um, the, the competition between, between,

Matt Pines:

say, us China, they're not factoring what is like a dark matter that exists

Matt Pines:

in the system, which is like the power of, I would say, like transnational,

Matt Pines:

um, uh, structures of power and money.

Matt Pines:

That have, uh, become extremely influential, but they're not hard

Matt Pines:

to, they're hard to pick out.

Matt Pines:

Right.

Matt Pines:

I'm not talking about like the Illuminati cabal, right.

Matt Pines:

Some Davos right there.

Matt Pines:

But there are large amounts of capital and, and networks of, of, of,

Matt Pines:

of, um, individuals associated with multiple different countries that

Matt Pines:

wield enormous amounts of influence.

Matt Pines:

Uh, and you know, I'll just say the intelligence systems of multiple

Matt Pines:

countries had a very strong incentive to sort of support the emergence of

Matt Pines:

such structures, um, over many decades.

Matt Pines:

And they kind of hyper accelerated in the last 30 years.

Matt Pines:

Um, and, and so financial markets are not just like, okay, buyers and sellers,

Matt Pines:

you know, trying to price the future.

Matt Pines:

They are, um, they are, uh, grounds by which these different

Matt Pines:

competing intelligence systems try to get advantage over each other.

Matt Pines:

And I say there's a, there's a long running principle agent dynamic at

Matt Pines:

play in every system between the political authority, the national

Matt Pines:

government, the leaders, right?

Matt Pines:

And then these intelligence systems, right?

Matt Pines:

Which have existed for a lot longer and perceive themselves as enduring much

Matt Pines:

longer than the, the, the, the terms of office of the national leadership and

Matt Pines:

whatever policies they wanna pursue.

Matt Pines:

So I think no one can, if you don't actually model in what you think, you

Matt Pines:

know, I don't mean like the CIA Qua, CIA, I mean, you know, the dark matter

Matt Pines:

that sort of was around that set of set of systems that, uh, he has existed for

Matt Pines:

a long time and is, you know, gained a lot of, of, of, of capital, um.

Matt Pines:

They have a certain interests themselves, but they don't,

Matt Pines:

they don't go on Bloomberg.

Matt Pines:

They don't, you know, articulate.

Matt Pines:

There's an op-ed pages.

Matt Pines:

They don't, um, you know, uh, debate openly their views, right?

Matt Pines:

They just fight back in the terms of, of the, of, uh, of the fight that they're

Matt Pines:

engaged in, which is financial markets, capital markets in, um, political markets.

Matt Pines:

Uh, and so I, I perceive a lot of these things that Trump is

Matt Pines:

doing, um, as fighting that type of battle at the same time, right?

Matt Pines:

He's like the US China competition is the main dynamic, but I also, he perceives

Matt Pines:

there being this sort of structure, right?

Matt Pines:

They, they call it the deep state, and they're obviously, you know,

Matt Pines:

wrapped around with various axles of, you know, uh, conspiracies.

Matt Pines:

Um, but they're not entirely wrong.

Matt Pines:

Uh, when it comes to like the existence of such a power structure.

Matt Pines:

Uh, I, it, it's, it's there.

Matt Pines:

I mean, it's, you guys be very naive to think that that doesn't exist now.

Matt Pines:

How, how Univalent is it?

Matt Pines:

How co, how coherent is it?

Matt Pines:

Um, I think that's.

Matt Pines:

That's, uh, there's, there's debates on that.

Matt Pines:

Um, but, uh, if you're not modeling these, these dynamics with that factor

Matt Pines:

in, you're missing a huge component of, of what's going on right now.

Jacob Shapiro:

Yeah.

Jacob Shapiro:

And you know, this, this stuff makes somebody like me, uh,

Jacob Shapiro:

uncomfortable in some sense.

Jacob Shapiro:

'cause, uh, there's an old Chris Rock bit where, you know,

Jacob Shapiro:

uh, we can update it for now.

Jacob Shapiro:

Like, first, first they came for China.

Jacob Shapiro:

That was okay.

Jacob Shapiro:

Then they came for immigrants.

Jacob Shapiro:

And I was like, ah, I sat up in my chair.

Jacob Shapiro:

'cause Jews and n words are next.

Jacob Shapiro:

Like that train is never late.

Jacob Shapiro:

It always comes.

Jacob Shapiro:

So we start talking about dark matter and international cabals.

Jacob Shapiro:

There's capital around it.

Jacob Shapiro:

Like, eventually the Jews will be blamed for this thing in some sort of way.

Jacob Shapiro:

Uh, which, you know, it's a coincide that there is rising antisemitism

Jacob Shapiro:

around the world, some of theses morses.

Matt Pines:

The irony though, is I, I would associate, you know, whatever this,

Matt Pines:

uh, structure is, uh, I would associate more with kind of a, a fascist Nazi,

Matt Pines:

um, orientation than anything else.

Matt Pines:

Uh, I think if you, if you tell, tell alternative history of the 20th century.

Matt Pines:

Post World War ii, we, uh, had, you know, basically an alliance with the Nazis.

Matt Pines:

Um, or I'd say we, I'd say the OSS steer of CIA kind of elite US factions,

Matt Pines:

which helped finance the Nazis in the thirties and then set up all these rat

Matt Pines:

lines, even starting in 19 43, 19 44, mainly through Spain and the Vatican

Matt Pines:

to relocate thousands of SS officers and other Nazi elite to South America.

Matt Pines:

And then the scientists and the technical folks we portioned off in Operation

Matt Pines:

Paperclip and brought them to the US to finance our, I mean, to, to drive

Matt Pines:

our, our, uh, our military industrial complex and created our space program

Matt Pines:

and created other secret programs.

Matt Pines:

And so, you know, that's the genesis of this is like we made a deal with

Matt Pines:

the Nazis to sort of save the key elite and their technical talent.

Matt Pines:

We brought them into our system and they became the foundational kind of

Matt Pines:

core of this security apparatus and this technical military, uh, complex.

Matt Pines:

Um, and that never went away, right?

Matt Pines:

And, and I think it was, uh, managed to a certain extent.

Matt Pines:

It was compartmented under, um, government oversight for.

Matt Pines:

20, 30 years, and I think in the seventies it's kind of peeled

Matt Pines:

off and did its own thing.

Matt Pines:

Um, so like, you know, I mean obviously Trump is a, is an authoritarian

Matt Pines:

by inclination, and I think he's rivaling, he's, he's, uh, ratcheting

Matt Pines:

up kind of APOE sentiments and sort of traditional nativism.

Matt Pines:

Um, and that's, that can, that has failure modes that are quite, quite destructive.

Matt Pines:

Um, but, uh, but I'd say fascism, pure fascism isn't

Matt Pines:

necessarily ethno fascism, right?

Matt Pines:

Pure fascism is just a, an alignment of capital with the state.

Matt Pines:

Um, and especially, you know, concentrated capital, uh, doesn't view, you know,

Matt Pines:

governments as, you know, as their ultimate authority, uh, or national

Matt Pines:

boundaries or ethnic allegiances, even as their primary attachment.

Matt Pines:

Um, so I think, you know, there's lots of things happening at once, right?

Matt Pines:

Uh, lots of fights always happening, lots of different elite factions kind of

Matt Pines:

jockeying for power and then we'll whip up popular sentiment, uh, and kind of create

Matt Pines:

propaganda on both sides to kind of.

Matt Pines:

Win those fights.

Matt Pines:

But ultimately it's like an elite civil war, I think, taking place.

Matt Pines:

But it's not just an elite civil war taking place inside

Matt Pines:

the US political economy.

Matt Pines:

It's an elite civil war taking place inside of the global political economy.

Matt Pines:

Um, and even in China, right?

Matt Pines:

There are, uh, elites in sort of the Shanghai clique, uh, folks in Hong

Matt Pines:

Kong that very much wanna squash the beef, get back to business.

Matt Pines:

Uh, they don't like, she, they want she to be in power.

Matt Pines:

Right?

Matt Pines:

And you've noticed there's been a lot of instability in Chinese system.

Matt Pines:

A lot of very senior folks, very close to Toxi have just been purged.

Matt Pines:

Um, so there's a lot of, you know, like underneath the surface there's

Matt Pines:

a lot of like things going on, um, that are indications that the

Matt Pines:

system is going through convulsions.

Matt Pines:

Uh, but uh, you know, it's be, it's beneath the surface, right?

Matt Pines:

They're not, you know, great power of war is too expensive for everyone to fight.

Matt Pines:

And the Eurasia and obviously the Russia, Ukraine conflict shows everyone that like.

Matt Pines:

Like even a great nuclear power, like Russia can just get bogged down here.

Matt Pines:

Um, so like, that's not the way you wanna fight this.

Matt Pines:

You wanna fight this through covert, you know, assassinations, financial warfare,

Matt Pines:

cyber attacks, espionage, um, and uh, you know, knocking people off different,

Matt Pines:

different, uh, sort of political ladders.

Matt Pines:

Uh, and that's just where we are now.

Matt Pines:

So you have that elite factional, civil wars are highly personal wars, right?

Matt Pines:

Literally those tiny ingroup all jocking for themselves.

Matt Pines:

And in that chaos, there's lots of grifting and corruption that takes place.

Matt Pines:

But because those people are national leaders of great power

Matt Pines:

countries, they, they affect foreign policy, they affect trade policy.

Matt Pines:

And so you have this highly personalized, you know, um, model of what's going on

Matt Pines:

as well as this highly abstract kind of macro model of what's going on.

Matt Pines:

And I think because the latter is more salient, you have indicators, you have,

Matt Pines:

you know, like big policy frameworks.

Matt Pines:

Takes most of the attention.

Matt Pines:

And the in-group is what intelligence services focus on, right?

Matt Pines:

It's like I need to be close to that person to understand like, where

Matt Pines:

does he sit in this, in this, in, in this, in this, in this fight.

Matt Pines:

But I think there's a like a, like an availability bias here because certain

Matt Pines:

things on the more macro side, on the geopolitical side that are like, you know,

Matt Pines:

obvious are more, um, salient and visible.

Matt Pines:

Uh, they draw more of our attention.

Matt Pines:

We think those are the things that matter.

Matt Pines:

But just because you don't see something doesn't mean it doesn't matter.

Matt Pines:

And the whole function of intelligence services is not only to see what most

Matt Pines:

people can't see, but to do things that affect strategic, you know, shifts in

Matt Pines:

ways that are not, um, uh, traceable.

Matt Pines:

Uh, the whole, that's the whole function of these systems.

Matt Pines:

Um, so anyways, that's a bit of a, of a, of a, of a riffing spew.

Matt Pines:

Uh, but, uh, yeah, this is, I I try to pay attention to the things

Matt Pines:

that are not as visible as well.

Jacob Shapiro:

I think that we should leave it there.

Jacob Shapiro:

'cause I think if we start to go down, uh, your other professional interests,

Jacob Shapiro:

we're gonna overwhelm the listeners.

Jacob Shapiro:

So why don't we, we put a pin in it there.

Jacob Shapiro:

We'll have you back soon and we can talk about aliens and,

Jacob Shapiro:

and all those other things.

Jacob Shapiro:

But I think this was a good sort of, uh, good first step for, for the listeners.

Jacob Shapiro:

Um, you know, maybe.

Jacob Shapiro:

Baby set, like you said, like, you know, we, we, we can't

Jacob Shapiro:

scare the client completely by giving them the whole grab bag.

Jacob Shapiro:

We gotta, we gotta give them some treats first.

Jacob Shapiro:

So thanks for coming on, man.

Matt Pines:

Thanks

Jacob Shapiro:

man.

Jacob Shapiro:

Next time.

Jacob Shapiro:

Thank you so much for listening to the Jacob Shapiro podcast.

Jacob Shapiro:

Uh, this show is produced and edited by Jacob Mian, and it's

Jacob Shapiro:

in, in many ways, the Jacob Show.

Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

You can find more information@jacobshapiro.com.

Jacob Shapiro:

You can also write to me directly at jacob@jacobshapiro.com.

Jacob Shapiro:

I'm also on, on X for now with the handle.

Jacob Shapiro:

Jacob Shap.

Jacob Shapiro:

That's Jacob, SHAP.

Jacob Shapiro:

No dots, dashes, or anything else, but I'm not hard to find.

Jacob Shapiro:

Um, see you out there.

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