Interview with a Macro Analyst: AI Is Draining All Liquidity from U.S. Equities; Bitcoin’s Bottom Is $40,000
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Interview with a Macro Analyst: AI Is Draining All Liquidity from U.S. Equities; Bitcoin’s Bottom Is $40,000
While the S&P 500 index repeatedly hits new highs on the surface, in reality, it is being propped up by just seven AI-related stocks.
Navigating Web3 tides with focused insightsCompiled & Translated by TechFlow
Guest: Luke Groman, Founder of FFT LC and Institutional Macro Strategist
Podcast Source: Coin Stories
Original Title: The $40K Bitcoin Bottom Coming?
Air Date: June 5, 2026
Key Takeaways
U.S. long-dated Treasury futures have depreciated 90% against gold over the past decade—while GDP continues to grow. That means “90%” still isn’t enough. This is the blunt wake-up call Luke Groman, founder of FFT LC and a macro strategist with 30 years on Wall Street, delivers to all investors.
In this episode, he lays out a stark yet internally consistent analytical framework: while the S&P 500 repeatedly hits new highs on the surface, those gains are in fact being propped up almost entirely by just seven AI-related stocks—and Bitcoin, the “last functioning smoke alarm for liquidity,” is now sounding the alarm.
If you want to understand why Groman sold most of his Bitcoin near the top and has yet to buy back in, why he believes U.S. equities will continue rising in dollar terms but falling sharply when priced in gold or Bitcoin, and why technical indicators point to a potential Bitcoin retest of the $40,000 level, this podcast is essential listening.
Highlights of Key Insights
Why hasn’t Luke Groman re-entered Bitcoin?
- “I bought a small amount, but essentially the answer is no—I haven’t truly bought back in. I didn’t sell everything, but I sold most of it.”
- “I’m watching closely. Bitcoin has recently gone through a fairly rough patch.”
The Divergence Puzzle: Soaring Stock Markets vs. Drying Bitcoin Liquidity
- “Bitcoin is the smoke alarm for liquidity—possibly the last one still working—and it’s telling us something deeply troubling.”
- “AI is sucking all the oxygen—and all the liquidity—out of the room. And I think that’s happening to Bitcoin too.”
The Illusion of Value: How Accounting Tricks Inflate AI Valuations
- “The faster you build and the less cash flow you generate, the higher—and faster—your reported earnings rise—but you’ll be desperately short on cash.”
- “Once construction slows and revenue growth decelerates, the lagging amortization effect catches up—and the situation reverses.”
Rising in Dollars, Falling in Gold and Bitcoin
- “My base case is: stocks surge in dollar terms—but crash when priced in gold or Bitcoin.”
- “Over the past decade, U.S. long-dated Treasury futures have fallen 90% against gold—even as GDP grew—meaning ‘90%’ still isn’t enough.”
China’s Dominance Over Rare Earths
- “Tens of trillions of dollars in U.S. equity market capitalization—especially tech stocks, but not only them—rest on rare earths: a commodity whose physical scale is minuscule.”
- “China dominates this space. They achieved it first by working at it for 30 years—and second by having more engineers than anyone else, coupled with looser environmental regulation.”
- “The U.S. government is now explicitly intervening in this sector. Historically, when governments intervene in corporate affairs, those companies rarely make good investment targets.”
The Strait of Hormuz: America’s ‘Suez Moment’
- “My base case is like someone jumping from a 100-story building, passing the 40th floor and saying, ‘Hey, this feels like flying—it’s amazing!’ What kills you isn’t the fall—it’s the sudden stop.”
- “Faced with this degree of complacency, this degree of inventory drawdown—why hasn’t it reopened? That’s what continues to surprise us ‘tail-risk folks.’”
Why Is Iran Keeping the Strait of Hormuz Closed?
- “Rationing demand via price means recession—that’s its definition. And simultaneously, inflation follows—a stagflationary recession.”
- “If I were standing in Iran’s shoes—I’ve been bombed, I’ve held on this long, I’ve prepared for this day for 40 years, dug countless tunnels, and they destroyed far less than they thought.”
Surge in ‘Non-Monetary’ Gold Exports from the U.S. to China
- “In five of the past six months, non-monetary gold has been the single largest U.S. export.”
- “Many Trump supporters have issued statements claiming, ‘Trump reduced the trade deficit by X!’ Yes—the trade deficit *is* shrinking, and the biggest marginal driver? Gold exports.”
Building a ‘Receipt-as-Clearing’ Proof-of-Work System
- “The world is moving toward a ‘no ticky, no washy’ system. What does that mean? It means: the U.S. wants rare earths—pay in gold, or the next shipment won’t arrive; China wants oil—pay in gold, or the next shipment won’t arrive.”
- “No one trusts anyone anymore. In such a world, where does the world go? To ledgers you *can’t* trust—so you need trustless clearing.”
When Debt-to-GDP Hits 130%: What Happened in All 58 Cases?
- “Over 150 years, 58 countries reached a debt-to-GDP ratio of 130%. To date, all 58 defaulted—primarily through a pronounced inflationary period.”
- “If AI doesn’t eliminate jobs, then it’s not the greatest thing since the internet—and doesn’t deserve these valuations. But if it *is* the greatest thing and those valuations are justified, then white-collar employment is about to be slaughtered—and U.S. employment contributes half of tax revenue.”
Do Technical Indicators Point to a $40,000 Bitcoin Bottom?
- “If you actually buy back in between $40,000 and $50,000, you’ll become an epic legend—because you sold near the top.”
- “They’re forecasting a bottom around Q3–Q4, roughly in the $40,000 range. Honestly, I think we may very well see that level.”
Why Hasn’t Luke Groman Re-entered Bitcoin?
Host Natalie Brunell: Let’s start with everyone’s burning Bitcoin question: Have you begun buying back in—or are you waiting for further downside? Because its recent performance has been frankly terrible.
Luke Groman:
It’s crashed hard over the past few days. I bought a tiny position as a test—but essentially the answer is: I haven’t truly re-entered. I didn’t liquidate my entire position, but I sold most of it. Bitcoin’s recent move—especially over the past three or four days—has been extremely painful.
The Divergence Puzzle: Soaring Stock Markets vs. Drying Bitcoin Liquidity
Host Natalie Brunell: Can you unpack why this divergence is happening? We’re seeing stocks rally powerfully, hitting record highs. It reminds me of 2021—new highs every other day. Back then, Bitcoin performed exceptionally well too—we were deep in a bull run. So what’s driving this divergence today?
Luke Groman:
I’m not certain—but my working hypothesis is that the underlying foundation of this market rally isn’t healthy. Indices keep making new highs, new highs, new highs—but it’s really just seven stocks. Yesterday I saw a chart showing that the S&P 500, excluding AI-related names, is actually slightly down from pre-Iran war levels. Another chart showed that if you compare U.S. MSCI with ex-U.S. MSCI Emerging Markets—and remove TSMC, Samsung, and another major AI or memory-related company from the emerging markets index—it looks like emerging markets are crushing the U.S. But once you strip out those three or four AI-linked firms, emerging markets are getting crushed. That’s the breadth problem. We’ve seen much discussion about market breadth—and I believe current headline index levels reflect extremely poor breadth. Ultimately, AI is sucking all the oxygen—and all the liquidity—out of the room, concentrating it in one narrow domain. I think this is happening to Bitcoin too—it’s a victim of the same dynamic. I believe Bitcoin is the smoke alarm for liquidity—perhaps the last one still functioning—and it’s telling us something deeply troubling. Meanwhile, oil is also soaking up liquidity—or rather, the Trump administration and the U.S. are doing everything possible to suppress oil prices, mainly via verbal interventions and releases from the Strategic Petroleum Reserve. Yet oil prices still rose—by roughly 50% since the war began, even from today’s relatively low baseline. So oil is absorbing liquidity, commodities are absorbing liquidity, and AI is absorbing liquidity. From a liquidity standpoint, any asset outside these three categories—or not directly linked to them—is performing poorly, flat at best, or declining.
The Illusion of Value: How Accounting Tricks Inflate AI Valuations
Host Natalie Brunell: Regarding AI companies, it’s fascinating: some call it a bubble, others don’t. Their P/E ratios aren’t especially high—not like the dot-com bubble—and many believe there’s still plenty of upside. But I recall you wrote about accounting practices—how demand is front-loaded, with all investment happening now, while real revenue generation lies years ahead. Those data centers won’t produce meaningful growth for years—but all the capital is being deployed right now.
Luke Groman:
The issue isn’t that real growth isn’t occurring—it’s more about accounting methodology. Because under current accounting rules, you book construction expenditures upfront, recognize revenue earlier, and spread expenses over a longer period. This accounting treatment affects reported earnings in the following way: the faster you build and the less cash flow you generate, the higher—and faster—your reported earnings rise. But you’ll be desperately short on cash, because you’re constantly paying out—even while reporting strong profits.
You can expect earnings forecasts to keep rising, share prices to respond positively, and financing needs to shift—from using cash, to borrowing, to borrowing more heavily. And indeed, we’re already witnessing all of this. What becomes tricky is when this construction cycle slows for any reason—whether due to shortages of physical raw materials, chip supply disruptions, or regulatory hurdles for data center approvals across various jurisdictions—once construction slows, your revenue growth decelerates, and the lagging amortization effect catches up—reversing the picture. Earnings slow sharply—or even decline—but much of that decline is non-cash, while cash flow actually improves.
So the question becomes: how will markets react? Will they interpret it as “earnings slowing but cash flow now healthy”? On one hand, valuations aren’t stretched, suggesting this might not be catastrophic. On the other, these stocks carry enormous momentum and are vacuuming up all available liquidity. So if earnings begin to slow, why hold them—instead of reallocating to assets previously starved of liquidity? Will capital rotate out of this sector into elsewhere? My guess leans toward the latter—it’ll likely stagnate for a while.
But this raises a tough question: when does that slowdown happen—and what triggers it? Many factors could contribute. And there’s an added complexity absent in 1999: back then, we had free markets. Government involvement was minimal—this was “peak America.” Today, government involvement is deep. Then, we were unipolar; now, we’re in a new great-power competition. The dot-com bubble burst under its own weight. Today, I also believe this cycle will eventually collapse or reverse under its own weight—but it won’t be allowed to self-destruct, because AI has been declared a critical battleground in great-power competition. That’s the complication: governments will likely step in to prop it up, taking whatever actions they deem necessary to sustain this expansion. And that means continuing to suck oxygen from every other asset class—creating more problems. Much reminds me of 1999–2000—but there are important differences too.
Rising in Dollars, Falling in Gold and Bitcoin
Host Natalie Brunell: Many people claim the stock market is about to crash—we’re nearing a peak—but it sounds like this rally could persist for quite some time. I know you’re generally cautious on equities and have long emphasized gold and infrastructure. Do you think gold and Bitcoin prices will remain suppressed? For Bitcoin holders, I recall you said it may linger between $58,000 and $72,000 for an extended period.
Luke Groman:
That was partly tongue-in-cheek—but I do observe that the U.S. appears to be pushing for decoupling from China. Politically, specific outcomes are needed: a weaker yen and won to help shift capacity out of China; a weaker dollar to encourage manufacturing reshoring. All of these should, in principle, strongly benefit gold and Bitcoin. Yet domestic U.S. forces oppose this outcome—because rising gold and Bitcoin would signal globally: “You’re just printing recklessly.” That creates funding challenges in the Treasury market—particularly visible in the 10-year yield movement since the war began.
I believe their method will be—expanding the derivatives market, as historically done with gold. Long-term, I doubt they can replicate this with Bitcoin; but short-term, amplifying derivatives works. A few months ago, someone noted massive volumes of call options being sold—effectively passive shorting. You’re satisfying demand: investors want Bitcoin exposure, but instead of buying Bitcoin itself, they buy call options. Without these derivatives, holding Bitcoin exposure required only one path—buying Bitcoin. Now, you can buy derivatives—making things loose and ambiguous. These details don’t matter long-term—but they matter short-term—depending on how policymakers wish to manage headline numbers. Short-term, they can engineer appearances; long-term, they cannot.
Host Natalie Brunell: Does the stock market need to crash first before gold rallies—or could we see a scenario where all assets rise together, with Bitcoin rejoining the uptrend? Or will it be zero-sum—one crashes while the other soars?
Luke Groman:
My view is: stocks rise sharply in dollar terms—but fall sharply when priced in gold or Bitcoin. In that world, the 10-year yield settles around 4%–4.5%—or perhaps 3.75%–4.5%—which I see as the long-term baseline end-state. We’ve effectively lived in this world since 2022—though Bitcoin performed terribly in 2022. But counting from when the Fed began hiking, stocks priced in gold fell nearly 40%.
This is the medium- to long-term outlook. When discussing manufacturing reshoring, dollar weakness, and trade rebalancing—all require a sharp dollar depreciation against the RMB, which is already underway—and even against the yen and euro. In a free market, these assets would naturally trade this way. But we’re not in a free market: the U.S. needs the yen weak to shift capacity out of China; the U.S. wants the RMB strong—and that’s happening too. So my medium- to long-term view is: gold rises substantially, Bitcoin rises substantially, stocks rise substantially in dollar terms—but fall when priced in gold or Bitcoin, while bond markets remain stable. Of course, bonds are already crushed relative to gold and Bitcoin. Over the past decade, U.S. long-dated Treasury futures have fallen 90% against gold—while GDP grew, proving that ‘90%’ still isn’t enough.
China’s Dominance Over Rare Earths
Host Natalie Brunell: You’ve also written extensively about rare earths—and how China effectively monopolizes the entire processing chain. You’ve discussed how these materials enter technologies: EVs, radar systems, our phones, military equipment, etc. How large is this market? If investors agree with your view—that we need vast quantities of these materials, yet lack the mining and refining capacity—they ask: how can they invest?
Luke Groman:
“How large is the market?” is a tricky question. In monetary market-cap terms, it’s not large; annual import tonnage isn’t huge either. But asking “how large is the market?” is like flipping Exter’s Pyramid upside-down. Tens of trillions of dollars in U.S. equity market capitalization—especially tech stocks, but not only them, even globally—are built on rare earths: a commodity whose physical scale is minuscule from a commodities perspective. So it’s extremely valuable—but not priced that way. The complication is that China dominates this space. They achieved it for two reasons. First, they worked at it for 30 years. Second, they have more engineers than anyone else—and looser environmental regulation. At least early on; though some regions have improved, regulation remains far looser than in the U.S. or Europe. They’ve indeed found excellent ways to produce these materials at extremely low cost. Their dominance goes beyond commonly cited points—“they hold reserves, they refine”—their innovations in refining machinery and processes are rarely mentioned. We can do things too: e.g., building facilities on military bases avoids NIMBY (Not In My Backyard) issues. But even then, the journey from start to finish remains long: mines, refining, engineering foundations, educational foundations—and even the refining machinery itself, much of which comes from China, who may not want to sell it to you. Finally: the U.S. government is now explicitly intervening in this sector. So the question arises: is this still a good business? Historically, when governments intervene in corporate affairs, those companies rarely make good investment targets. Though this rule has been broken over the past 12 months—Intel and other Trump-backed firms have performed well.
The Strait of Hormuz: America’s “Suez Moment”
Host Natalie Brunell: Let’s discuss the Iran war. You’re among the few analysts who predicted the Strait of Hormuz would remain closed for so long—and I believe markets haven’t fully priced this in. There seems to be consensus that we still possess unmatched global military power. Yet the Strait remains closed. My confusion is: why? Other nations—including Iran—should suffer too. So first: why can they keep it closed so long—given our interconnected global economy? Second: what did you mean by the “Suez moment”?
Luke Groman:
Let me clarify: my call on the Strait of Hormuz was correct—but my call on market reaction has been wrong so far. Around March 3–6, I said preparation should begin—it could still be closed on July 4. People thought I was crazy. And indeed, it will still be closed on July 4. In fact, I suspect last night a major broker declared it could remain closed through Labor Day. Now consider: if on March 6 you were 100% certain it’d stay closed on June 3, likely closed on July 4, and possibly closed through Labor Day—how should markets trade? Oil should be far above today’s WTI near $95, and stocks far below current levels. Yields *have* risen—the 10-year U.S. Treasury yield has climbed 50–60 bps since the war began; Japanese and Korean yields surged; we’ve seen massive Treasury selling—essentially managing current-account imbalances caused by pricier oil imports—but it’s not yet catastrophic.
It’s like jumping from a 100-story building, passing the 40th floor and saying, “This feels like flying—it’s amazing!” But what kills you isn’t the fall—it’s the sudden stop. Here, the sudden stop is hitting the bottom of the storage tanks. ExxonMobil and Chevron—and multiple Middle Eastern energy officials—have stated, “We’re approaching an extremely dangerous point.” Exxon and Chevron say within the next two to three weeks… similar comments emerged from regional authorities. It won’t be evenly distributed—you’re already seeing supply issues in Asia. Yet market complacency remains shocking. A few days ago, I posted a meme: a bell curve—with “idiots” at one end, “geniuses” at the other, and “everyone” in the middle—filled with analysts’ heads. I could put my face there too, since I’ve said similar things. But looking at the numbers, you can’t help thinking: this doesn’t add up. Something’s off. The views at either tail are: “Oil doesn’t matter.” And “The Strait of Hormuz closure doesn’t matter.” Yes—so far, it hasn’t. Faced with this degree of complacency, this degree of inventory drawdown—I think this is the biggest surprise for all of us “tail-risk folks,” including myself: how much inventory can be drawn down—and how fast.
Why hasn’t it reopened? To me, this remains a huge surprise—because it’s the question “tail-risk folks” keep asking—due to insufficient ground-level information flowing back. It took eight weeks for leaks to reveal: we were nearly bombed out of all Middle Eastern bases by Iran; our air defense systems performed poorly; a congressional report two weeks ago revealed actual aircraft losses far exceeding prior disclosures. You could ask: what does Occam’s Razor suggest? Occam’s Razor says Iran’s ability to control artillery fire over the Persian Gulf exceeds what people are willing to admit. That’s what’s happening. Of course, insurers play a role—but their logic is simply that they don’t want their ships blown up.
This connects to your mention of America’s “Suez moment.” Again, when I first wrote this in early-to-mid March, I wrote it nervously—I called it a risk, possibly materializing late March or early April. Later, I revised it to: this is now the base case. Last week, Robert Kagan—the founding director of the Project for the New American Century, a hawk on Iran and Israel, and enthusiastic about regime-change wars—husband of Victoria Nuland (Obama-era Assistant Secretary of State, involved in Ukraine’s regime change, infamous for her “F*** the EU” phone call). Kagan wrote two articles in three weeks declaring this a major strategic loss for America. I agree. He’s no outsider—he understands war and strategy. He wrote twice, recognizing America will suffer a strategic loss in the Persian Gulf regardless—and trying to get ahead of the narrative: “This is all Trump’s fault—not neocons’ fault—and we never wanted this war.” What are you talking about? This is the neocons’ 40-year ultimate fantasy. Now you’ve finally gotten the fight you chased for 40 years—and you don’t know how to handle it.
What does this mean for markets? After Britain’s Suez moment in 1956, its median annual inflation over the next 20 years was—nearly 20 years at 7% annually. This signals a loss of status. It implies an acknowledgment—in America’s context: the “American umbrella.” “Why pay Americans for protection?” I think this actually gives America real strategic options—look, if we no longer need to provide this umbrella, we can invest more domestically; those bases—if damaged—can be abandoned, letting others handle it. Of course, “letting others handle it” likely means China dealing with Iran, Iran retaining control over the Strait, and multi-currency energy pricing accelerating away from the dollar. That’s what it looks like—and why I believe it’s ultimately structurally inflationary and dollar-negative. Because fundamentally, if you can buy energy and commodities in your own currency, you don’t need to hold as many dollars in global reserves. And if you don’t need to hold as many dollars, you need to hold more gold. Simultaneously, someone must buy those U.S. Treasuries. We truly can’t sustain 10-year yields above 4.6%–4.8%. So at some point, that “someone” will be the Fed—printing money—or banking-system agents, however implemented. And that will be inflationary long-term—just as the Fed’s balance sheet expanded from $800 billion to $6 trillion over the past 20 years, consistently inflationary.
Why Is Iran Keeping the Strait of Hormuz Closed?
Host Natalie Brunell: But doesn’t prolonged closure hurt Iran itself? Or are they bypassing it via the rail system you mentioned—through China? Why maintain closure?
Luke Groman:
This is a contest of endurance—a test of who can hold out longer. Closure doesn’t serve their interests—but background matters: Russia supplies them partially via the Caspian Sea; China supplies via rail—neither fully offsets losses, at best providing morphine. On the flip side, you have a world shorting oil—supported by SPR releases and global inventory drawdowns. So you’re stuck in a painful race: one side depleting inventories, the other sustaining supply via backdoor Caspian and rail routes to avoid internal political and economic collapse. The common refrain is: “Once we hit tank bottoms, we’ll ration demand via price.” Yes—exactly. But those saying “ration demand globally via price”—either won’t say it, or should know but don’t: rationing demand via price means recession. That’s its definition. And simultaneously, inflation follows—a stagflationary recession, none of which Western nations can withstand: income declines (inevitable in recession) alongside rising rates (inevitable in inflation). So hitting tank bottoms and rationing demand puts us in a bind: Western interest expenses head in the wrong direction, while federal revenues—Western fiscal revenues—also head in the wrong direction, both lines exploding apart. In the U.S.—at least currently—and similarly in the UK, welfare spending plus interest expenses already approach or equal nearly 100% of fiscal revenue. So your revenue falls, your interest expense rises—and the situation becomes extremely precarious. That’s the essence of this painful race.
If I stood in Iran’s shoes—I’ve been bombed, I’ve held on this long, I’ve prepared for this day for 40 years, dug countless tunnels, and they destroyed far less than they thought. Now I have leverage to negotiate—not “tolls,” but “environmental fees.” Look—suddenly Iran cares about the environment. Who saw that coming?
Host Natalie Brunell: I’ve seen reports about them establishing some Bitcoin payment system. Is that true?
Luke Groman:
I saw those reports—but heard little follow-up. I saw Treasury Secretary Bessent boasting last weekend about seizing all their crypto assets.
Host Natalie Brunell: Theoretically, unless held on an exchange, they can’t seize Bitcoin.
Luke Groman:
If they’re conducting any sizable Bitcoin operations, I doubt Bitcoin would still be hovering near $68,000—it’d probably be $168,000. So who knows? Another area showing explosive growth is CIPS—the Chinese Cross-Border Interbank Payment System. Since March, transaction volume has exploded, indicating massive trade shifting to RMB via CIPS. And in practice, this implies gold’s involvement.
Surge in “Non-Monetary” Gold Exports from the U.S. to China
Host Natalie Brunell: Before we wrap up, glad you brought up gold again. If gold is used to settle trade, why call it “non-monetary gold”? Doesn’t that prove it *is* money? Regardless, can you discuss how we’re shipping our gold abroad—and presumably ending up in China, whether via Switzerland or London?
Luke Groman:
We imported massive amounts of gold in Q1 2025—when Trump won re-election—then gold prices rose. Then, beginning around last October—actually around the U.S.-China Busan meeting—we saw that in five of the past six months, non-monetary gold has been the single largest U.S. export. Larger than aircraft, larger than pharmaceuticals. The one month it wasn’t largest, it ranked second—behind pharmaceuticals. One view says: “We’re just re-exporting imported gold.” Some gold was indeed imported due to tariff concerns. But I don’t think all of it was tariff-driven—because gold is a political metal: if players called the White House asking, “Will you impose tariffs?”—even if you distrust their answer, you wouldn’t move so much gold from London and Switzerland. Why? And anyway, the tariff issue was resolved in July—yet exports didn’t meaningfully ramp up until October—slightly picking up in Q2, dipping, then surging sharply in Q4 and beyond. So in reality, this is net trade settlement. We can track its destination—it flows primarily to Switzerland, minimally to China; and Swiss and UK portions flow overwhelmingly to China or Hong Kong. So regardless of how we debate the nature of Q1 gold inflows, the fact remains—it flowed to China, coinciding with our massive trade deficit with China, effectively reducing that deficit, incidentally. Many Trump supporters issued statements like: “Trump reduced the trade deficit by X!” Yes—the trade deficit *is* shrinking, and the biggest marginal driver? Gold exports. There’s nothing wrong with this—it’s exactly what should happen. It just needs to occur at a higher gold price, otherwise we’ll deplete all our gold. But theoretically, Bessent is smart. If the world sells him gold at $4,500, and he strikes a deal with China—$4,500 gold buys $6,000 worth of rare earths—that’s a good deal. Prices will inevitably rise long-term, but such management is feasible. Why call it “non-monetary gold”? Non-monetary gold must be declared—likely per IMF trade reporting requirements. Monetary gold need not be declared. If a central bank buys non-monetary gold, then reclassifies it as monetary gold, it never appears in any report. So it’s entirely possible non-monetary gold bears no direct sovereign link—purely satisfying China’s gold demand—yet still nets out U.S. trade deficits with China, or at least reduces them. Via gold. And it’s highly probable we’ve shipped massive amounts of monetary gold to China—completely unknown to us, unknown to anyone, unrecorded.
Building a “Receipt-as-Clearing” Proof-of-Work System
Host Natalie Brunell: Honestly, it’s unclear whom to trust. How do you verify data from the People’s Bank of China? Why would a hostile nation say “Yes, we have these”—but how do we know the truth?
Luke Groman:
Where does all this lead? I believe in today’s world, no one trusts anyone anymore. And in such a world, where does the world go? This phrase is outdated—and politically incorrect—but I’m from Cleveland, so let’s be blunt. My grandfather always said: “no ticky, no washy”—no laundry receipt, no clean clothes. The world is moving toward a “no ticky, no washy” system. What does that mean? It means: the U.S. wants rare earths—pay in gold, or the next shipment won’t arrive; China wants oil—pay in gold, or the next shipment won’t arrive. You can see China has spent years building precisely the infrastructure for this scenario.
In every major global gold trading hub, there’s an offshore RMB clearing bank. London has one, Switzerland has one, Dubai has one, Singapore has one, Hong Kong has one, Shanghai has one. What does that mean? If you happen to run a trade surplus with China—almost no country does, except occasional oil exporters and occasionally Korea—you’ll accumulate net RMB positions. Other countries won’t hold net RMB. You run deficits with China—they hold your currency, you don’t hold theirs. But if you *do* acquire RMB, how do you use it? China makes great products—you can buy excellent BYD cars, Huawei devices, etc. If you still have leftover RMB and don’t want to buy more Chinese goods—you buy gold. Then you withdraw it from that gold trading hub and store it in your own vault.
Again, “no ticky, no washy”—no trust required, no verification needed. This is old-school “proof of work”—work done, literally. It’s inefficient, it’s not instantaneous—but it *is* genuine proof of work—because people must physically load gold bars onto trucks, hire security, transport them to airports, and ensure aircraft loading. So when you hear news from two weeks ago: China’s largest express delivery company—the equivalent of FedEx in China—is opening a 2,000-ton gold vault at Hong Kong airport. Would China pursue “paper gold” or “credit gold”—like the West? Why does their largest express company need a vault? Especially at an airport—an airport-side mega-vault? Why build this? They’re constructing a global “no ticky, no washy” system—because no one trusts anyone anymore.
I believe gold and Bitcoin can fulfill this role. But real concerns exist: foreign governments worry about exchange backdoors. Ultimately, though—70-year-old Putin, 70-year-old Xi Jinping, 70-year-old Polish President—will they trust Bitcoin more? Or say: “Bring me the gold—I’ll store it right here, beside all my tanks and missiles”? They choose the latter. So yes—I agree the world has zero trust today—but I believe people still trust what’s physically in each other’s vaults. In a sense, the world moves toward: “Fine, I don’t trust you. I won’t accept your IOUs for clearing. At clearing, I’ll take your paper money—but instantly convert it into something that holds value, not your promissory note. Give me gold—or give me something I can truly use.” I believe that’s where all this ultimately leads.
When Debt-to-GDP Hits 130%: What Happened in All 58 Cases?
Host Natalie Brunell: Every interview I see with you carries a “doom-and-gloom” vibe. I remember last time we spoke, you said, “I’m nervous about how things are unfolding.” I know you paid off all your debts, etc. So people have slotted you into the “doomster” box—I wonder if you feel placed there?
Luke Groman:
There’s a quote by William Arthur Ward (I believe he’s the author): “The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” I consider myself a realist. We have 150 years of history to reference. Over 150 years, 58 countries reached a debt-to-GDP ratio of 130%. As of roughly three years ago, 57 of those 58 defaulted—mostly via a significant inflationary period. I’ve been in this business 30 years—I can count on one hand how many times I’ve faced historical odds of “57 out of 58.” Incidentally, the sole exception three or four years ago was Japan—now Japan is experiencing inflation, and its debt is collapsing materially. Japanese bond market value is plunging, inflation is rising, rates are climbing—and yes, equities are soaring, but measured in gold, Japan’s stock market has fallen ~20% over the past five years.
The U.S. crossed the 130% line in summer 2020. Since then, U.S. long-dated Treasuries priced in gold have fallen ~60%. Another area that frequently brands me a “doomster” is AI. On AI, a cohort of major tech leaders tells you: this is the most revolutionary technology in history—bigger than the internet—and valuations match. I refer to valuations relative to total U.S. equity market cap—they’ve soared into the stratosphere. Yet these same people tell you: don’t worry, AI won’t disrupt jobs. Only one can be true. Yes, over sufficient time, both can coexist. But for AI’s commercial logic—to justify its valuation share of total economic market cap—it *must* eliminate jobs. It *must* devastate white-collar employment—that’s the only mathematically coherent path.
You look at all this and ask: it won’t eliminate jobs? Then it’s not the greatest thing since the internet—and doesn’t deserve these valuations. Once that becomes clear, it creates problems in private credit—and for all lenders financing these projects. And if it *is* the greatest thing—and these valuations are fully justified, then white-collar employment faces mass slaughter—and at this juncture, U.S. employment contributes half of tax revenue—while we can’t even cover tax revenue, or barely cover welfare spending plus interest. Which is true? Every time I ask tech titans this question, silence follows. David Sacks posted on X just days ago: “AI isn’t causing unemployment.” We created only 95,000 jobs last month. 95,000—like Ben Stiller in *Zoolander*: “That’s employment growth for ants.” 95,000 jobs in a 350-million-person country. In my youth, a solid month meant 200,000–300,000 new jobs—back when population was 20%–30% smaller. So I simply look at reality and ask: long-term, we can have thriving AI and thriving employment. But between now and then—given our debt burden—mathematically, it’s impossible. That’s the fact. They know it too—they’re too smart not to. So why say otherwise? Think: if they voiced what I say, what would politicians do? We’re already seeing it—you saw Bernie Sanders’ recent statement: “All Americans should share in AI companies’ profits—because AI stole their jobs.” So you see Andreessen, Sacks, etc., rushing to deny: “No unemployment. These aren’t the job losses you’re looking for. AI won’t take your jobs. Everything will be fine.” So am I a doomster? I don’t think it’s doom—I think it’s realism.
Do Technical Indicators Point to a $40,000 Bitcoin Bottom?
Host Natalie Brunell: I think the eternal question is timing—that’s always the hardest part. Time is the biggest challenge. I’m now labeled a “doomster” too—because I don’t believe Bitcoin has bottomed yet. Northstar Bad Charts (a technical analysis firm) predicts a bottom around Q3–Q4, roughly in the $40,000 range—and honestly, I think we may very well see that level.
Luke Groman:
Yes, they’re extremely skilled technically. If you buy back in between $40,000 and $50,000, you’ll become an epic legend—because you sold near the top.
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