Tucker Carlson Show: w/ Coleman Church on Gold, Crypto, Debt Crisis (Transcript)

But the harder it is to trade, the more the banks make money at trading it. So certain countries are harder to access than others.

TUCKER CARLSON: So all of this debt originates from the desire of countries to raise money from the world.

COLEMAN CHURCH: Correct.

TUCKER CARLSON: So if I’m Kenya and I want to fund the operations of my government, I issue bonds.

COLEMAN CHURCH: Yep, you issue locally, issue local bills to local banks, primarily local bank treasuries. Foreign investors can access that through…

TUCKER CARLSON: Typically.

COLEMAN CHURCH: Plain vanilla kind of derivatives. And they’ll issue dollar denominated euro bonds that are open to the world to trade in dollars.

The Power of the Treasury Secretary

TUCKER CARLSON: So if you’re the treasury secretary, that’s a huge power that you have. You can bailing out other countries certainly.

COLEMAN CHURCH: I mean I saw it. My first job for about a year, I was an analyst on a trading desk. And like six months in, they gave me a trading book, the Mexico book. This is 1994. And they gave it to me because I was a kid and it was the safest book. You couldn’t hurt yourself too much with it.

About six months after that, the Mexican peso crisis hit. So, yeah, that was Robert Rubin and friends. I lived through that whole experience of the book.

TUCKER CARLSON: What did they do? What did who do?

TUCKER CARLSON: What did Rubin, then Treasury Secretary, what did he do with the Mexico crisis?

The Mexican Peso Crisis and the Bazooka Approach

COLEMAN CHURCH: Well, what’s interesting is I don’t know if it’s a function of just how the human brain works. And you look back and you’re like, oh, yeah, we basically bailed Mexico out and cleaned it up and everything went on as it was. But you forget as you’re going through that these things all take a lot longer. Your memory shortens up. It took a lot longer and it took a few go rounds.

And what I learned through that whole thing was because I went through a bunch of these crises. There was the 1994 Mexican peso, 1997, the Asia crisis, Thai baht or a few, remember Thai baht crisis and Korea chai balls and all that. And then 1998 was Russia, 2000 was Argentina peso crisis. And then we had the GFC. So there was a series of rolling crises all in like the first 10 years of my career.

So that definitely kind of wounds your ability to stay perma bullish when you’re going through a bunch of rolling crises. But what I learned through these series of crises is that what you have to kind of start with is the bazooka to go with the MOAB of bailout that you have to go with way more than the market thinks you need.

Because in the Mexican peso crisis, if my memory serves properly, they kept coming with not half measures, but just enough of what they thought would bring back market stability or market confidence. And just enough creates a bit of spike in confidence and then start to panic again and then come back again until finally they come back with the mega bazooka, swap lines, bailouts, all that sort of stuff. So now that was also early in sort of the Washington consensus era of foreign policy.

TUCKER CARLSON: And there was, I guess the macro point I would make or the conclusion I’m reaching is this is a huge feature of our foreign policy.

The IMF’s Role in Global Finance

COLEMAN CHURCH: It is. And the IMF. It’s funny, I’ve been, you mentioned Ukraine and the trip I went to Ukraine was an investor trip. And part of the purpose of an investor trip is to go and to meet with their finance ministry, their debt liability people, meet with banks, meet with locals, get an assessment and go to, you always go to the IMF, the IMF there, and ask what the likelihood is of the next tranche being delivered.

And perhaps it’s a bit cynical, but 30 years of trade, emerging markets will make it pretty cynical. But I’d always go into those meetings and walk away from those meetings. Like, what are we talking about here? Of course they’re going to, of course they’re going to disperse the next tranche. That’s what they’re in the business of doing. They’re in the business of lending money to these countries because that’s what they do and that’s where they make their money.

So it’s very rare that they won’t or they don’t, unless it’s a real sort of turn your thumb up, turn your, turn your nose up, or thumb your nose at the IMF.

TUCKER CARLSON: Is the purpose of the IMF to bail out mismanaged countries?

COLEMAN CHURCH: I think it’s simple terms, yes. I don’t think that’s the most euphemistic way of putting it or how they describe it, but effectively, yes, I’d say backstop or keep them, keep them afloat and to offer them guidance as to how to run austerity programs and get themselves back on the rails so that they can move towards prosperity, democracy, all this.

TUCKER CARLSON: Does it work?

COLEMAN CHURCH: Typically, no.

TUCKER CARLSON: Why?

The Political Problem with Austerity

COLEMAN CHURCH: Because, one, it’s very politically unpopular as a domestic politician to be taking orders from any foreign power, but certainly the west, and those orders come with strict austerity because how did they get themselves in those problems in the first place? Right. A certain distinct lack of austerity.

TUCKER CARLSON: Living beyond their means.

COLEMAN CHURCH: Correct. So that’s not particular to emerging markets countries. All sovereigns do that.

TUCKER CARLSON: Right.

COLEMAN CHURCH: Everyone in the west is doing that as well now, living beyond their means. But some of us, like the United States, are able to run what’s called countercyclical monetary policy because we have a reserve currency, so we have a special privilege to be able to maybe be somewhat more profligate than others.

But the money runs out a lot faster in emerging markets countries when you can’t finance your debt and you have a dual crisis of both your currency and your interest rates running out of control. And at that point you’ve got nowhere to go other than to your friends in D.C. or in Brussels and ask for the backstop.

But in return for the backstop, you need to make some promises about how you’re going to conduct your business going forward. And as you can imagine, cutting expenses, raising interest rates, slowing the economy doesn’t generally get people reelected.

TUCKER CARLSON: Exactly. So you really, you’ve got a democracy problem. These countries overspend because they’re democracies and they’re trying to meet the demands of their voters and then it’s impossible to fix because their democracy is trying to meet the demands of their voters.

COLEMAN CHURCH: That’s probably a little more euphemistic than I would say. Yes, that’s one factor, but there are other factors at play as well.

TUCKER CARLSON: How many countries have been bailed out by the United States over the past 30 years that you’re aware of?

The Scale of Bailouts

COLEMAN CHURCH: I mean, there’s hard bailouts and soft bailouts, so I couldn’t really put a number on it. Like how many are running an IMF program right now? Have to be in the dozens. How many? Like strict bailouts? I really don’t know off the top of my head.

I mean, we can go through the, we can go through, obviously, Mexico, Argentina. In the Asia crisis, there were a whole host of Asian countries that had to post up. So there’s the hard bailouts and then there’s like the softer bailouts are sort of coming back, staying on the teat, so to speak.

TUCKER CARLSON: Who makes money from this?

COLEMAN CHURCH: Who makes money from this? So the IMF theoretically makes money from the interest on the loans, but it’s typically below market loans. So it’s not a real profit motive. Banks make money from this, from facilitating the debt, the trading of it, the issuing of it, the fees of issuing of it. Investors make money from higher interest rates, obviously.

And then there’s a subset of investors, like distressed debt investors that will—

TUCKER CARLSON: Buy.

COLEMAN CHURCH: A bunch of defaulted, defaulted paper, sit on it, and then do workouts. Like the most probably stark examples recently would be Argentina. And, you know, right now Ukraine will be pretty significant one as well. See what the workout is with that.

Ukraine’s Unique Position

TUCKER CARLSON: What would you do with Ukraine as a banker at this point? Like, what’s likely to happen to Ukraine? Not on a military level, but Ukraine.

COLEMAN CHURCH: Ukraine is a different one than say in Argentina because it has at the moment more of a geopolitical put, so to speak, than pick a random country like Bolivia or Argentina. Although now under this administration, clearly there’s more with sort of Monroe Doctrine Part 2, there’s more of a geopolitical put to Argentina.

But Ukraine’s a tricky one because there are obviously, up until recently, you had the entire west behind them, right? And there’s this week alone, you’ve got, you got Larry Fink, Witkoff, and Kushner over there working on stage two of what’s going to happen, the peace process, but also the rebuild. So it’s an odd one. I think that’s going to be a combination of public and private because there’ll be so much rebuild to do, and there’ll be a lot of money to be made in the rebuild.

Anatomy of a Debt Crisis

TUCKER CARLSON: What does a debt crisis look like? What is a debt crisis?

COLEMAN CHURCH: Well, a debt crisis typically is not a debt crisis alone. It’s accompanied by a currency crisis, the debt crisis, the external debt, and then a local market interest rate crisis, which is also debt in itself. So the local T-bills, local interest rates will skyrocket at first to try to raise interest rates, to try to attract money to the currency, to stem the route on the currency. And that can work up until a point until you lose control of both.

So what a debt crisis looks like is currency runaway currency devaluation, runaway higher interest rates which clamps down the interest rates, clamps down any lending locally, clamps down any local growth, creates defaults on domestic businesses. The currency running away depending on the country. But all countries, it causes inflation. But countries that rely on imports certainly even more. Right. Everything you’re bringing in is going to cost far more in your local currency. So it’s really a spiral.

And then current, typically what happens is bonds will drop to a level that’s called “recovery value.” And recovery value is effectively what is a term really more from say the corporate credit markets where if you were to strip everything down and sell it for parts, what could you get? What could you get for the cash value?

TUCKER CARLSON: So interest rates spike, bond values drop, collapse. Yes. What does this have to do with debt? Why is it described as a debt crisis?

COLEMAN CHURCH: Because no one can function without borrowing. No one can function without debt. So if you can’t borrow, you can’t exist.

TUCKER CARLSON: And there’s no country that’s not true of, I mean there—

COLEMAN CHURCH: Are countries that don’t necessarily need to borrow as much as they do, but they still do.

TUCKER CARLSON: Why?

COLEMAN CHURCH: Because one, because they can cheaply. I would argue the GCC countries don’t necessarily need to borrow as much as—

TUCKER CARLSON: They have the Gulf, Persian Gulf countries.

COLEMAN CHURCH: But they have recently Saudi for example, because they’re going on a massive expansion to diversify themselves away from their core business, which is oil.

TUCKER CARLSON: Which.

COLEMAN CHURCH: Is actually a very wise thing to do because if you look at countries historically, Venezuela is probably the most extreme example that had an, it was a single A rated country in the 80s. I went there in the 90s with gleaming infrastructure, incredible highways, beautiful hotels, amazing place. And they never took the oil wealth and diversified away from it in a meaningful way.

And then when you have an oil shock and you’ve taken out too much debt against the let’s make up a number, $100 oil price and oil drops to 30, you’re all upside down. And so that’s what, you know, that’s what MBS is looking at for a multi-decade plan to build, you know, build these cities, technology innovation centers and so forth which is clearly learning from, from the past.

TUCKER CARLSON: But, but they’re borrowing to do that.

COLEMAN CHURCH: They’re borrowing to do that. Yeah, but they’re borrowing at fairly cheap rates. There’s also a concept that you want to borrow as a sovereign at the sovereign level to set a benchmark against your companies can borrow in international markets. It’d be the broader the investor base, theoretically the cheaper the interest rate. So they’ll set a, they’ll set a benchmark level and then a corporation can borrow at that rate plus 20 basis points or 50 basis points.

Debt and Sovereignty

TUCKER CARLSON: So if every country’s indebted, I mean, debt decreases your sovereignty, your ability to make independent decisions.

COLEMAN CHURCH: That’s correct, yeah.

TUCKER CARLSON: So if every country’s in debt, then there are no fully sovereign countries then, right. Can’t just, it’s not. No country is free to do exactly what it thinks it should do in its own interest. They’re all connected.

COLEMAN CHURCH: No. And again, back to the US I mean, theoretically we are or were based on the fact that we have a global reserve currency. But there is a limit to everything at some point.

TUCKER CARLSON: What’s the limit for the United States?

COLEMAN CHURCH: It’s hard to say what the limit is. The limit is what loses the global reserve currency status. As I alluded to before, these things don’t happen quickly. They happen over a much longer period of time than anyone would think.

TUCKER CARLSON: So.

COLEMAN CHURCH: How do you in simple terms, for me, let’s look at some global reserve currencies historically. Dutch Gilder, British pound, US Dollar, probably the most obvious examples in relatively recent history. And what did they all have in common? They ruled the seas. Military dominance.

TUCKER CARLSON: Right.

COLEMAN CHURCH: And you know, you’ll see memes online where people say what, you know, pictures of fleets of aircraft carriers in the Gulf and displays of military power. “That’s what backs my currency” and that is true. But you know, at some point you got to ask yourself a question like where. You know, also how did empires from—

TUCKER CARLSON: Rome.

COLEMAN CHURCH: To the Dutch to the Brits, like imperial overreach to an extent was what undid them.

TUCKER CARLSON: Right.

COLEMAN CHURCH: And if we continue to, I mean, what concerns me longer term of the potential to lose the reserve status is if we lose our military dominance. That’s not happening obviously tomorrow, the next day. There’s a few things that, that could obviously, I mean, you’re more versed than I am in this whole notion of modern day drone warfare. But that certainly levels the playing field very, very quickly. You see what the Houthis were able to do with not so sophisticated and not very expensive drone technology. But that’s, you know, that’s pervy for some military expert, not me. The other thing that concerns—

Military Dominance and Reserve Currency Status

TUCKER CARLSON: But the structure remains the same. So the United States can continue being indebted to the degree that it is because it has the world’s reserve currency and it possesses that because of its military dominance.

COLEMAN CHURCH: It does.

TUCKER CARLSON: But if.

COLEMAN CHURCH: Yes, I think what’s a very important. Was a very important moment, however, was the seizing of the Russian reserves at the beginning of the Russia-Ukraine conflict. I felt that and I think we’ll look—

TUCKER CARLSON: Can you tell us what happened just for people?

COLEMAN CHURCH: Yes. So quite simply, the Western power seized the Russian reserves that were sitting in the New York Fed. I believe it’s $300 billion is the number that they seized. And the Europeans still want to use that for rebuild and so forth in Ukraine now.

Not to get into who’s right and who’s wrong in the Ukraine-Russia conflict. That’s not the point of this. The point is it sets a precedent. That’s a scary precedent. That is your money that sits in US Treasuries or gold in our—

TUCKER CARLSON: In.

COLEMAN CHURCH: Our Federal Reserve is not safe if you run afoul of the powers that be. So there’s a very obvious and natural reaction function to that, which is powers like India, China and Russia stop buying treasuries and start buying gold. The gold call was certainly we have inflationary pressures we can talk about. But even more to the point, it seemed obvious at that point that that’s the trade. Yes, it’s an inflationary—

TUCKER CARLSON: I bought gold that month.

COLEMAN CHURCH: I don’t remember.

TUCKER CARLSON: Yeah, and I’ve done better than the stock market’s done.

The Debasement Trade

COLEMAN CHURCH: Well, it’s funny, the move in gold this year. I won’t get it right off the top of my head, but it’s over the last 20 years. I think now gold’s now beat the S&P. Now when you compare the two, it’s really effectively just a debasement trade when you look at it.

TUCKER CARLSON: What’s a debasement trade?

COLEMAN CHURCH: Debasement trade is that the currency that we, the currency that we all use and think about every day has been debased against gold, the value of the dollar. I think oftentimes people look at the dollar as the dollar strong or the dollar weak. And what people are looking at is effectively the DXY, the dollar index. And that’s a basket of major currencies or it’s heavily weighted to the major currencies. Euro, yen, Canadian dollar, Aussie dollar.

And it’s really at this point, kind of a ridiculous comparison because all of those countries are sort of in a basket case with their debt issue and their growth. But if you look at the dollar versus bitcoin or if you look at it versus gold over the last 10 years, it’s pretty clear that the currency has been debased in those terms.

So if you look at it in that terms, the stock market returns don’t really actually look quite as as great, as wonderful. If you’re looking at what a dollar would, how many, how many dollars it took to buy an ounce of gold 10 or 15 years ago versus today.

TUCKER CARLSON: And all of that or some of it is downstream from the decision by the Biden administration to freeze Russian assets because that scared the crap out of the rest of the world.

COLEMAN CHURCH: I think the gold move is for sure the dollar weakness against gold. Yes, but there’s also, I mean, I think the big move in, if you look at what we did after the GFC in terms of interest rates and global financial crisis, where what we did, bailout, extraordinary measures, fiscal and monetary, keeping interest rates at zero, emergency measures, keeping rates at zero, that remained in place for a good 10 years.

I don’t know how you stayed emergency measures at zero interest rates when the stock market quadruples over triples, quadruples over 10 years. I think—

TUCKER CARLSON: Why is that bad? All those investors got rich. Everyone’s happy with their 401(k)s. Why is that bad?

The Problem with Price Controls

COLEMAN CHURCH: Well, it’s bad for a number of reasons. One is if you believe in a free market capitalist system, you believe in the pricing mechanisms and the free market pricing is everything. The price of meat at the farmer’s market is set by the free market. Who’s willing? Willing buyers, willing sellers at a fair price.

Once you start to put in price controls on the Soviet Union, definitionally, we don’t have free market capital. At the core of free market capitalism is the price of money. So we artificially put price controls on the price of money is the way I look at it. We artificially kept interest rates way too low at zero when the market didn’t necessarily demand the conditions. Maybe at the time, certainly five years hence, 2015. I don’t really see why we needed to keep interest rates at zero for that long.

So yes, I think the reason was, in my opinion the reason why the people at the Fed, the dozens and dozens of PhDs at the Fed making these decisions probably to a man, to a woman, wrote their PhD on the Great Depression and what the Fed did wrong and the horrors of deflation. So really the depression was really a result of deflation. So that’s the greatest boogeyman of all. So anything you can do to fight deflation. Deflation is the real killer, especially when you have an excessive debt load.

TUCKER CARLSON: I’m going to stick to the dumbest possible questions. I hope I don’t offend you. What is deflation?

COLEMAN CHURCH: Deflation is prices going down. What you kind of want is a gentle inflation to help inflate away the debt, to show gradual. The benchmark, the target Fed target for a long, long time has been 2% inflation. They soft up that to 3 recently and as you know, just cut rates this week even with core PCE at 2.8. So they’ve kind of abandoned that 2% target. But what I think in that time.

TUCKER CARLSON: Why wouldn’t I want deflation? Because that makes the value of my paycheck higher.

COLEMAN CHURCH: It depends on who I is, who the I asking that question is.

TUCKER CARLSON: Right.

COLEMAN CHURCH: So if you’re you and your wages are constant and you’ve paid off your house, certainly deflation would be great. Go to the store every day and things are cheaper. I mean there’s deflation, certain parts, certain sectors. Right. They for years there’s been deflation in all technological goods. Right. You get a flat screen TV for 400 bucks.

TUCKER CARLSON: Yeah.

The “Run It Hot” Strategy

COLEMAN CHURCH: So for you Tucker Carlson, it would be wonderful for the economy as a whole that’s really run on hyper financialization and debt. If you have a deflationary spiral, you are going to be left with a bunch of defaulted debt.

So where we are right now to pivot, I guess to where we are here with the US is I think when this administration came in, they messaged pretty clearly that the move was going to be away from the Biden administration and more towards some austerity. There would be some tax cuts, but will be offset with spending cuts. Doge, Elon, etc. People got very excited about potential, potential cuts.

And then I don’t know what happened shortly into the administration, but there was clearly a pivot that I didn’t see coming. And it was around the time of the tariff, the tariff tantrum and the big sell off in the stock market. But out of that seemed to come that there was a shift towards what people are now calling “run it hot,” which is forget about tamping down spending, little tax cut, maybe we’ll take some slower growth, but we’ll reduce the deficit for that’ll be good for the long term.

And instead let’s just run it both ways, fiscal and monetary. So let’s cut rates and…

TUCKER CARLSON: Let’s cut.

COLEMAN CHURCH: Taxes and let’s spend more. And I don’t know what happened or if that was always the plan or someone saw under the hood and said, look, the only way, typically there’s two ways to get out of a debt problem. You grow your way out or you inflate your way out.

TUCKER CARLSON: Right.

COLEMAN CHURCH: And it seems to me we’re going all gas, no brakes on both. We’re going to grow and we’re going to let some inflation go and that’s the way we’re going to get out of this debt issue. And I think Trump this week was saying I could see 20, 25% GDP growth. I mean, that’s a nice number, but that would certainly help our deficit issues.

TUCKER CARLSON: Well, it wasn’t that long ago that many Americans thought they were inherently safe from the kinds of disasters you hear about all the time in third world countries. A power loss, for example, or people freezing to death in their own homes. That could never happen here. Obviously it’s America. People are recalculating, unfortunately, because they have no choice.

The last few years have taught us that. Remember when the power grid in Texas failed in the dead of winter? Yeah, it happened and it could happen again. So the government is not actually as reliable as you hope they would be. And the truth is, the future is unique, unforeseeable, and things do seem to be getting a little squirrely.

Have you ever seen any country try that?

COLEMAN CHURCH: No.

TUCKER CARLSON: Really?

COLEMAN CHURCH: Well, in 35 years of watching 20, 25% GDP. No, no.

TUCKER CARLSON: Have you ever seen any country approach a debt crisis with that?

COLEMAN CHURCH: Sure, sure. I mean, Erdogan’s probably the most famous in Turkey.

TUCKER CARLSON: Did it work?

COLEMAN CHURCH: No.

TUCKER CARLSON: What happened?

COLEMAN CHURCH: He tried to keep cutting rates into an inflationary environment and put pressure on the central bank to cap rates. But the free market always, I think I would say you can suspend the laws of science, of physics, of gravity, of market economy for a time, but ultimately the gravity always works and the free market always works. So, no, it didn’t work. They have runaway inflation and extraordinarily high interest rates. And he’s been under a lot of pressure domestically for reelection, obviously.

The Right Approach to a Debt Crisis

TUCKER CARLSON: So what’s the right way to approach it?

COLEMAN CHURCH: Well, as I think, was it Thomas Sowell says there are no solutions, only trade offs. Yeah, there are no solutions. When you’re in this situation, when you’re in this situation of $37 trillion deficit.

TUCKER CARLSON: Is that a lot?

COLEMAN CHURCH: Sounds like a big number to me. I’m not even sure how many commas are in there. It’s a big number. It’s hard. It’s really hard to grasp.

But I think you go back, you started with ideology. The answer is always going to depend to an extent on what your ideology is and what you’re willing to sustain in terms of pain, short term to long term. For me, I was more a proponent of what I thought the plan was going to be, which is some deficit cutting through spending cuts.

And from what was coming out of Doge early, it seemed like there was plenty of fat to cut. That would have been politically rather popular, I think, especially with the right PR guys behind it. Guys were getting out there every week and on Twitter and going on podcasts and talking about sort of the absurdities they were finding. Now maybe, maybe it’s a drop in the bucket overall, but I think it was a worthwhile exercise to go with. I don’t know. Again, I don’t know. I’m not on the inside, so I don’t see what.

TUCKER CARLSON: Could it be that there are. I mean, so the idea always was that federal bureaucrats, public servants, as we call them, were serving, were serving and they were making less than their private sector counterparts and there was suffering involved, but patriotism compelled them to do it, so they did.

And now you look at the numbers and it’s like, no, no, no, no. Your federal employee on average makes way more than your private sector employee. 2x. So they’re the most privileged people, okay, in the middle class.

COLEMAN CHURCH: And by far that doesn’t count their gilded pension plans.

TUCKER CARLSON: Is it really 2x?

COLEMAN CHURCH: I think the number is average medium private sector family income is $70,000. I think it’s $110,000 or $115,000 for federal.

TUCKER CARLSON: Not including the benefits, which are ridiculous. Work from home for five years. But then of course, the population of federal workers or federal contractors, which are. I mean, there are probably as many federal contractors. No one ever says that, but there are. Deloitte is a federal contractor. Right.

So there are so many of them now that we maybe have reached that tipping point where no administration can pivot against its own employees because they’re voters.

The Washington D.C. Wealth Boom

COLEMAN CHURCH: Maybe, maybe. But I’m sure you’ve alluded to many times, you can’t have. What is it? 7 out of 10 top zip codes in the United States are all sort of in and around Washington D.C. I mean, I went to. You, you grew up there. I went to school there in the early 90s and I hadn’t been back for 15 years.

It’s night and day, it’s gleaming, gleaming office towers, rows and rows. I remember having an internship two blocks from the White House and you were passing, you had to pass sort of bombed out derelict buildings.

TUCKER CARLSON: And now it’s just from the 1968 riots. They never were rebuilt.

COLEMAN CHURCH: 1992, they were still there, like literally two or three blocks from the White House.

TUCKER CARLSON: I remember.

COLEMAN CHURCH: And it’s crazy. I mean, it’s. And Flash is a Roman empire, right? You go to, you go to Rome to collect your tribute. And so I don’t know. I don’t know. I’m not as privy to that world as you are. I don’t know what people see when they get into office and realize that there’s potentially no way, there’s no way around it. All our intentions are we’re great, but this is the way it’s going to be. I don’t know.

TUCKER CARLSON: Okay, but you’re also suggesting that this is not a solution, that you can’t spend your way out of a debt crisis.

COLEMAN CHURCH: I haven’t seen it done before.

TUCKER CARLSON: Right. How much magic would that be?

The Only Way Out?

COLEMAN CHURCH: The sense. A very talented individual, he’s a lot of experience in markets, very successful, the right guy to have at the helm. If he thinks this can be done, I guess we don’t have any choice but to see how it plays out.

But maybe that’s the play. The play is this is our only way out. People on both sides, people I speak to, people I knew in the markets, friends of mine, people whose opinion I respect on both sides of the aisle, the one thing we all agree on is that this is not a tenable situation. It’s not some MMT Elizabeth Warren people we’re talking to. This is like normal people that say, like, okay, at this point we’re kind of boxed at 37, 38 trillion.

So maybe that’s the issue. Maybe we’re so boxed that we got to run this experiment because it’s our only way out and hopefully growth kicks in. But it doesn’t. Yeah, the current growth scenario in the US is really hard to get your hands around in one part because it’s such a polarized economy.

People are calling it a K shaped economy, which I think is a pretty accurate term. K shaped, meaning the lower end is hurting and continues to hurt more and the upper end gains and continues to gain more. And we’ve seen throughout history that’s not a tenable situation.

TUCKER CARLSON: No, it’s actually what happened in Venezuela. It’s how they got Hugo Chavez.

The Powder Keg Economy

COLEMAN CHURCH: Yeah, it’s a powder keg ultimately. And it’s also extraordinarily difficult to get a real handle on where the numbers are because we’re not releasing any numbers right now because of the government shutdown. So the Fed’s flying blind to an extent.

You can rely on certain private sector indicators that are kind of shockingly bad, frankly, when you look at consumer loan defaults, credit card balances, late credit card payments, auto loan defaults. I think October was 185,000 announced private sector layoffs and worse since 2008.

So you have a situation where the U.S. economy is 69, 70% consumer led. So if we’re going to rely on the top 10% to continue to spend on Gucci bags and trips to St. Barts, I just don’t know how sustainable that is when the lower end is swapping out New York strip for pork loin. And Walmart numbers are great because middle and upper middle class is shifting from the Publix to Walmart shopping. Everyone’s getting squeezed.

So I don’t know that the growth is there. The growth can come, maybe the growth can come with these tax cuts, with interest rate cuts, certainly with deregulation will help and all this promised foreign investment. But there’s a lag to all that.

TUCKER CARLSON: So we’ll see. It does seem from an ignorant outsider standpoint, which is mine, that there’s an awful lot of emphasis on the public equities markets. And like stock market’s the measure of how we’re doing. Whether or not that’s a good measure, I don’t know. Maybe not a perfect measure, it feels like to me. But how safe is the stock market in the United States as a place to put your money? I can tell this is an uncomfortable question. Be as diplomatic as you can be.

The Concentration Risk in U.S. Markets

COLEMAN CHURCH: Well, it is the largest, most liquid stock market in the world. It does attract not just domestic savings, but huge foreign investment. There’s an expression that says money goes, capital goes where it’s treated best. And we still do treat capital the best in this country. Extraordinarily dynamic markets, from venture cap to private equity to public markets. And that’s something we should all be very proud of. And it helps grease the skids of global commerce. And that’s great.

There are some concerns, clearly concerns about the current valuation of the equity market and the structure, the economic structure of the flows. So one, there’s massive concentration risk. It was the FANGs. Now it’s the Mag 7. The top 10 companies in S&P 500 I think have accounted for something like 42% of the gains year to date.

The big get bigger. You had Nvidia at one point tipped over $5 trillion market cap, which is again a hard number to really get your head around at that point. I think it was larger in market cap than every market in the world except for U.S. and Japan. Entire market cap of any other trade, any index in the world.

TUCKER CARLSON: Wait, bigger than the entire index of any country in the world?

COLEMAN CHURCH: Yes, bigger than the cumulative total of the value of all the companies traded.

TUCKER CARLSON: On those indexes on a random exchange.

COLEMAN CHURCH: Yeah, except for I believe U.S. for sure. And I think Japan, again, I could be wrong, but something in that you get the idea of what I’m saying.

TUCKER CARLSON: So just one company dwarfed all these economies.

COLEMAN CHURCH: That’s right.

The Explosion of Options Trading

COLEMAN CHURCH: And we don’t need to go into all sort of the price to book and price to sales and expectations of future revenue, all that sort of thing. You get into a market psychology event where stocks that go up continue to go up because people chase momentum.

I read something yesterday that the explosion in options trading, the volume options trade is now $3.5 trillion a day, which is larger than the entire market cap of the Russell 2000. So the 2,000 small mid-sized companies, $300 million to $2 billion market cap companies in the United States, and that doubled I think from 2022 and then doubled again. So you’ve got an insane amount of leverage. You’ve got margin debt at all time high.

TUCKER CARLSON: May I ask why is it significant that the options market is huge?

COLEMAN CHURCH: Because it’s not just the options market’s huge, it’s also the structure of the options. They’ve moved to zero day to expiry options. It used to be weekly or monthly options and now it’s same day options. The retail with the gamification.

TUCKER CARLSON: An option, my understanding of an option is an option is a bet on in what direction?

COLEMAN CHURCH: In the direction with and you get an immense amount of leverage. Immense amount of leverage.

TUCKER CARLSON: So how does that work? How do I…

COLEMAN CHURCH: So let’s say that you want to buy a call betting that Nvidia is going to go up between now and the close and at the money. Nvidia call meaning let’s say it’s trading at $177 right now and you think it’s going to go up and the price of the at the money, the $177 call is till now to the end of day is 75 cents. Let’s just say so you’re betting that it’s going to go up more than 75 cents.

If it goes up $1.50 you’ve doubled your money. You’re not just making 75 cents on $177 which would be whatever third of 1%. You’re making 100% of your money. So you’re getting all you can lose is the premium, the 75 cents you pay for that option. But everything over 75 cents starts to run exponentially in terms of profitability.

So people are making an insane amount of money on in this run up on options, zero day options and they’re doing it from their phone. It’s pretty easy.

TUCKER CARLSON: That’s not really investing though, that’s betting.

COLEMAN CHURCH: Yeah, that’s gambling. But that’s just one component of the structure of the world.

TUCKER CARLSON: But it sounds like it’s now a huge component.

COLEMAN CHURCH: It is a huge component. But again with the gamification of…

TUCKER CARLSON: Crypto.

The Passive Flow Problem

COLEMAN CHURCH: Trading and options trading and Robinhood and with gambling, DraftKings and all that stuff. Sort of part of the culture. And it all started in COVID when people at home with extra stimulus money and not much to do. And the market was ripping and people got hooked on it and people keep doing it and generally people are doing quite well. I think retail has done better than institutional, largely speaking this year.

But the other part of the structure of the market that’s somewhat concerning is just this passive flow. So there’s a guy named Mike Green who you should probably speak to has done the best work on this. And passive flow, basically 401k. If you put your money in every two weeks, your money’s automatically going to your 401k and you click to that. It’s auto invest.

If you go and you look at most companies’ 401k options, their options on what to invest and then you break down each one of them. Basically every single equity option fund you have has the same high concentration in the same five stocks. So Apple, Microsoft, Nvidia. So you don’t know that necessarily. You don’t really know what you’re buying or what percentage of the fund is in those.

It’s very highly weighted because the higher the market cap go, the higher weighting, the higher the weighting goes and on and on and on. So it’s an automatic machine like underlying bid to the market that continues to the big, the big get bigger and bigger and bigger.

And you could say, okay, what’s wrong with that? These are great companies, they’re multinational, they have great business models that were low capital intensive and high margin. And they’re basically a lot of them are monopolies in their space.

Okay, well two things can happen. If unemployment rises, if you lose your job, you’re not putting your money in your 401k. If you lose your job and inflation keeps ripping, you might have to withdraw from your 401k. Creates a vicious cycle.

The other way it’s too much concentration and too few, too much concentration and the structure of it perpetuates it. And then you add on the leverage of the option trading with momentum that keeps this trade going and going and going to where you get to $5 trillion market caps.

Now there’ll be a whole coterie of Wall Street analysts that will justify why $5 trillion makes sense because of this, that and the other thing. But I’m not sure what if they’re…

TUCKER CARLSON: Of the 5, 8, 10 companies that have the bulk of the value, the plurality of the value of the entire S&P, if one or a couple of those companies dramatically reset in its value and its share price, what would happen?

COLEMAN CHURCH: Well, you’re seeing it kind of right now as we speak. As the AI trade is starting to lose a little bit of favor, there’s starting to be some questioning on the AI trade. And the market can’t continue to trade up if one or two of the major components are falling out of bed.

I mean, this week it’s been Oracle and last night Broadcom took the market down. Nvidia is starting to weigh a little bit. So we’re very tech sector heavy. And the other thing that concerns me to an extent about not just for public markets but for private credit markets is that with this AI build out and this data center build out.

TUCKER CARLSON: Out.

The Capital Intensity Problem

COLEMAN CHURCH: Obviously an extraordinarily capital intensive. And what I was speaking about before, about how a lot of these Mag 7 countries had a great model of being capital light, they’re now becoming quite capital intensive.

TUCKER CARLSON: Right. It’s not writing software, it’s building physical things.

COLEMAN CHURCH: Exactly. You’re building physical things and you’re borrowing a ton of money. This is what the problem with Oracle is right now is they tend to borrow a lot of money and now they’re borrowing a lot of money to build things and build things that depreciate in value over time.

A chip that you buy, a lot of the financing that’s been going on too has been people have been using collateral, these chips as collateral to borrow against. So there’s borrowing and borrowing and borrowing, but you’re borrowing against a chip that naturally is going to be replaced by the next evolution, of course. So that’s a bit of a concern about the value of the collateral. And when that daisy chain unwinds, it could be ugly.

The other thing is that there’s so much borrowing in the private credit markets for these hyperscalers and these data centers that it crowds out. There’s a finite amount of borrowing available. It’s crowding out borrowing and investing in other areas of the economy. And that concentration risk concerns me to an extent as well.

TUCKER CARLSON: An extent as well.

Comparing to the Dot-Com Bubble

COLEMAN CHURCH: A lot of people have made the analogy to the 1999, 2000 tech bubble. And the good news coming out of that down the line is that okay, we all got hyped up on the Internet and we got carried away with pets.com, things like that, eToys. But the truth was in retrospect, we weren’t hyped up enough about the Internet and what it would do and how it would change the world.

But there’s still a cycle that comes along where there’s the euphoric cycle and then the crash cycle. And then on the back end of that you have the winners that survive, like the Amazons that you could have bought for practically nothing in 2002.

And then there are companies like, similar to me to the hyperscale data center were the fiber companies like Global Crossing, WorldCom, and those were bubbles that crashed. But what were they doing? They were laying fiber cable for the Internet, which, okay, we had a malinvestment boom. The companies crashed. But cables still exist. And the cables are in use today. And the cables were very valuable. And the cables didn’t depreciate because the cables have a useful purpose.

So people are making the same argument now is like, okay, we may go through that cycle as well. It’s maybe get a little euphoric. There’ll be winners and losers out of this and it’ll be fine down the road. And AI is not going away. I’m not here to disagree with that.

But there’s a slightly different component where you’re building these things that aren’t, that could, you’re buying all these chips that could depreciate, download. It’s not exactly the same tree.

TUCKER CARLSON: No. And the nature of technology is hard to forecast. Very hard to forecast. I mean, so they were telling us six months ago that AGI was right around the corner. Nobody thinks that anymore. So for example. Just for example. And so all of these infrastructure bets are predicated on predictions about what the technology will require in 10 years.

COLEMAN CHURCH: The thing that we’re really running up against.

TUCKER CARLSON: Do we know that?

COLEMAN CHURCH: We don’t. You’re exactly right. And I think there’s the worm’s turning a little bit on the efficiency. A lot of these…

TUCKER CARLSON: Yes.

The AI Infrastructure Challenge

And what they can and can’t do. And people say, you know, I saved a half an hour or I saved an hour coding something, but then it took me three hours to check to debug the work that the actual, you know, Claude or whatever did.

But the real thing that we’re going to run into is we don’t have enough power, we don’t have an electric and we don’t have enough water to heat and cool all these things. That’s just point blank. And even, you know, Jensen and Altman and these guys will tell you that. And that’s why they’re going hat in hand in D.C. and trying to make the case that this is a critically important industry that may need some government backing.

But even if you get that, the fact of the matter is the only way you can really power these things without spiking electricity bills another 300% and then creating a whole other political problem domestically is you need nuclear power. And we have plenty of natural gas that can work as a stopgap, but you need nuclear power and it’s a 10 year build out minimum to get the nuclear power that you need.

So when do we hit the wall? Somewhere between here and that 10 years we hit the wall in terms of our ability to get the electricity for these at this growth rate. Now, is this growth rate accurate projection? Maybe it’s not. And if it’s not, then we need to see a lot of these companies come off in value.

TUCKER CARLSON: So also, there are a lot of concerns about climate change. Yes. Oh, just kidding. That kind of ended quickly, didn’t it? Yeah. I haven’t heard that phrase in months, have you?

COLEMAN CHURCH: Climate change? No, I did see something. I saw something that Nature had. Nature magazine had to revoke a paper they did a few years ago that said that climate catastrophe was going to create an economic catastrophe. And that was all based on false premises. I think they did. Really?

TUCKER CARLSON: Yeah. I think the new idea is we’re going to have an economic catastrophe if we think about the climate catastrophe in any way. I noticed Larry Fink’s not lecturing as much about the climate anymore.

COLEMAN CHURCH: Climate and ESG is not as fashionable as it was a couple years ago, that’s for sure.

The ESG Phenomenon

TUCKER CARLSON: So how did that, like, as a guy who has dealt in markets like emerging debt, pretty pure. It’s like a debt trading is like a pretty pure market, right?

COLEMAN CHURCH: Well, pure is an interesting choice of words.

TUCKER CARLSON: No, I’m not saying unsullied.

COLEMAN CHURCH: It’s pretty plain vanilla. That what you mean?

TUCKER CARLSON: I mean like there’s a willing seller, willing buyer. But what I really mean is the price is an organic price. It’s like what people will pay.

COLEMAN CHURCH: Correct.

TUCKER CARLSON: So that is the definition of a market. Right. How do you get to the price? Correct. So as someone who’s spent his life in that world and who clearly, you’re clearly like committed to the idea of markets like you believe people should be able to decide what they’re going to pay for something and what they’re going to sell something for, how do you explain ESG?

COLEMAN CHURCH: I don’t know that. Funnily enough, I don’t know that even the experts can actually define it. And I’m not joking when I say that at my last job we would do a conference every summer in Europe for investors and we’d have a series of roundtable topics. And the one topic that was standing room only sold out every summer in Europe was the ESG, without question.

It seems the US has definitely faded quickly from that, but Europe still seems very hooked in. It’s not faded there at all. It’s definitely a part of the investment process. But what’s fascinating is if you go to 20 clients in London and you talk about ESG, you will get a different answer from each ESG specialist.

As to especially in emerging markets, it’s a very difficult thing to work your way around the ESG constraints when most of what emerging markets are based on are hard commodities. And there’s also obviously the governance component, the G component. It’s not always maybe up to Western standards with the G. So they’re with…

TUCKER CARLSON: With the G, they’re a little light on…

COLEMAN CHURCH: The G. The G, the E’s not great. The S, no one really knows what that means. And the G is highly questionable. So it’s funny, it’s still, I guess what I call a work in progress.

TUCKER CARLSON: But just like conceptually, the idea that factors that are not really relevant to your fiduciary responsibility, which is to maximize returns for shareholders or something related to that, like, I don’t know, it’s just an interesting concept like how did that happen? It’s that my personal guilt as like an educated Westerner supersedes your right to have me handle your money responsibly.

COLEMAN CHURCH: Well, it’s straight government intervention is what it is. It’s government, it’s ideology. If you are of that mindset where you believe in control economy, it is the dream of all dreams to incorporate your ideological bent into the last thing that should be left alone, which is the free market.

You now inculcate all of this ideology into every decision making process all the way down to setting the price of money, which to me, I know I’ll run afoul of plenty of people on this, but to me that’s a bridge too far. That’s not the place for it. But it’s once in, it’s impossible to get out. Once you go into that’s involved in all the investment processes, it’s really hard to take it back out again.

Market Concentration and Risk

TUCKER CARLSON: So back to the AI infrastructure boom in the United States. If that slowed down or if people lost confidence in it, are you concerned about a cascade effect on public markets?

COLEMAN CHURCH: In the short term, yes. The question is how quickly does the market rotate, do the rotation trade? So we’re starting to see that actually the last week or two, you’re starting to see small caps really rally. Dow components really rally, old economy stuff really rally as tech is being soft.

So there’s theoretically a way you can thread the needle there. But with the concentration risk and with the size of just actual size of these companies, it’s going to be a drag on the overall market as a whole. Best case scenario.

TUCKER CARLSON: One of the reasons the stock market is my theory is so big is because it’s the easiest and as you said, most liquid way to park your money with some hope of return. And I don’t really think Americans are encouraged to think of other ways. I just have always noticed that.

COLEMAN CHURCH: Absolutely. And as an emerging markets guy who’s been able to look into other countries, frontier markets, etc. and how they look at it, there’s always from if you’re an Argentine or a Brazilian or Turk, you’re always looking outside of your domestic economy, domestic market for opportunities. And we really don’t. Too much.

TUCKER CARLSON: No. And it’s so easy to participate in the public markets in the United States. As you said, you can do it on your phone. You can make bets on market movements from your phone, which is just like, seems like it might have unintended consequences maybe. Yeah.

COLEMAN CHURCH: Crosses the line from, as you said, from investing to straight gambling.

TUCKER CARLSON: But okay, so it’s ease of use is like the key to any scale, I think.

COLEMAN CHURCH: Sure.

TUCKER CARLSON: That was Amazon.

COLEMAN CHURCH: That was. Yeah. There’s a lot of applications to that.

TUCKER CARLSON: Well, yes, yeah, yeah, that’s true. Yes. Yeah. Well, that’s by the way, why tobacco use went absolutely crazy as soon as someone figured out an automatic rolling machine for cigarettes. People used to have to smoke pipes, cigars, take stuff up their nose. The second you made it super easy to burn tobacco, the whole world became addicted to it.

COLEMAN CHURCH: Makes a lot of sense.

TUCKER CARLSON: Right. And that’s what the stock market is in the United States from my perspective. So. But if you’re trying to be a little more creative or hedge a little bit, your future, your family’s security, where else do you put your money?

Investment Alternatives

COLEMAN CHURCH: Again, it depends on, you know, who you are, net worth, etc.

TUCKER CARLSON: Let’s say you have an extra 100 grand. What would you, what would be a good call?

COLEMAN CHURCH: Well, the problem is the great obvious trades run a lot already, right. Gold and silver’s already run a ton. So long term investing, try to look at stuff, the ideal cross of…

TUCKER CARLSON: What?

COLEMAN CHURCH: Sort of fairly valued or cheap or distressed or out of favor that people haven’t really cottoned onto because you see a trend that’s about to emerge. Right now we’re in full throated recognition of the debasement trade and silver’s breaking out not for that reason, but also there’s a notion that there may not be as much physical silver out there as derivatives have been written against.

So there’s been a bit of a squeeze going on. Two weeks ago the Chicago Mercantile Exchange shut down for a cooling issue overnight just as silver was spiking, which was kind of convenient. So there’s some technicals in that market.

TUCKER CARLSON: Wait, so you think it’s possible there’s more paper against silver than there is silver?

COLEMAN CHURCH: Yes. So yes, there are definitely more derivatives written against all commodities than exist. But no one ever asked. Not no one. But typically if you’re an investor, you don’t ask for physical delivery of the commodity.

TUCKER CARLSON: I do.

COLEMAN CHURCH: I know you do.

TUCKER CARLSON: I do.

COLEMAN CHURCH: You do. And I’m going to find out where that stuff’s buried. So you don’t typically ask for the physical delivery of it when you’re trading in tens and hundreds of millions of dollars of derivatives against you. Cash settle, your derivative against mine, cash settle. The loser pays the winner and you move on.

So where do you go at this point given where valuations are? I think you go abroad, you look at multiples on US stock market where we were trading historically, extremely high PE ratios for the index on a historical basis and very high against foreign markets.

I think what this administration’s doing in Latin America, particularly as I mentioned earlier, sort of Monroe Doctrine 2, there’s clearly a movement afoot to stabilize the region and to partner with those that are critical to us. I would imagine that open up a ton of investment in growth there. There are plenty of Latin American countries that offer pretty cheap historical PE ratios.

So I think it’s probably time to diversify a little bit out of the US and diversify out of tech heavy stuff. That’s where I would go simply. I think you still have to own some gold and silver, just have to own some, but just not as much as you wanted three years ago, given how far it’s running.

TUCKER CARLSON: So. But you’re basically making a pitch for the Venezuelan stock market.

COLEMAN CHURCH: Not specifically, but there may be a catalyst coming there that could create a big move one way or the other. It seems in the next couple weeks.

TUCKER CARLSON: What about real estate? Land?

COLEMAN CHURCH: Real estate land for sure. That’s why I asked. It depends on who you are. I think productive agricultural real estate anywhere is always a good investment. Sort of a disaster hedge, but yes, land as a whole, yes. I don’t think I’d want to be rushing into blue cities and paying high interest rates and taking out a bunch of debt on overpriced co-ops in New York City necessarily.

TUCKER CARLSON: What about buying a 70 story office building on Sixth Avenue in Midtown New York?

COLEMAN CHURCH: If you can convert it to residential, perhaps and get a lot of tax breaks, I may want to see what our friend Mamdani says the first couple weeks.

The Future of Reserve Currency

TUCKER CARLSON: So you made the point that for a bunch of different reasons, Ukraine war, but other structural reasons, we are on the path to losing our privilege as the holders of the global reserve currency at some point, right? Well, because all empires are. Yes, so we know that.

The question is when does that happen and what replaces it? And my read is as of now, there’s no obvious national replacement. We’re not going to adopt the British pound or the euro or the yen or the ruble, but instead gold is the stopgap as it has so often been. But crypto seems like the next global reserve currency. Is that fair to say?

The Future of Blockchain and Tokenization

COLEMAN CHURCH: Yes, yes. I mean I would say this. I think people bundle together the notion of blockchain and cryptocurrencies. And what I’d say is I can’t necessarily make a pure prognostication on any one particular crypto. I mean, it’s been a phenomenal exercise and wonderful to see. It’s sort of like adherent to Austrian economics to see the experiment work.

I don’t think we want to get into the dynamics of individual cryptos. I think at some point, probably Bitcoin as a crypto will be usurped just by sort of a better technology. But put that aside, what to me unequivocally, and the next venture I’m going into is related to blockchain, is blockchain is here and is not going away whatsoever.

And blockchain is going to transform the financial services industry, pretty much everything we do financially transaction-wise. And fortunately we have the wind at our backs of this administration and Dave Sachs and Genius Act, et cetera. And nobody who maybe was somewhat skeptical three, four years ago is at all. I mean, Larry Fink as an example, I think continues to say all assets are going to be tokenized.

Just this week DTCC said all assets are going to be tokenized and put on the chain. And that’s going to remove a lot of little frictions in the system, extra costs that don’t need to exist, extra time lags that don’t need to exist. So the cryptocurrencies exist with the layer of the blockchain. You can’t have crypto without the blockchain, but the two are somewhat distinct.

TUCKER CARLSON: So a couple questions. One, is it safe? I mean, it’s reliant on electricity.

COLEMAN CHURCH: Yes, but so is every… And I got to mention, the CME went dark, right, the other day, Chicago. So the NASDAQ shut down.

TUCKER CARLSON: Right.

COLEMAN CHURCH: Everything we do is reliant on, except for you coming over in your golf cart with a bag of gold coins for me, is relying on energy to that extent. Is it safe? Is it hackable? The theory, you know, one of the theories being proposed, Bitcoin, I’m not really sure if this is… You know, Bitcoin’s had a pretty decent drop from high 120s to around 90.

Part of the thing being floated is that with quantum computing making the leaps that it’s making, that Bitcoin might be able to be hacked at some point, perhaps. But again, I’ll put that separate to the blockchain. The blockchain, deeply encrypted, safe. These are the rails on which everything’s going to run.

TUCKER CARLSON: Okay, will it eliminate corruption or curtail it?

COLEMAN CHURCH: I think…

TUCKER CARLSON: I mean, because it’s kind of…

COLEMAN CHURCH: I think the question coming from you is a funny question because you know that nothing will ever eradicate corruption unless…

TUCKER CARLSON: It changes the human heart, right? No, of course, yes.

COLEMAN CHURCH: It should eliminate corruption, because what the blockchain is going to do, what it does is it creates a permanent, electronic, unhackable ledger. So think about something as basic as, like, title insurance. I don’t know if you’ve ever had to deal with that, but first of all, why do we need to pay?

TUCKER CARLSON: Have I ever had to deal with that? Yeah, I pay constantly. So why?

Blockchain’s Practical Applications

COLEMAN CHURCH: It’s an absurd notion, right? There’s a title. You own the title, you put it on the blockchain, it’s there forever. And I buy my house from you. The title gets transferred to me. It’s registered on the blockchain. The transaction’s there, now it’s mine. It’s there forever. We don’t need to pay a couple grand or whatever.

Sorry, one of my best friends runs a title company in Maryland. But, you know, he’s my age, so he’s probably almost done anyway. But that’s just an example. Like why do we need to pay five grand for title insurance? I just sold a house in Westchester and I found out that there was from two owners ago, there was, according to paperwork, there was a $650,000 mortgage still on the property and that never got expunged, but the brokers just kind of waved it back and forth and everyone just kind of stamped it.

That’s just an example that everyone can kind of relate to. But also why we’ll be able to send money immediately with no… If I send money to you, you’ll immediately get the money, get the care, get the interest on it. Why should I be paying $30 to send a wire from JP Morgan? That’s pure $30 of margin, all that kind of little stuff. So the company that I’m going to be starting with January 1st is called Liquidity I.O.

TUCKER CARLSON: And…

COLEMAN CHURCH: We have one of only six fully registered licensed alternative trading systems, which is a trading system that’s going to be able to trade all these tokenized and financial assets. And what we want to do is help democratize the financial markets and tokenize all kinds of assets.

But we’re working with our backer, just made some acquisitions with a couple of consumer loan businesses, auto loans and manufactured homes, mobile homes for example. There’s a great story. These two young guys in Dallas, they were working at JP Morgan and with their fourth bonus they said we’re not going to blow it this time, let’s buy some rental property.

And they couldn’t find any rental property. They were in Dallas. So they just cold called like 250 mobile home parks and they found one, put in $50,000, turned around. It was a $6 million trade. They were going to do a bigger one. And what they realized they were better off doing was revolutionizing the lending business for mobile homes because guess who the biggest player in that is? Warren Buffett.

So great business, obviously, high margin business. But what I didn’t learn until recently is that there is no refi on a mobile home and there is no lending available on a secondary purchase. So if I take out a loan for my mobile home and then want to sell it to you, you can’t get a loan. You have to buy for cash. And if rates go down from 8 to 4, I can’t refinance it.

So they’re going to, with their business and tokenization, they’re going to eradicate all kinds of costs which can create these two separate markets, which is a solution to, is a partial solution to the home affordability crisis. Like that’s something everyone can get behind.

Stablecoins and Monetary Policy

TUCKER CARLSON: How does this new technology figure into like monetary policy?

COLEMAN CHURCH: Like, wow, that’s a great question. So you familiar with the stablecoins?

TUCKER CARLSON: Yeah, I am, but will you describe what they are?

COLEMAN CHURCH: Sure. So stablecoins, think about it this way. In simple terms, say crypto, like a Bitcoin is sort of a free-floating currency. The market dictates the stablecoin is more like a pegged currency. So pegged to fiat, in this case Tether, Circle, they’re pegged to the US dollar and try to keep it stable at parity one to one. So what they are is a…

TUCKER CARLSON: And there are national currencies like this, there are countries like the Bahamas or whatever just pegged one to one.

COLEMAN CHURCH: Exact.

TUCKER CARLSON: Yeah.

COLEMAN CHURCH: Panama’s dollarized. Stephen Hanke was a big dollarization component. They tried to do it in Argentina, it didn’t work. Hong Kong’s got a dollar peg. So the stablecoins, they try to keep parity with the dollar and they are theoretically backed by treasury bills.

So money comes in, the money gets invested in treasury bills. One for one, you’re backed by AAA rated, short dated, no risk. But these become a conduit for all these transactions on the chain automatic through these. So it could go through the stablecoin and into other things from there as a sort of a conduit.

Now that’s all good and well, as long as we’re sure that those stablecoins are taking dollar for dollar, investing in what they say they are without a lag or without moving too far away from that tether. At the moment it seems to be diversifying away from strict T bills and they’ve been moving into gold, which is working for now, but yet to be determined how that works out.

TUCKER CARLSON: Does that make, does all this make the US dollar stronger or weaker?

COLEMAN CHURCH: Oh, sorry, yeah. So that creates a natural bid for our treasury bills, which is a great thing for Bessent and friends because that creates a whole new demand vehicle for our treasury debt on the stablecoins. And what the stablecoins do allow for, again a lot of emerging markets participants, is allows them to quickly access dollars and avoid depreciation risk in their own country.

So you’re getting a lot of foreign money into stablecoins that will be bid for T bills, which should hopefully help with our funding.

TUCKER CARLSON: Is there any way for the US government to use stablecoins as a weapon in the way the Biden administration used Russian assets at the New York Fed as a weapon?

COLEMAN CHURCH: I don’t know. I don’t know. I imagine there is. I don’t know what that mechanism would be. And I don’t think… I mean, in the Russia reserve instance, it was a bilateral seizure. This would be a seizure of untold amounts of investors. You’re seizing that. I’m not sure what the purpose would be other than just stealing the money.

Global Gold Reserves and Transparency

TUCKER CARLSON: Well, we’ve seen that before. True. What do we know about global gold reserves since it’s such a huge component now?

COLEMAN CHURCH: What we know, we don’t know everything that we know because it’s not fully transparent. But what we do know is the direction of travel, which is massive increases, particularly from India, China, Russia. That doesn’t seem to be abating at any time.

TUCKER CARLSON: That means they’re importing gold.

COLEMAN CHURCH: That means they’re buying gold. And there has been a lot of movement of physical gold, particularly over the summer. But the movement appeared to be more from the London vaults back to the United States rather than elsewhere. But we don’t know. We don’t have complete clarity on any of that stuff.

TUCKER CARLSON: How and why? How so? If you’re going to have an ancient commodity that’s like a huge part of the global system, economic system, how can you not have transparency? Maybe I’m answering my own question. You look at me like I’m an idiot.

COLEMAN CHURCH: I saw you. I saw you answer it before you finish the sentence.

TUCKER CARLSON: In other words, if it’s so important, why are people being honest about it? Because it’s so important, that’s why.

COLEMAN CHURCH: Weird that the Chinese wouldn’t tell us exactly how much gold they have in the vaults. Yeah, yeah. There’s no reason they should or would or have to.

TUCKER CARLSON: I guess.

COLEMAN CHURCH: My question. You don’t actually show your hand and how much you’re accumulating as you’re trying to accumulate an asset.

TUCKER CARLSON: Oh, is that true?

COLEMAN CHURCH: Well, yeah, typically.

TUCKER CARLSON: I’m learning a lot about markets from you.

COLEMAN CHURCH: That’s great.

TUCKER CARLSON: So I told you, I promised you stupid questions.

COLEMAN CHURCH: I know I said there are no stupid questions, but I was wrong.

TUCKER CARLSON: So, okay, then let me reframe the question this way. If we got somehow full transparency on gold, global gold reserves, where they are, who has gold, how much, would we be shocked? Is there a big spread between perception and reality?

COLEMAN CHURCH: We still don’t have the audit of Fort Knox that we were supposed to get a few months ago, so…

TUCKER CARLSON: Really?

COLEMAN CHURCH: Yeah. You might be shocked about that, too. I don’t know.

TUCKER CARLSON: You think Fort Knox just has a lot more gold than they’re telling us?

COLEMAN CHURCH: They may have 10 times more.

TUCKER CARLSON: More.

COLEMAN CHURCH: I don’t know. I really don’t. I don’t want to speculate. I mean I like to speculate but I don’t want to speculate on that.

TUCKER CARLSON: Uh huh. I’m guessing if there is a spread between perception and reality, it’s to the negative. But what do I know?

COLEMAN CHURCH: Not sure. There’s talk about revaluing the gold as well.

TUCKER CARLSON: What does that mean?

COLEMAN CHURCH: That means if you automatically revalue our gold reserves to market, we automatically have a higher effective capital base that should make us more credit worthy for lack of a better term.

TUCKER CARLSON: So gold, now US reserves are valued at under 100 bucks an ounce. Something like that. Something crazy, right?

COLEMAN CHURCH: I’m not sure exactly what it is.

TUCKER CARLSON: But I mean that’s like 1933 levels or something. And of course gold is over $4,000 an ounce. So why would we continue to value our own gold reserves thousands of dollars below what they’re actually worth?

COLEMAN CHURCH: I have no idea.

TUCKER CARLSON: That’s weird though, right?

COLEMAN CHURCH: It is, yeah. Especially when every other metric and you know, we have cost of living adjustments based on the CPI basket. I don’t know.

The Trading Floor Experience

TUCKER CARLSON: So how much, just to go back to your career trajectory in emerging markets debt. How much chicanery is there in that business? So if you’re dealing with emerging markets, some of those are solid, transparent, well-governed countries and some of them are Nigeria. What’s that like?

COLEMAN CHURCH: I would say there’s two components in the emerging markets trading business. There’s the trading thereof in the big money centers like Hong Kong, London and New York. And then there’s the domestic stuff that happens.

Now I could say in terms of chicanery, there’s a clear BC line at the global financial crisis on how we conducted business across the street in all products pre-GFC and post-GFC. I could say it was a lot more fun pre-GFC.

TUCKER CARLSON: Was it fun?

COLEMAN CHURCH: It was a lot of fun. It was as much, it was as fun as you could have having a job, really.

TUCKER CARLSON: What was so fun about it?

COLEMAN CHURCH: Every day was different. You’re on a trading floor. Every day is different. You have a front seat. You have a front seat and you’re participating in global events every day. Markets moving up, moving down.

You’re working with a truly diverse bunch of people from all walks of life that are as close probably to meritocracy on a trading floor as you could get. And it was very clear what the motivator was—it was making as much money as you could every single day and there was nowhere to hide from that.

So as a young person it couldn’t be a better learning experience because every day at the end of the day there was a number next to your name and whether it was through your good luck, bad luck, hard work, whatever, the number doesn’t lie and that’s the number. And it’s just a great way to learn and to have to face yourself and improve upon yourself.

Trading floors, guys from PhDs from Princeton to guys that dropped out of college and we were all in it as a team. It was really fun.

TUCKER CARLSON: What were the personality traits that allowed people to be successful? Like what’s the perfect profile of a trader?

COLEMAN CHURCH: It’s funny. I found that the best traders, and there’s investors and there’s traders right? Different, it’s a different mindset. The best traders I find were guys who thought more in two dimensions.

So if you thought in three dimensions you could outsmart yourself way too much. The “what ifs” and “oh but,” and if you’re in one dimension you’re just not at the IQ level to function. So the two dimension that took the factors into play, saw what the trend was, took it at face value, didn’t overthink it, went with it and wasn’t too much, had enough risk appetite but wasn’t too much of a cowboy I guess would be the perfect trader.

TUCKER CARLSON: You’re describing my dogs.

COLEMAN CHURCH: Yes. The worst traders I saw were oftentimes the smartest people. Really?

TUCKER CARLSON: Yeah, because they just overthink it.

COLEMAN CHURCH: Just overthink your way. You over-trade it, you overthink it, you’re always looking at “but this and that” and “I have all this information,” you’re analysis paralysis, or talking yourself out of a good trade.

Post-Crisis Regulation

TUCKER CARLSON: How did it change after the financial crisis?

COLEMAN CHURCH: We were egregiously over-regulated from all sides.

TUCKER CARLSON: Did that make markets safer for retail investors?

COLEMAN CHURCH: I don’t think so.

TUCKER CARLSON: Because the picture you painted over the last hour and a half is not one of like impregnable safety. Let me just say that.

COLEMAN CHURCH: I mean there’s obviously a lot of unintended consequences from the excess regulation but it just, it’s funny on Wall Street I think we were actually at the vanguard of hyper-regulation, hyper-monitoring. I mean they were monitoring every Bloomberg chat, every email, every phone call, everything was taped. Then they ran algorithms against it for keywords. Just way more scrutiny and everything.

TUCKER CARLSON: So you lived in the Panopticon before everyone else?

COLEMAN CHURCH: Yeah, I did. And I think there’s also, going back to the global financial crisis, it’s such a seminal moment in this country in a lot of ways because it actually, we made this deal with the devil and I’m a beneficiary of bailout. I worked at a big bank that got bailed out and I’ll never deny that.

But in doing so, we let the Trojan horse in and we married the government effectively. And they came in and they basically wrote our policies. They wrote our policies for us. From HR policies to recruiting policies to all the regulation and the stuff that I saw from a distance in terms of arbitrary fining for violations was kind of gangster-like.

And I saw a lot of good people thrown on the funeral pyre, sacrificed, just tossed out. Like, “let’s, this guy, this guy was in violation, these guys weren’t, but they were on the same Bloomberg chat. So let’s give like 10 bodies. Everyone’s fired, everyone’s career’s over.” It was a bad time. And so everyone started trading scared. People tried trading scared and it lost the joy and it lost the…

TUCKER CARLSON: But famously, none of the, the CEO, the executive level seem pretty insulated from punishment.

COLEMAN CHURCH: Yes. If I were going to give a more generous take on it, the CEOs really didn’t have much of a choice in some regard. It was like, “look, here’s the deal. You could keep your job and keep making $25 million a year if you agree to this fine for mortgage-backed securities or whatever, Libor rigging or whatever it is, this arbitrary number, you could keep your job and you can keep your salary or you can get fired and the next guy will agree to it.”

And they kept it afloat and they had to be in good stead with the government or the fines and the regulation would just come and come and come. But once you get bailed out, once you ask for the bailout, they own you. And that’s what happened.

TUCKER CARLSON: It always is what happened. They made the deal.

COLEMAN CHURCH: And it was like the tobacco companies, right? Like they kept the tobacco companies alive just long enough to keep bleeding them for fees. Like then they figured out there was just money there to take and they just kept coming back.

TUCKER CARLSON: Yeah. And the country did not get healthier. Life expectancy went down. And if I can just be honest, I don’t think the quality of the cigarettes improved at all. I’m serious. If you smoke a pre-settlement Marlboro Red, not that they exist anymore or a current one, it’s like it’s not even the same product.

COLEMAN CHURCH: I was a pre-settlement guy. I quit.

TUCKER CARLSON: Yeah. Oh, me too. I’m just saying I’ve heard that. So no, I don’t really think anyone won except for politicians. I don’t think there are a lot of lung cancer patients who…

COLEMAN CHURCH: A lot of nice new regulatory buildings were built. And I think also one of the great stories that hasn’t really been, maybe this was for you, one of the great stories that should be investigated is where did the proceeds from all those post-GFC fines go?

Because I saw some stuff around the time that was kind of staggering as to where it went. Now obviously it went back into building more of the regulatory bodies, like more SEC, whatever. But I think some of the money flowed to some very specific political organizations.

The Justification and Reality

TUCKER CARLSON: There’s no question it went to the swamp. Meanwhile, the whole pretext for this, the justification for doing this was, I lived here then. I just saw my house that year. So I was a victim of all this too, even though I never participated in it. But I lost my job along with a lot of other people. And just because the economy contracted so people lost their jobs, including those with four children.

But the justification was, which I wasn’t against, it was like “these people are totally reckless. Like they’re completely reckless. What is a mortgage-backed security? What’s a derivative?” And no one outside your world ever heard of any of that. It’s like I thought when I signed up for a mortgage, the bank I signed with held the mortgage. We had no idea they sold the mortgage. Most people didn’t know.

Again, there’s a lot of ignorance, including in my house about this stuff. And so the idea was like “this is crazy and we need to rein it in.” You’ve just described the gamification of markets. And it’s like that doesn’t seem like a decrease in recklessness.

COLEMAN CHURCH: Well it actually reminds me something from the previous conversation which is, people say you never know when you’re in a bubble until it’s over. And that’s entirely incorrect. I mean, I’ve been through a bunch and we all know. We just didn’t know when it was going to end.

People were talking about the bubble in 2005. Now if you fought it in 2005, you were out of a job pretty quickly. Like it went on for a long time. I could tell you the reason I want to bring it up is, again, the parallel to today is, in 2007 I had been trading bonds for whatever, 13, 14 years. So not the smartest guy, not the most quantitative guy, but been around enough to trade enough stuff to understand how stuff works.

And all this stuff they’re coming through with like CDO squared and CLO and synthetic this and that. And I didn’t really understand it. I didn’t have to trade it, but I didn’t really understand it. I don’t really want to get into it because I didn’t need to. But it’s just, if I’m already in the whatever percent of financial experts just by nature of where I sit every day and it doesn’t smell right to me, something’s not right.

TUCKER CARLSON: And you trade Nigerian debt.

COLEMAN CHURCH: Right, right, right. So I mean, I’m trading credit derivatives on Bulgaria and stuff. So yeah.

TUCKER CARLSON: You’re taking derivatives of Bulgaria. But you’re like, “this is too much for me.”

COLEMAN CHURCH: It’s just like how many acronyms? Also I’m substantially averse to any acronym. And then when you take the acronym and square it, you know you’re in trouble.

But then this latest go-around the last couple months with all this circular financing and hype with all the AI companies and every day somebody’s buying chips from somebody who’s going to lend the money to buy the chips to invest in the scale or who’s going to do this. Every day four companies are, you’re like, “dude, I suppose I could figure that out if I sat down and really tried to.”

But it gives me a headache just even thinking about it. And clearly it smacks of some kind of, it smacks of desperation or something. That’s just, my gut is just having the sniff. Haven’t been around a long time. It’s like, dude, if it doesn’t smell right, it doesn’t sound…

TUCKER CARLSON: Don’t put it in your mouth.

COLEMAN CHURCH: Right, right.

Bubble Recognition

TUCKER CARLSON: So you remember thinking, what about the tech bubble in 1999, 2000?

COLEMAN CHURCH: Oh, I got blown out personally trying to short that, like the fall of 1999. A lot of other people. Yeah, I mean, everybody. Yeah. Oh, hilarious. Hilarious.

I was with my wife in March of 2000 at a dinner, at a lunch with a guy who’s chairman of a major, major broker dealer. Famous, famous broker dealer. And she’s 30 at the time, never invested in anything. And we’re sitting next to him. He’s like, “so what do you…” She’s “oh, I’ve been day trading stocks.” He’s like, “explain that. What do you mean you’ve been day trading?”

She’s like, “oh, yeah, I just buy whatever IPOs. I just, if it comes out, I buy it.” Do you remember that in 2000 on the IPO front, everything just went up. She’s like, “yeah, I just buy it and then I sell it. It’s awesome.” And I saw his eyes just go like this. And that was like, that was the Joe Kennedy shoeshine moment. I mean, it was literally like February or something. I think it was probably within, probably two…

TUCKER CARLSON: No, it’s when your housekeeper is investing in condos in Clark County, Nevada that you were like, “I think maybe this is overheated just a little bit.” No, for real.

The Late-Stage Rally

Or you get your Uber driver trading crypto on whatever, completely.

TUCKER CARLSON: Whenever people are going hard on Cape Coral, Florida real estate who don’t know anything about real estate—not against Cape Coral, but you know what I mean—and those were the hottest zip codes. So you think it’s pretty obvious is what you’re saying.

COLEMAN CHURCH: It just feels… there are sort of like the Russian… just sort of like the letter that they wrote about the Hunter Biden laptop. It has all the hallmarks of Russian disinformation. It has all hallmarks of a late-stage rally, let’s say that.

TUCKER CARLSON: Well, you’re very diplomatic. I have to say though, just like with the baseline fact that you spent your life trading emerging markets debt, I think if you’re uncomfortable with something, it’s fair for the rest of us to be uncomfortable with it.

COLEMAN CHURCH: Appreciate that.

Who Bails Out the Bailer?

TUCKER CARLSON: Last question. You’ve been through all these bubbles and bursts and debt crises and bailouts, and at the end of every story, is the United States or U.S.-aligned institutions like the IMF coming in and kind of saving the day. Is that… if that’s the thread that runs through all these, yeah.

COLEMAN CHURCH: In simple terms, sure.

TUCKER CARLSON: I only deal in simple terms, Coleman. But what happens if that happens to… who bails out the bailer, right?

COLEMAN CHURCH: Who bails the bailer? Nobody.

TUCKER CARLSON: Okay, so then what happens?

COLEMAN CHURCH: I don’t think… hope you bought that agricultural land in Brazil at that point. So then what happens? I don’t think we’re… I don’t think we get to that point anytime soon.

TUCKER CARLSON: But just theoretically, as we’ve mentioned before.

The Cleanest Dirty Shirt

COLEMAN CHURCH: There’s no alternative right now. People still, as bad as it could get in the States, we’re still the cleanest dirty shirt in the pile for the time being. We still have these free and open markets where capital flows and gets treated well.

There’s time. There’s still time to course correct. I’m not willing to go to “who bails out the bailer.” I just… I’m not willing to go there. I’m not willing to go there. We’ll be all right.

TUCKER CARLSON: We’re still…

COLEMAN CHURCH: Still the United States of America. And we’ve got a lot. I mean, this administration’s got a lot of mental firepower and a lot of experience. We still got time.

TUCKER CARLSON: Coleman Church, ladies and gentlemen. Thank you.

COLEMAN CHURCH: Thank you so much.

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