Another great interview of PlanB with Preysto Pyhs:
BTC048: Does the Stock to Flow Model Eventually Break w/ Plan B
Preston Pysh talks with renowned analyst, Plan B. He talks about whether the Stock to Flow Model will eventually fail, along with numerous other macro insights.
IN THIS EPISODE, YOU'LL LEARN:
00:00 - Intro
02:09 - What’s Happening in the Broader Macro Economy From His Perspective?
16:28 - Will the Stock to Flow Model Eventually Fail?
28:21 - Regional Trends - Specifically With Proof of Work
33:52 - When Will More Countries Start to Adopt It?
37:07 - Is the ETF important?
41:19 - Lightning Adoption, What’s the Impact?
46:07 - Would Plan B Ever Reveal Himself?
It's a great conversation. I strongly suggest you to listen to in in the full length.
Two points stands out:
Preston Pysh (22:40):
As we’re going through this transition, you were describing it earlier with China, they’re buying anything that has scarcity to it as soon as they can, with the dollars they’re receiving, because it’s going to retain their buying power as whatever this thing is that’s transitioning takes place, and on the other side, that buying power is still going to be there for whatever the scarce thing is that they purchased.
Preston Pysh (23:03):
This goes for anybody on the individual level, country level, whatever, but I really think that we’re going to eventually get to a point where there’s going to be so much demand for people to store their buying power in this thing that is everything and is nothing. Whether the stock-to-flow is slightly above real estate or slightly above gold, I think you’re just going to get to a point where there’s just total FOMO of, I can’t store $10 billion worth of buying power in this bond anymore, as it’s yielding negative whatever percent. I just see that whole fixed income $200, $300 trillion worth of buying power today just evaporating and getting sucked in like a black hole and it’s going to send the curve just in a parabolic kind of direction.
Plan B (23:53):
I agree. I fully agree. Real estate is not fungible, and it’s not portable either. All those dimensions, Bitcoin is the better money. On the other hand, the only thing where we differ, I guess, is the timing of the events. Yes, the dollar will die. Every reserve currency dies, it’s a certainty. There will be something new, something better. But when is that happening? It’s the same question as the supercycle, are we entering the supercycle now or later?
Plan B (24:23):
I think the supercycle will be there, it’s inevitable, but not now. I think it will happen after next halfing, if you will, after the stock-to-flow of Bitcoins will be higher than gold and higher than real estate. Because until that point of stock-to-flow of 100, real estate will, for whatever reason, be the preferred asset as we’re seeing right now.
Plan B (24:46):
I’m seeing around me, people put more money in real estate like hundreds of millions. BlackRock, for example is buying the entire city of Amsterdam because those companies and the money right now is with old people. They have real estate and the gold, the physical world and not the digital world. The digital scarcity is a next generation thing.
Plan B (25:06):
I think it will happen. But I also see, in my own model, that there is a linear relationship between scarcity and value. I agree that is one of the dimensions of money, fungibility is the other one, portability is another one, divisibility is another one. That’s also a very problematic with houses, divisibility. But scarcity is, in my view, the most important factor, causing that linear relationship and causing people to put more money in real estate now, that will change next to divisibility, fungibility, portability, also the scarcity of Bitcoin will be better than real estate.
Plan B (25:46):
My guess would be, I’m probably going into that question right now, are we going into this FOMO hyperbolic scenario right now or next year, or the year after, or are we going to drop 80% first have a big war with the powers that be, the central banks, the US dollar, et cetera, et cetera, and go into that hyperbolic scenario, or a US dollar scenario, if you will where Bitcoin is the best store of value after the next halfing. So, say 2024, or ’28, that will be the period or maybe a little bit after that. Let’s say somewhere between 2024 and 2032. Yes, I think we both agree there will be this hyperbolic scenario. Bitcoin will be by far the best asset physically, dynamically, mathematically, above all other, but the powers that be, with the largest armies, the biggest balance sheets, and all the political power, they will fight, they will fight till the death.
Going a little bit oustidethe bitcoin only scenario:
Preston Pysh (06:49):
New people that are maybe just coming into the space would hear that, and they would say, well… I’m playing the contrarian here, I know you’re going to knock this question out of the ballpark, but I think it’s important for education purposes for people. A person would be hearing all that, and they’d say, well, you just had a global pandemic, they had to print all this money, and this is just a spike. They’re not going to be printing $4.5 trillion in the coming years like they did for, I think that was the number that you said, for COVID. Some of this stuff will start to normalize. It just needs more time. You see the big time banks, I think it was JP Morgan come out and say, oh, supply chain issue is going to be resolved here in six months from now. Why is that wrong, in your opinion?
Plan B (07:37):
First, from a logical point of view, if printing money was the solution for these problems, then like I said, Zimbabwe would be the richest country in the world, and every country would be doing it. Of course, that’s that’s not true. Through the ages as well, the Roman Empire died, part of because the debasement of the currency, the printing of the money. It was the denarius at the time. So, the silver content was diminished from 90% to 0%. That caused big, big troubles, because nobody accepted that money anymore, because it was like Monopoly money. That’s one.
Plan B (08:11):
But on the other hand, the debt that the US is creating to keep the dollar going, to keep the government going, to keep everything going, and the same in Europe, by the way, but the US, of course, is the reserve currency, that debt is someone else’s asset. The asset can be in the pension fund, it can be… Well, most of US debt, by the way, is owned by China, right? China is making all this stuff for the world, for the US, earning a lot of money, but then parking that money in the treasury bonds, so in the debt of the US government, and that debt, of course, we all know that, all institutional investors know US debt will never, ever be paid off. We all know that. But we also know there will be new debt, there will be an extra credit card, if you will to pay off the old credit card. As long as that goes on, that’s all fine, but it cannot go on.
Preston Pysh (09:05):
It requires rates to keep going down.
Plan B (09:08):
If you would increase interest rate right now the debt would be unserviceable. The US could not pay the debt when interest rises with the current tax income. It’s unsustainable, they have to keep rates low and keep decreasing them or the whole house of cards will fall down. Of course, China sees that as well, because imagine that you have all this US debt and you see that the debt is printing his own money and you know it will be worthless one day.
Plan B (09:37):
What will you do? You’ll spend it like a madman and you see them doing that. They buy every gold mine, every scarce commodity mine in Africa, they buy all the harbors in the Middle East, in Europe even, they buy everything with the US dollars that they have, except more US debt, of course. That’s a smart thing. By printing and printing more, the US is actually making China stronger and stronger every day.
