The AI Bailout Is Coming, and Bitcoin Already Knows It! | Truth Block

Nico Moran (0:00)

The AI bubble may have just found its pin. Overnight, South Korea's stock market crashed almost 8%, tripped a circuit breaker, and fell into a bear market. This morning, wholesale inflation came in at 6.3%, way hotter than expected. And bond yields fell anyway. Bitcoin dropped under 80k, then bounced right back above 82k. And 19 days before the midterms, the president is promising $5,000 checks and warning of a depression if his party loses. So what happens when the bubble holding up the whole economy starts to leak and Washington can't afford to let it pop? Today, I'll show you why Bitcoin already seems to know where this road ends. And why even the AI economy may end up needing Bitcoin to survive. This is TruthBlock. I'm Hurley. Let's mine truth.

Okay, before we dig in, give me your gut call in the comments. Did the AI bubble just pop? And most people watching this show still aren't subscribed. So if you're getting value out of it, don't forget to hit subscribe so you don't miss what's coming next. Okay, let's get into it. Today's been a volatile day in markets. This morning Bitcoin slipped under 80k for the first time in about a month, and within two hours it had erased the entire drop. So what's the cause of all this volatility? Wednesday's CPI came in at 3.7%, which is much hotter than expected. And that's enough to wipe out the average raise. This morning's wholesale number, the PPI, was even worse. Goods prices jumped 2.6% in a single month, the biggest jump since that series began in 2009

And a lot of that is energy.

As James Lavish put it, they can't print oil and higher rates will not bring down the price of gas. When CPI hit on Wednesday, fund manager Larry Lepard posted, bonds aren't going to like this. And for about an hour, he was right. Hot inflation normally pushes bond yields up, because investors want more interest to make up for rising prices and they expect the Fed to keep hiking. On Wednesday, the 10-year shot above 5.3%.

Then it did a sharp 180 After this morning's PPI, it kept falling. All the way to its lowest level since September 23rd. Falling yields mean people are piling into bonds. So the hottest wholesale inflation in almost four years hit and money still ran into government bonds.

Here and in Japan, Germany, France and Canada. Investors only do that when they're more scared of something else. So what are they scared of? Lepard had a word for it this morning. It appears that the AI buildout bubble just found its pin.

Korea makes a lot of the memory chips inside AI servers and its stock market just had its worst seven day period since the COVID crash. Here at home, NVIDIA has lost about $700 billion in market value in a matter of days.

CoreWeave, one of the biggest AI cloud companies in America, has bonds trading under 80 cents on the dollar. And the Financial Times reported that OpenAI told investors its revenue was approaching $50 billion a year, well short of its $68 billion that had been reported. Legendary investor Ray Dalio was asked on Bloomberg last week whether AI is in a bubble. And he went back to the 1920s to answer it.

SPEAKER_2 (2:54)

You talk about how AI will contribute to productivity, but we're also seeing a bubble, correct? What are the signs?

Ray Dalio (3:03)

They always come together. Like, I've studied the last 500 years of history because things that happened before my lifetime, I realize, are happening now, and so I needed to study that 500 years of history.

And what you see is, for example, think about the late 20s, prior to the bust in the late 20s. It was the first time you had electricity in houses. So you had refrigeration and you had lights. You have first time you had cars, first time you had airplanes, first time you had the movies, first time you had radio.

So all around you, you're seeing this tremendous innovation that everybody knows is going to change the world and everybody wants to bet on it. But you produce a dynamic as a result that everybody's excited about and they say, I'm gonna buy it and I'm going to borrow to buy it. And that creates a big difference because there's an important difference between wealth and money. Okay, wealth is in a sense easy to create, but you can't spend wealth. You have to sell wealth in order to get money to spend it. And so when there's a lot of borrowing to buy those assets, or there could be even a wealth tax where you need to sell wealth in order to make money, then you have a bubble bursting. And so what we see right now is that kind of a dynamic going on in terms of not looking at the price. And by necessity, it's imperfect. Because there are those in this new technology where there's a lot of future that's not precisely known, that you can't under invest and compete, and you're probably going to over invest and compete. So that dynamic goes on to create a bubble. What creates the bursting of a bubble is the fact that you need cash, and you start to convert the wealth that you have, you sell the wealth that you need to do that. Something like a wealth tax would have that effect, or having to pay back loans traditionally has that effect.