Balaji Bets the Dollar will Hyperinflate to Zero. NOT A DRILL!

foreign Boston on he's talking about his prediction that within 90 days the US dollar would hyper inflate and one Bitcoin would be worth one million dollars this is uh both a prediction he made and a bet that he has made after that prediction on Twitter he's been saying some alarming things over the past few days I would say about the U.S banking system and um maybe the most alarming is some of his early

predictions have sort of been right there's there's more murmurings of Bank closures that have passed both the United States are now in Europe we just had Credit Suisse But First Republic Bank that just kind of go to zero we have a central bank Communications talking about coordinated efforts between them all to inject liquidity in this market the prospect of like unlimited coverage for all deposits and for all of these underwater assets is now in play too and so I I worry about some of the things coming to pass

because his predictions David are quite dire he is sending out an alarm he says the bit signal he says people to get their money outside of the U.S banking system system and into Bitcoin specifically into crypto systems and outside of the areas where the FED has root level access so we brought him on to make this case to hear the evidence for his claims and to see how alarmed we should really be one thing I'll say before uh you get your response in this David is we do intend to bring on a

Counterpoint as well so biology has given his case for why we're all basically the US dollar is doomed it's going to hyperinflate and that's going to happen in relatively short period of time we also want to get on somebody to make the opposite claim so that this is balanced and so that listeners can listen to the evidence biology comes up with and listen to the Counterpoint and make their own decision on this but I gotta say we needed to hear him out on this because um he's been right about many things in the past he's been right overall about

crypto and kind of the direction and now he's setting off this alarm Bell it certainly um gave me cause for concern and for the reason for this conversation so David what are your thoughts going to this episode what should people keep in mind yeah I think I should the biology is just sounding the alarm that Bitcoin is going to a million dollars he's made that bet and many many people are like uh well he owns a bunch of Bitcoin this is a rational thing for him to do it's a million dollar marketing expense that's not uh what biology is here to say

um he is saying the net effect of Bitcoin reaching one million dollars is as a result of the complete destruction perhaps of the United States banking system and the dollar system at large uh his big claim is that you know all of Alameda research and FTX is insolvency where they try to prop up their accounts with uh with some you know finagling of their accounting he is saying that that is perhaps true of the entire banking system where there is just not a there there anymore and so his his idea that

Bitcoins won a million dollars is actually a much bigger topic which is more or less the complete and utter destruction of our banking system a few comments on the actual form factor uh podcasting Logistics 6 for this episode uh biology just we've been talking to biology about doing an episode he randomly just hit us up and said all right let's do this right now uh and so we kind of aped into this interview uh Balaji gave us a ton of links to share and we are doing our best to share them

in uh Riverside which is our podcasting recording software recording this one was logistically challenging like I said Ryan said I'm also in the Dominican Republic my internet is an issue but I think the message will become loud and clear and really going back to the content I think the takeaway for bankless listeners regardless of how true apology is I think there's a spectrum here either biology is like 100 right or he's only five percent right but either way the patterns and things that unfold over the next perhaps 90

days of time as a result to banking crises and inflation and liquidity at least I think biology is giving us a mental model a map to test what events happen in one week one month three months and we can test them against biology's thesis and his theories and what he's presented here today so I think that's really the call to action for bankless listeners to understand is see what see the model that biology is putting forth and as more announcements happen as more press bank failures happen or doesn't happen you'll be able to test it against what biology is

presented here today yeah absolutely and uh I don't think David you and I are in a place to say that he's right or he's wrong but certainly his argument warrants consideration so that's why we are putting this in front of you today guys we're going to get right to the episode with Biology but before we do we want to thank the sponsors that made this episode possible including Kraken which is the best way to get your Fiat into crypto and our number one recommended exchange for 2023. Kraken has been a

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developer docs Bridge your assets and start building your first app with arbitrum experience web3 development the way it was meant to be secure fast cheap and friction Free bankless Nation we have biology srinivasan here on bankless again today talking about something very specific which is a very bold call that biology made last week biology welcome back to bankless hey welcome thanks uh or I guess uh thank you you're supposed to say welcome thank you so well I'm supposed to yeah yeah you've got your own podcast now by the way which is uh

fantastic so um you've probably been playing the the role of host more often so um yeah tell folks about that before we get in it's funny because you know I launched a a Blog right before kovid and it launched a podcast right before this so it's a little bit of deja vu you know where it was just like a month into kind of this new sort of content project and then things started getting intense on the internet um or not just an internet but like the world yeah the podcast is called the

network State podcast it is about um what sort of comes after the the 20th century order you know and um I actually think that there's you know the book the networkstate.com uh there's a bunch of stuff in there which I think will potentially be actually fairly relevant to what's going to transpire and I kind of thought it might you know play out over a decade or something like that you know like that saying by you're saying by Lenin there's a uh there's decades where nothing happens and there's weeks where decades happen right like during Corona at the beginning of Corona the um

remote work went like 30 40 50 points vertical it did like a decade of adoption in like a few weeks all these kinds of things went like vertical or horizontal or you know down you know right you're here because I think this is you're claiming this is one of those two weeks where our decades happen uh and all of a sudden uh you have been inundated with intention about this crazy crazy bet that you've made where you think that Bitcoin our beloved asset is going to become worth one million dollars inside of the next 90 days which uh when you take that take into account people will call that a bold call uh and

so this is made the internet uh all pivot their attention to this claim which is a crazy crazy claim that I think people aren't aren't totally understanding or willing to accept so subology maybe you can kind of walk us through your thought process here like well how is Bitcoin going to become worth a million dollars in the next three months so here's the thing is I don't think I've ever made a price prediction or something like that just not what I do I'm not a price guy I'm not a chart guy um that's you know if you look okay I've I've been in the foreign

for 10 years you know I have tens of thousands of tweets I have hundreds of pages of writing whatever hours of podcasts including some someone with you guys right essays and so on and so forth and there's enough context there where people I think you know know that I'm not like a I'm not a Money Motivated person I'm an ideological person in our talks you know and so on I've never been like oh price blah blah let me just back up for a second okay 10 days it should go 10 12 days ago um Silicon Valley Bank uh and silvergate and then Silicon

Valley Bank like basically just collapsed overnight there's no warning right just boom done and then this gigantic you know this 200 billion dollar Bank was 40 000 tech companies people who have done basically nothing you know they're just going about their business suddenly found that they're checking accounts the money was gone right like and and then they were being blamed as if you know uh wanting their checking account back was like a bailout or something like that as if they had done something risky and this is this whole frantic kind of

thing over the weekend and some people were acting tactically and they were trying to figure out you know how to how to like you know fix the situation or whatever um but I was like how could this possibly have happened you know you know and I started like looking at all of the numbers that I could find online and just to summarize what I found and I'll show you a zillion references on this because it's actually kind of crazy um the Central Bank meaning the Fed the banks and the bank Regulators have

all known for at least the past year that hundreds of banks in the US are insolvent meaning Uncle Sam bankman freed they don't have assets on hand on a mark to Market basis to match their liabilities you know Uncle Sam Baker and freed is the best way of understanding this because Sam bakeman freed whether he lied to himself or he lied to others or whatever complicated thing remember he had this balance sheet that was this crazy balance sheet which you know like

in his head it added up to more than what people were asking for you know their money out right and until the stress test actually came and people actually withdrew their money neither he nor they knew how much money he actually had because he wasn't just holding it on like a one-for-one basis he was doing these crazy conversions exposing everybody to Market risk and so on and so forth right essentially he took people's trust he took their deposits he invested them in these you know coins and they you know or spent it on something whatever the heck

he did marked it as if it was still there and um and then but when they actually came for it there was a huge hole right we now know that story okay that is basically what has happened and the funny thing is you know amjad Massad and I in the uh in the fall of 20 uh 22. we were like you know that's kind of what Fiat banking is also because of fractional reserve and so on if everybody actually asked for their money at the same time they wouldn't be able to get it back but the situation we've got now is so much worse than even

fractional Reserve and what that is is that um the banks all did something very much like Sam bingman freed they took your deposits and they bought long-dated treasuries and other long-dated government bonds in 2021 essentially on the guidance of the federal government and or especially the FED really that they were going to keep interest rates low for a long time and then the FED raised rates in 2022 in this sort of surprise super high hike crushed the portfolios of every single

um entity that had trusted them and uh and stuck to Banks for this giant surprise of this massive devaluation of bonds uh and you can see and I found all these links where the the bankers are basically panicking about this over 2022 enjoy what they come up with they basically come up with an accounting trick okay called hide you know hold to maturity I call it height to maturity we're just like Sam Baker and free they book it as having not depreciated oh it's still worth what we paid for it we're good right and this time bomb just grew larger and

larger and larger and larger across the entire industry with everybody obviously knowing about it and again whether they were lying to themselves or they're lying to others what they didn't do is they didn't notify you the depositor that the money was gone for not just svb but for like millions of depositors across the country and every bank that has U.S treasuries and long data government bonds this is one of those things you know like it's saying like if you have a problem uh if you owe the bank a million dollars uh

you know you have a problem if you're the bank of billion dollars a bank has a problem right if you have one bank failure that's A bank's problem if you have hundreds of bank failures that's a central bank's problem back now for a second what is a proposed action that people should take um get your coins get whatever uh you can into crypto okay uh it's I mean I I recommend Bitcoin at this point it is going to be the Lifeboat for you know for a number of different reasons of course if you have other cryptocurrency whatever you know obviously you guys are ethereum guys I'm not you know let's just say that all of the crypto

tribalism is going to rise to like a ideological level that we've never seen in a in a year or two years or whatever this crisis over but in this crisis there'll be three kinds of zones Fiat only zones um where like you know crypto is banned or seized and only the government can have it um because it's used to back the currency Bitcoin only zones like maximalist zones and then like you know crypto free zones where you can use whatever cryptocurrency you want okay um and one of the reasons is a lot of Fiat banks are about to die they all trusted the FED at the same time the

centralization at the FED buying the same asset at the same time getting it devalued by the same vendor namely the FED in the same way then all going bust at once um that's basically what's happening so biology I just want to put kind of the timeline together and ask how you have been piecing this together right so we had silver uh Silver Gate bank and Silicon Valley Bank that that happens um the weekend of the 11th and 12th let's call it right you put up the bit signal on March 16th so that was Thursday after that weekend and the bit

signal is basically like um you telling people that uh Bitcoin was going to go up you said this how do you ring the fire alarm on the internet how do you show it's not a false alarm I'm putting up the bit signal one million dollars in Bitcoin to alert us to the stealth financial crisis thousand dollars per tweet for the best one thousand reply with your charts graph stats and memes so you're clearly propagating a message one question I have for you is to some of the doubters maybe like let's just uh address this at the beginning so this is previous to the

bet so some of the people are saying some people are saying biology that this tweet and also the BET itself is kind of like um motion it's basically advertising for your bags which are crypto Centric bags uh how do you respond to that critique the thing is if I didn't hold crypto they would say oh you don't actually have skin the game you're just doing it for attention and so on and so forth right all I can say on that is whole dollars in okay if you don't believe me whole

dollars and then see what happens right if you don't believe me buy buy short dated treasuries like three months and just say biology is crazy and you know whatever fine go ahead um but this is like if you look at the full context of everything I've said um it's improv impossible to prove quote motivation or whatever okay but if you look at all the tweets and everything I've ever said um this is something where this is like the crisis that Bitcoin was built for like

Bitcoin was born out of Crisis the 2008 crisis and this is the 2023 banking crisis and I remember apology that uh you were very very early to the covet crisis uh and so I remember you were sounding the covet alarm in January February and then coveted hit in March and so you have a track record of doing this and all at least once before that I can remember uh and it being contrarian at the time uh and while this is very different from kovid uh I will have to say that you do have a good you have one

very strong Mark of sounding an alarm in a prior crisis at least a couple months ahead of time so this is not this is not a new activity for you yeah it's not it's not fun it's not fun right because everybody thinks you're crazy or you're doing it for attention because essentially both the virus well first let me talk about covert for a second let me come back to that people are saying it was a paranoid conspiracy theory to say that coronavirus would ever spread out of China obviously you're a racist blah blah blah but obviously Public Health people have been thinking about pandemics for a while and

at the time um that was a good way of sort of framing that this was not like a threat that a crazy person was coming up with but that public health people were and I had sort of a mental model of the world right like imagine there's like a bunch of rubber bands between countries like Taiwan China right or India Pakistan or Bitcoin ethereum right there's there's these various rubber bands between groups right stress tensions and so on and then we have like a shock to the system where someone goes from zero to one or one to zero a lot of those you know rubber bands update and the system moves into a new confirmation

okay and so that's kind of how I was thinking about this like I had like you know this sort of chess board in my head and I was like okay if this hits how does that move this this this this this this and this right do you see what I'm saying okay and by the way for for listeners this was uh a January 30th 2020 tweet timestamp is what we're talking about so well before the general us six weeks became aware six weeks or so and and I'll show you how you can if you just scroll down a little bit you'll see how I did it right

um so first is I've been following I was following the raw data I had some background in in you know I like I I before I got into crypto I was actually uh you know basically doing computational genomics and statistics and especially microbial genomics right so I had some background in the space so I had some lenses with which I could read some of the technical literature viruses are exponential and and the thing about this at the time by the way it's funny it's like you know total confirmed cases outside was like less than a thousand or whatever right Sharon's like look it's so low I'm like yeah you know but is it like somebody

knows viruses knows Tech it's about like rate of growth you know and this is like a pretty high rate of growth um and the thing about this by the way one thing I'll just back up for a second and say as of January 2023 three years later people believe two things about covid first a novel virus out of China infected more than 700 million people worldwide killing about one percent of them and seriously sickening another tens of millions of people causing

significant upheaval by all kinds of governments and a huge Tech shock right on the other hand they also think yeah it wasn't that big a deal life went on both of those things I would say the combination of both those two facts is actually what I'd say the conventional wisdom is as of January 2023 would you agree with that yeah roughly but the thing about that is um while I agree life went on and it certainly it wasn't like the end of life on Earth or anything and we're lucky that it wasn't like the Spanish flu or something um that was certainly not like if you

had said if I'd said in January 700 million people will get infected seven million will die um but Life Will Go On nobody would that would be in the weirdest projection ever okay it would sound terrifying and Preposterous but then also and this is important the concert of normality of some kind being restored on the other side would have also seen Preposterous that that is a very non-obvious frame of mind which is a frame of mind I'm in kind of now okay we're basically in and

I'll get into details we're basically in the Fiat crisis okay we're in the crisis where like all the centralization of Fiat all the opacity of Fiat all of the you know all the things that Satoshi talked about all of that is now blowing up on people in a very tangible way and really it's um it's kind of remarkable and so now the the thing is we're gonna have a wrenching transition to the crypto economy where just like remote work kind of went like vertical because people just had to right a lot of Fiat systems

are going to break uh potentially over the next weeks and months and maybe years and uh we're gonna have to switch over to crypto systems and it'll be a big pain a huge pain of which the single most important is a transition to bitcoin as a global Reserve currency but um but there will be normality of some kind on the other side so biology what one difference between kind of the fire alarm you pulled around covet and the fire alarm the the Fiat crisis fire alarm that you're pulling now is you are actually talking about numbers in a timeline right so you've got 90 days as

a number you've got a um a prediction or a bet now as it's turned into of one million dollars in Bitcoin and that is a fairly short duration um timeline so you must think that this is going to happen like um all at once using that that phraseology so suddenly now this is the all at once moment and I'm wondering why you think that like why I mean this is almost like hyper bitcoinization or um the inflation away of all Fiat is sort of a long-term crypto prediction anyway

right that's what happens to Fiat over 70 to 100 Year time periods when you know nation states go on the decline in a new monetary policy regime and but you're saying this this is going to happen in 90 days this is going to happen in fast motion and by the way it's happening now and here's your Tweet warning about it so can you tell us why like why why do you feel confident enough to put numbers around this in timelines so you know the exact state of the world in 90 days I don't know but I think it's going to be quite different than today and the main thing I wanted to get

people's see it's this is not really a bet on the price of Bitcoin it's a bet on the devaluation of the dollar this is The Honky Cruise hyperinflation table first of all hyperinflation is much more common than people think and second when it happens it's much more rapid than people think people basically lose faith in a currency and they go to a competing Reserve currency okay now historically that has been something where they escaped their local currency for the US dollar but until now you see the big difference

versus 2008 is today the US dollar is no longer too big to fail there are two competitors to the dollar there's a renmin b and there's Bitcoin and as I'll get to what what is currently happening is all you know how people have said that the us is going to monetize the debt you've probably heard that before right yeah so everybody knew it was going to happen but not exactly how and it's happening now when I was digging into the SUV situation I was trying to be like how could a 200 billion dollar Bank be insolvent take a

look at this graph this is not my graph this is from FDIC this is unrealized gains losses on securities do you see the 2008-2009 over on the left hand side okay and now look at the yawning losses that are there in 2022 okay right this I mean this looks like uh similar to I guess the same bag but freed FTX analogy of like you have a balance sheet with a lot of trash on it and you have a market downturn and they've all lost like 80 to 90 percent of their value and now what's propping

up your assets that's sort of what this graph looks like to me and this is across not just one bank it's all the mix one way of thinking about it is you know sometimes people are in debt and then there's a balloon payment at the end and then they're done they just can't pay it right they just don't have the money this is this is kind of like that that's like you know the one of the things that the FI the financial system is set up to be opaque right it's set up to like in 2008 you know if if the market choice is happening on Twitter people would say tell me you don't know what a CDO is without telling me you don't know what a CDO is

the whole point is that nobody knows what a CDO is including the guy who's selling it and the guy who's buying it they've all fooled themselves and thinking they're so smart and actually the thing underlying is a house that sucks because nobody's paying the mortgage and no amount of financial engineering can can do anything other than hide that eventual Mark to Market on the thing with the guys paying zero money you see what I'm saying right and in the same way what's happened today is uh all of this financial engineering has led to a house of cards

um where the act the money is gone right under underneath it like the the banks literally don't have if you came to them this gigantic hole on the right hand side if people came to them and actually asked for their dollars out the banks would not be able to liquidate their assets to get their dollars out okay and so for the whole year they hid this you know with the right decoder lens from where we are now three four months later you can see huh wait it's not one bank it's not svb it's a lot of banks right and but look at the thing at

the end right it's like uh you know 423 billion during the first six months a year grew larger right this time bomb was growing and the bank Regulators were aware of it and they weren't notifying you the depositors they were just thinking they could Kick the Can again somehow we all know as part of a fractional Reserve System if there is a run on the bank there's not enough dollars in the bank account to meet the demands of that run on the bank but this is somehow worse because we have these Securities propping up the assets of the

bank and of depositors uh funds that have just lost massive amounts of of value and so if you mark them to Market we are much further underwater than just the the typical fractional Reserve banking system you know one of the things I learned in kind of tweeting about this is just like bankman freed had these weird self-deception tricks or taboos or whatever within the company that stop people from asking the right questions all of these bankers um basically do not think of the FED as

an actor right and so they think of them as a referee and um so first let me explain what the reality of the situation is and then let me explain what they think it is and why they're they haven't told you about it the reality of the situation is um while it's complicated the Federal Reserve effectively gave guidance to Banks to buy certain assets that it then massively depreciated all at once and crushed every single bank that trusted the fed their Bank their balance sheets all at once and that's responsible for this huge devaluation here

um and uh the the thing is though that like a lot of Finance guys they think that it's like weird to blame the Fed okay why do you think it's weird to play with that they think of the FED as like a referee you know how people used to say oh you can't blame the media if you're a bad guy the media will call you out you should be ashamed like as in a referee as in neutral kind of an arbitrary of of laws yes as a neutral right just like people used to think the media was like a neutral referee of just like the political system or whatever it just calls balls and Strikes we have you know

we don't have any opinions on anything right I mean that's ludicrous today right um you know they're constantly attacking people um people thought that the the Fed was like a a neutral referee of the system and it just like deliberation to figure out what the right rate to set is and Beyond politics and so on and so forth right if you're a fund manager you simultaneously think okay the FED is all important Powell is more powerful than the president uh you know we listen to everything the FED says our algorithms trigger on their every word oh they're

so so important but then if somebody says oh this bank got decimated because the FED hydrates they'll say LOL what a loser you know look you can't take everything the FED says it's their word it's your responsibility to hedge um you know it's not the feds you know the FED just puts out guidance uh you you know you just got to make your own book and so on and so forth okay now but think about that right that's two different things it's first the FED is all powerful and second the FED is never to be held responsible Tim Tang okay and the reason that if you are a fund manager

um you can't control the fed you just have to react to it so it's almost as if they're like setting the laws of the video game that you're playing and so you can't be a wimp you just have to win within the laws of the video game do you see what I'm saying okay and people are like you know what yeah maybe once in a while they'll complain about a call by the ref but fundamentally they think the FED as legitimate how could they think any other way you know what you're not going to have somebody setting interest rates well that would mean we can't help people we can't have full employment that would be terrible right or you're saying we should they should just publish an interest rate and stick to it no no they need to have a