Max Keiser on economic crash and Bitcoin in 2020

0:01i'm ashton addison from eventchain for investmentpitch media and fintech news network and today on blockchain interviews we have max kaiser the host of the kaiser report and the founder of heisenberg capital max thank you so much for taking the time welcome to the show and it's a pleasure to have you here hi ashton thanks for having me on you're very welcome i'd love to kick

0:19off our discussion with a little bit of the current situation in the markets and then we'll dive into the intricacies of bitcoin and where it's heading and i wanted to start off by talking about the market in the last decade has had such huge gains and you know the technology times are a little bit different now but the stock market was also doing very

0:36hot just before the stock market crash in the 30s and we know that the markets go in cycles you know what are your thoughts on the current market crisis that do you see history repeating itself and will the cycle continue to potentially something far worse than we've ever seen before right well markets are definitely extended and historically they're

0:56trading at multiples that we see typically at tops but we have an interesting situation that the central banks are really bottomless money printers there doesn't seem to be any limit and the federal reserve owns hundreds and hundreds of securities and these central banks buy up all these securities and companies are buying back their own stock and the cost of doing all this is

1:20zero because interest rates are zero and so i think we have further to go really i mean these central banks can add another 10 20 trillion dollars of assets to their balance sheets and so uh the momentum is certainly there and we could see this go higher obviously there's a high concentration in just a few names in the u.s those names are well known apple amazon

1:44to name two and um you know the no reas there's no reason why we're not going to see them continue at the current trend and for the short term definitely ice you know it's been going up for almost two quarters half the year now it seems like it's been a v-shaped recovery with no sight of ever going down and you know as dave portnoy's saying stocks only go

2:08up right now but this has a lot of retail investors and you know dumb money excited about the market putting their money in i've been hearing from delivery drivers you know uber drivers that about their robin hood gains and it's getting a lot of people that don't normally invest into the market invested into the market and yes it's going up uh but it seems

2:30like at some point it can't continue to go up forever do you see like all of these retail investors coming into the market just expecting easy gains and eventually getting liquidated and losing everything like like little sheep or what do you think about that well you have two groups you have the robin hood traders which we can talk about in a moment

2:52but you also have warren buffett so what's warren buffett doing warren buffett has got a huge cash position warren buffett has recently moved into a gold stock which is very a different kind of investment than he's used to making over the past decades and as of this week he's now got a big position in japanese stocks japanese conglomerates so he's getting out of the

3:13dollar i think that's pretty clear and that should be a red flag to folks out there that the world's one of the world's most successful investors is getting out of the dollar as far as the dollar goes you know if you look at the best performing markets in the world they're actually like zimbabwe venezuela iran it's because those currencies are collapsing so you have to ask yourself

3:35is markets are they reflecting loss of confidence in the dollar i think the answer is yes to a large degree ray dalio big hedge fund guy one of the biggest in the world he's got 20 in gold now that should also be a warning to those who don't think we're going to see inflation the biggest loser would be in the bond market so i think you've got to look at the bond market

4:03should be the kind of indicator that we're at the end of the of this cycle right because the bond market is going to have to come to grips with some at some point with this collapse of the dollar and this rise of inflation right inflation is the enemy of the bond market so i don't know how much longer they can keep that bond market going once you start seeing

4:27the bond market invert and start to flip away then then then you've got to take a defensive position and you've already seen the smart money moving into gold and bitcoin uh so then getting back to the robin hood traders i don't think they're going to be nimble enough to to escape the blade of the guillotine once it falls and that's typical every generation

4:48usually gets crushed by at least you know by a collapse i've been through three of them the 87 crash i was working on wall street the dot-com rehash i had a dot-com company and um the 2008 crash i was mostly just a journalist at that point reporting on it so this would be my fourth eyewitness to a major crash uh robin hood traders fascinating thing to me

5:17and an unusual i would say in my close to 40 years in the markets i've never seen a phenomenon like tesla really uh it's it's up again today post split it's well over 400 billion dollar valuation i think it's getting close to 450 billion valuation and this is i think i've never seen anything like that in my 40 years yeah it's pretty crazy with the tesla stock even after the

5:43split it was up like 10 percent and i think it's like 10 times more cost per that stock for per one dollar of profit than you know any other similar companies so it seems way overboard and it's very interesting you mentioned warren buffett i saw that he invested in barrick gold and he's moving out of most of the american bank stocks but he still hasn't invested in gold

6:07itself you know i know you're a big gold fanatic uh do you see him taking that move soon well the gold barrett gold is a leveraged play on gold and it does pay dividend and if you like gold why not why not get a leveraged positioning goal so i think he it would make more sense to him from that point of view um i guess again both ray dalio and also this ohio pensions fund that

6:36just reported the last week or so they went from a zero allocation of gold to five percent gold so now if the institutional money starts getting off zero and moving to five percent position in gold that's a huge demand that's a 50 trillion dollar market that goes suddenly they've got a they want an allocation of five percent gold uh you know gold's at just under nine

6:57trillion dollar market cap but if you add up the global money management universe it's about 100 trillion and right now in aggregate it's less than one percent in gold so let's say everyone decides you know what i'm going to follow warren buffett i'm going to follow ray dalio i'm going to follow this pension account i'm going to go 5 gold to be prudent because i need an

7:15inflation hedge okay so that's now a five trillion dollar demand on a nine trillion dollar market that's already the supplies are tight and the comex and the lbma already there's a run on those two institutions where they can't source the gold so you could see a massive short squeeze massive demand all coming together gold gapping up to three four five

7:37thousand over a week over a week i i don't think that would be really a big shouldn't be a big shock to folks at this point yeah when when it does move i could anticipate it moving quickly right and you've been a proponent for gold and silver and bitcoin for 10 15 years or at least with bitcoin since close to after it came out and you've been seeing what's happening

8:01in the markets and i think that you have a great position and you're always recommending for people uh to look into gold and silver and there's a lot of people that are you know they trust in the stock market and that's the only thing that they invest in they still haven't picked up uh any hedged assets i guess my question to you is is it too late to buy in and more

8:21importantly when does it become too late to buy into these assets well and you have to keep in mind also that when the when there's trouble on these exchanges like for example today several of the exchanges including merrill lynch were not operating they they were technically in default they were not processing trades and i think so people have to realize that when

8:45when they start to run for the exits it's it may not be easy to get out you know when i was working on wall street during the 1987 crash we would put an order in on that monday black monday and i didn't get an execution until that thursday well that's how backed up they were yeah and you had no idea what you bought or sold in this case sell you had no idea what the

9:06what the print was for four days wow um you know so you just so how do you manage those margin accounts how do you manage those accounts how do you know how you're completely blind so here you have a bunch of traders who they're in their margin no doubt and they're in options market no doubt and then suddenly you have no access to these platforms for several days and that's where the

9:30danger is with gold and silver it you know you can store it outside of the system and there is no counterparty risk yeah you know if you have gold and you store it in a vault and there are several vaulting services that are good you know you don't have that issue and that's going to be a big issue going forward is just the mechanics of these platforms because they're very new i

9:53mean robin hood goes down every couple of weeks imagine if you have a crash like scenario and suddenly they're i don't know how many millions of users they have something like 40 million users i i forget the exact number but they're all going to come in together and try to get out at the same day their technology doesn't scale i mean not not to that extent

10:12not simultaneously it's going to take them a long time to put in the servers just to handle that traffic right so now that's a huge risk and when you sign up to these services you know you sign off and you are essentially give you know signing away your right to sue them for in accessibility to your funds in case of of uh force measure or you know in case of a problem

10:35yeah right so you have no recourse and so you're just going to be you know you could be it's it's a big problem with gold and silver you know you have the ability in bitcoin to to essentially custodian those assets outside of all these systems and that's a huge advantage and i think people need who who don't who are stock players who are averse to these as their assets

11:01like gold silver and bitcoin just think about what i'm saying here for a second in terms of managing your risk you need to be able to function in case of duress and if everything is locked down you know you're going to have no access to anything for a number of days or longer and that that could be a big problem definitely and that's a huge advantage to bitcoin and

11:26precious metals when you're holding them to not have that risk of anybody else you're trusting somebody else to hold your assets for you and they could just disappear so i want to touch on uh diving into the bitcoin protocol a little bit i know you've been a huge fan of the bitcoin protocol and one of your philosophies that i was reading into is that you know bitcoin is

11:44actually observing us and working us now can you can you talk about uh can you elaborate on that philosophy that you have sure uh the bitcoin technology is remark it's profound and it's philosophical in some ways because it's the first asset that we've seen that is enjoys absolute scarcity so in terms of it's different than gold because gold

12:12is relatively scarce but we know it the supply the stock to flow ratio et cetera the supply is increasing by roughly two percent a year people drill for gold and there might be asteroids with gold and potentially you can find gold and seawater and stuff like that um but you know it doesn't have this attribute of being absolutely scarce so bitcoin has this attribute it's very

12:33unique in that sense and that that people use it as a gold substitute and that is completely outside of the state and that it it issues its monetary policies to issue new coins every 10 minutes and as a result people who start to um invest in bitcoin or start to uh to to put their savings into bitcoin it

13:01it it tends to kind of think it change the way they're they think um we've seen this already in gold because people who tend to gold buyers tend to think more in terms of savings than spending right i mean and keynesian economics is all about spending and going into debt and in american financial press is always propagandizing savings as being bad and they talk about

13:25the paradox of thrift and the savings glut and they use all these words to via vilify savings you know don't be a saver be a spender be get into debt and then the gold buyers are like wait a minute i'd rather have individual wealth that you can't confiscate and i don't you know that's my you money you know i don't i don't want to you know uh use foul language on your

13:50show but you know it is what it is so uh bitcoin is everything that fulfills what you find in gold in terms of it's what it does to your consciousness the the re it changes the way you think about money think about savings think about the economy you start reading about um you know austrian school economics you start you know you really start to change the way you think

14:13so bitcoin is everything that you find with gold but just that much more uh extreme if you will because it's it's it's more extreme than gold in many ways it's more portable it's more divisible uh it has everything that gold has but more so and so you eventually you want you ask yourself why why why is bitcoin why is it here why did it come in 2009 what is it doing

14:40what's the point and and you get into a very philosophical minds about you know maybe um maybe that whole fiat experiment that's that was started in 1971 when when the u.s closed the gold window and the world went on a pure fiat standard for the first time in history you know maybe maybe there was we have forces that were not really

15:09visible to us are working to try to redirect us and nudge us you know back away from this this path of fiat madness so that's really interesting what you have uh you know your thought process around bitcoin working us and how it acts as a substitute for gold but i want to talk about governments you know i i've heard that you see governments holding

15:35you know different gold reserves and whoever's going to hold the most would be essentially having strength over other countries but also there's that bitcoin play where there's this theory that governments will subsidize bitcoin mining for a hash war and different countries will all be fighting for you know their part of controlling the hash power in bitcoin

15:58can you talk about how you see that playing out what countries you see on top and what countries uh the countries that are on top what advantages that they would have right so getting back to gold and gold suddenly is in fashion warren buffett's in gold pension funds are in gold ray dalio's in gold and central banks around the world have been buying gold russia and china have been

16:24stockpiling gold enormously hundreds of tons and so if the inflation genie comes out of the bottle and suddenly fiat money is being dumped in gargantuan amounts and there's a mad rush for gold we may have a problem sourcing gold because there's just not that much gold there's about 160 000 tons above ground i think thirty five thousand tons is

16:52already in central banks twenty thousand tons are held by women in india so of the hundred uh thousand tons remaining you've got thirty thousand tons or more than jewelry um and you work through the numbers and it's just there's not that much around it's hard if you needed to buy 300 tons of gold you know you're gonna not really gonna find it not at the current price right i mean it

17:17could be like okay i'll sell you 300 tons of gold but i'm going to sell it to you 25 000 an ounce right yeah you have all you wanted 25 000. yeah so so then there's going to be like well what what what we need hard money so i think that's where you're going to see these central banks turn to bitcoin in sovereign wealth funds and they'll be like well

17:40this bitcoin thing's been around now for 11 12 years it's 99.9 fail fail proof and it's got everything we want in hard money and so then you'll see countries start to accumulate gold and they'll start to my bitcoin and they'll start to mine for bitcoin as well and then they'll start to subsidize the money they would be

18:06subsidizing the energy industry in and subsidizing that in the bitcoin mining space and um so then you have a the game theory kicks in so for example iran right now has something like two percent of global hash rate of bitcoin and um what i understand i haven't seen hard numbers but that's what i understand to be the case okay and so let's say suddenly you know it comes out they've

18:34got five percent of the hash rate they they're they're they're redirecting their energy business into bitcoin mining and so then you know america says wait a minute this is like the sputnik moment you know iran could potentially be the richest country in the world if they have a significant piece of bitcoin and price goes to 400 000 to compete with gold per coin

18:56i mean iran would be you know would be the richest country in the world do we have one no we better stop this so then they start to subsidize their mining and so you have this game theory kick in and these countries are now competitively mining so what this does is it increases the hash rate so the hash rate now is over 100 quintillion calculations per second

19:14in the bitcoin mining space that would increase which means the security goes up which means it's even harder money bitcoin is not only it's hard money but it keeps getting harder every week every month because the hashtag keeps getting higher and higher and higher so then uh with that the higher security and higher hashrate that means price goes up

19:34so it becomes a self-fulfilling prophecy so now you're chasing the bitcoin up to a hundred thousand two hundred thousand a coin to get the hard money because your all your fiat money is collapsing you know nothing has survived u.s dollar money is you know collapsing these reserve currencies last about 100 years you know if you go back to uh portugal and france spain

19:57and the netherlands and great britain and then america they all had took their turn having the world reserve currency in the last about 100 years and then they lose it uh and it looks like the us is on the path and i'm losing world reserve currency status so there's going to be a lot of fiat money chaos there's as always there's going to be an attempt

20:18to reset everything against gold remember central banks never went off the gold standard central banks have always settled their accounts with gold that's how they do business so that this idea that we're off to gold centers is an illusion we're not we're just we're central banks are still very much on a goal standard so then they sit down like brenton woods agreement and they

20:39say we've got to reset the only way we can get rid of this debt and the global debts now greater than global gdp it's over a hundred trillion okay yeah say we've gotta reset this debt uh against gold of course so we gotta bring gold up to ten thousand an ounce uh and um you know in the meantime by then it's already gonna there there will already be a race in the bitcoin

21:06space so that that's that's how it kicks in that's how it plays out uh and and again i ask you know it's it's in a bitcoin part of the protocol is that every four years they have what's called the having yeah where the the emission schedules get cuts in half and it seems like it like it happens during election years it happens during financial chaos years

21:29it seems like it knows what it's doing and again it seems like it's it's it's has a hyper consciousness of what we're up to in the fiat world and is already gaming us right yeah so they had the having now the hash rate goes up price goes up and the with the 2008 global financial crisis were having part two because they never solved the 2008 crisis they just

21:50flooded the system with more fiat and credit they didn't solve anything now it's much worse so now so now but unlike then there is bitcoin now as as an escape route so that's how that's how i see it played it's that game theory element that's baked into the bitcoin protocol just played out on the sovereign level yeah that's super interesting and the fact that bitcoin was born in the

22:172008 crisis and now it seems to be thriving so far in this 2020 crisis i think there are a lot of good things ahead for bitcoin that that we could look forward to and i'm running out of time max but i really appreciate you coming on the show and i do have one last question um for people that uh besides buying bitcoin and buying gold and silver do you have any advice for people in the

22:38middle class that are looking to get through the tough economy and these tough years ahead well not really other than to get started you know get off zero even with its if you're doing dollar cost averaging on bitcoin uh we have a relationship with a company called swan bitcoin which makes it very easy to on-ramp and you can do ten dollars at a clip and

23:01just do a dollar cost averaging with gold it's just a matter of getting started and being being disciplined about it unfortunately there's no shortcuts so i mean if you're starting from absolute scratch um it's tough because you look at the road ahead and it seems interminable but um nevertheless you know every journey begins with that first step ashton as you know

23:28in vancouver right the vancouver is the hotbed of of of gold and uh hockey how come the canucks are already out of the stanley cup what happened i think they got eliminated already well they haven't been doing too well for the last 10 years but uh you know times are changing in vancouver and yeah you're right the the gold and the precious metals markets

23:50here are pretty hot and as well we do have the first bitcoin atm in the world uh just down the street from us as well so i think the people in vancouver will be doing all right uh but yeah that's great advice max you really haven't started a new podcast called orange pill podcast and it's only a few weeks old and in that podcast we kind of walk through

24:10some of the basics like how do the how to get started in bitcoin and not lose your bitcoin because most a lot of people lose bitcoin it's easy to lose your bitcoin but so we we talk about that we talk about gold silver how you know the the companies that we we use to accumulate gold and silver um so it's called orange pill podcast and you can find it you know it's it's

24:34on many platforms now stacy herbert is the producer and the genius behind the orange pill podcast so you know it's quality ashton what can i say you know we're good we're known for quality definitely stacy's got a qual she's a quality you know producer everything that comes out of stacy is quality that's the key it's got to be good quality that's awesome well i will leave a link

24:59to the orange pill podcast in the description thanks so much for taking the time to speak today max it's been a pleasure speaking to you all the best and let's follow up in the near future okay ashton have a good one see ya you