Bitcoin Roundup

Brookings experts on the Supreme Court’s tariff decision

The Supreme Court struck down Trump's IEEPA tariffs 6-3. Within hours he signed a new 10% global tariff under Section 122, then hiked that to 15%. The media called the ruling a "rebuke." The administration treated it as a routing problem. IEEPA doesn't work? Fine, Section 122. Section 122 expires in 150 days? Fine, Section 301 investigations are already queued up. Congress won't act? Fine, the president will find another statutory box to check. “Show me a 10 foot while and I will build a 12 foot ladder.” This is not a commentary on whether tariffs are good or bad policy, although if they work I would love to see the highly unconstitutional federal income tax repealed. This is a commentary on the rapidly growing concentration of power in the executive during both Republican and Democrat presidencies. The red vs blue is a pendulum swinging left and right, but that pendulum is also moving on a second axis, away from democracy and towards authoritarianism. This is a side effect of fiat money centralizing power. The experts in this article somewhat all seem to agree that this SCOTUS ruling is somewhere between a pothole and speed bump for the administration as they pursue their agenda. It would be naïve to think the administration would go “aw, shucks” upon this ruling and just stop with the pursuit of tariff policy. Apply this same thing to the impending fed rate policy debate. Warsh was selected to replace Powell in May. Some are worried he’ll be a hawk and defy Trump’s objectives. Does anyone really think the administration will just accept that?

Private Credit Fears Deepen With UBS Warning of 15% Defaults

Blue Owl Capital permanently halted redemptions from one of its private credit funds last week. The stock fell for eleven straight days — the worst streak since the company went public. UBS published a report estimating that private credit defaults could hit 15% in a tail scenario, with $1.6-1.8 trillion in total drawn exposure, 30-40% of which sits in structures they consider "higher risk." Jamie Dimon warned last month about "cockroaches" hiding in the private credit market. Victor Khosla, founder of $20 billion Strategic Value Partners, told Business Insider this week: "One day it'll really buckle." I have seen these deals firsthand in the private markets. They call it debt, but some of it is riskier than common equity. When a lender is taking PIK interest, meaning they are not actually receiving cash, just accruing paper returns on a growing note, on a highly leveraged buyout where the sponsor put in 30% equity and the "debt" has structural subordination, covenant-lite terms, and no liquidity, you are not a lender. You are the most optimistic person in the capital structure. You just have a different name for it on the term sheet. UBS notes that PIK usage is nearing post-pandemic highs. That is not a sign of strength. That is borrowers telling you they cannot service their debt in cash. The illiquidity is the critical feature here. These are not publicly traded bonds that reprice in real time. They sit in funds with quarterly NAVs and gated redemptions. When Blue Owl freezes withdrawals, the assets do not suddenly become worthless — but they also cannot be valued honestly until someone actually tries to sell them. That process takes years. And when the losses eventually surface, they will be large enough that the government steps in. We saw it in 2008 with mortgage-backed securities. The U.S. government will not allow $1.8 trillion in opaque, illiquid debt to cascade through the financial system, because the dollars behind these investments are those of pensioners, retirement funds, endowments, etc. It is the people’s money, in many cases, that Wall Street gambles with. They will bail it out, one way or another. Which means more money printing, more dollar debasement, and more reasons to own an asset with a fixed supply. Bitcoin is not a solution to the private credit problem. But it is an insurance policy against the inevitability of how that problem gets resolved.

Jack Dorsey just halved the size of Block’s employee base — and he says your company is next

Jack Dorsey cut Block's workforce nearly in half, from 10,000 to just under 6,000, and said AI "fundamentally changes what it means to build and run a company." The stock surged on the realization that profits will likely grow considerable as these costs are removed. Dorsey told the remaining employees and the public: "I'd rather get there honestly and on our own terms than be forced into it reactively." He expects a majority of companies to reach the same conclusion. He is probably right. Let's do the math. Four thousand employees at an average fully loaded cost of, say, $180,000 per year. That is $720 million in annual labor cost. Replace a meaningful chunk of that output with AI tools at $200 per month per seat — call it $2,400 per year. Even if you need 6,000 subscriptions for the remaining workforce, that is $14.4 million. You just replaced $720 million in human labor cost with $14.4 million in software subscriptions. That is a 98% reduction. Now multiply that across every company in the S&P 500 that reaches the same conclusion Dorsey did. Salesforce already cut thousands citing AI. Amazon did the same. These tools are improving every week, and no CEO wants to explain to their board why they didn't cut headcount when their competitors did. For a short period of time, that means elevated profit margins for these businesses that act first, but quickly, competition should drive the price of these offerings down to reflect the reduced cost structure associated with an AI-native business model and workforce. If the aggregate price level eventually drops a similar 90%+, the debt based economy will collapse. Consumer spending is 70% of GDP. Mortgages, auto loans, credit cards, student debt, etc., are all underwritten against income. When aggregate income drops because four million people who made $180,000 are now making unemployment, the loans do not service, the spending collapses, and the deflationary spiral triggers exactly the kind of crisis that central banks were designed to prevent. The only tool they have is the printer. How much do they print? It is anyone’s guess. Here is one overly simple framework: enough to make that $200/month AI subscription feel as expensive as the salary it replaced. If AI eliminates $10 trillion in global labor cost and the system requires that spending to continue, the money supply has to expand to fill the gap. The dollar has to lose value until the numbers work again. TLDR; They are going to print so much fucking money