Lyn Alden - A Bitcoin Enthusiast
Summaries of YouTube Videos featuring reputable subject matter experts on global economic affairs.
Who is Lyn Alden?
Lyn Alden is an investor, best-selling author, and worldwide speaker with a background in engineering and finance. She holds a bachelor's degree in electrical engineering and a master's degree in engineering management. She founded Lyn Alden Investment Strategy in 2016, a research firm providing investment research for retail and institutional investors. In 2023, she authored the best-selling book "Broken Money1," which explores the past, present, and future of money through the lens of technology.
Key Views
→ The Flaws of the Current Monetary System: She frequently discusses how the rapid increase in money supply, particularly in fiat currencies, leads to the dilution of savings and wages, wealth concentration, and increased government debt. She argues that the current centralized banking system is prone to failures and inflation.
→ The Decline of the Dollar-Based System: Alden analyzes the structural imbalances in the U.S.-led monetary system, including trade deficits and the "exorbitant privilege" of the dollar's reserve currency status, suggesting it's becoming a liability.
→ Bitcoin as a Solution: A significant theme in her work is the potential of Bitcoin as a decentralized, open-source alternative to traditional, inflationary monetary systems. She highlights its finite supply and ability to enable peer-to-peer asset settlements, offering protection against monetary dilution and financial censorship.
The History of Money
This video provides a comprehensive overview of the history and evolution of money and banking, highlighting the current issues within the global financial system and proposing Bitcoin as a potential solution.
The Problem with Current Money Systems
The rapid increase in money supply for most of the world's 160+ currencies dilutes savings and wages, transferring value to corporate interests, bankers, or corrupt officials. This process is often more subtle than taxation and leads to wealth concentration and increased government debt. Central banks' inflation mandates ensure prices continually rise, despite technological advancements that should make things cheaper.
Evolution of the Global Financial System
Central Banks → Established to mitigate fractional reserve banking crises and support governments. They monopolized reserve holding, leading to fractional reserve practices even within the central bank.
International Gold Standard (1871-early 20th century) → The telegraph enabled fast communication, but physical money settlements remained slow, creating arbitrage opportunities for banks. This led to centralization around London, with claims for gold far exceeding actual reserves. World War I ended this era as governments printed money and defaulted on gold redemption.
Bretton Woods System (Post-WWII - 1971) → The US, with its strong economy, became central. Currencies were pegged to the dollar, which was tied to gold, though Americans couldn't redeem dollars for gold. Fractional reserve banking again led to the system's collapse as dollars in circulation tripled while US gold reserves diminished. President Nixon terminated gold redeemability in 1971.
Petrodollar System (1970s - Present) → After 1971, the world entered an unbacked monetary system. The US leveraged its economic and military power to strike a deal with Saudi Arabia, requiring oil sales in dollars and investment of surpluses in US government bonds, creating the petrodollar system.
Centralization and Abstraction → Across these eras, there's a clear trend towards centralization and abstraction, with banks and central banks monopolizing fast, long-distance value transfers and eventually defining money entirely around central bank ledgers.
Consequences of the Broken System
Currency Devaluation and Failure → There are over 160 currencies, most losing value quickly. The US dollar anchors this system, benefiting the US geopolitically but allowing it to devalue the dollar, eroding foreign reserves, or strengthen it, causing financial crises in debtor nations.
Hyperinflation and Instability → Many countries have experienced hyperinflation or triple-digit inflation, leading to loss of savings and wages. This instability forces reliance on external currency financing, creating a destructive cycle.
Issues in Wealthy Countries → Even wealthy nations face problems, such as negative-yielding bonds and massive public debt increases, effectively printed by central banks, which disproportionately benefits those closer to money creation.
Bitcoin as a Solution
Decentralized Digital Currency → The video introduces Bitcoin as a decentralized, permissionless, open-source digital currency, building on earlier cryptographic research.
Peer-to-Peer Final Settlements → Bitcoin enables peer-to-peer asset final settlements at the speed of light, closing the gap between transactions and settlements without relying on centralized intermediaries or credit.
Finite Supply and Robustness → Bitcoin has a fixed supply of 21 million coins, generated in a pre-programmed deflationary pattern. Its network is robust, with users running nodes, signing transactions with private keys, and miners adding blocks.
Protection Against Dilution and Censorship → Bitcoin allows individuals to protect themselves against monetary dilution and financial censorship, especially in authoritarian regimes or high-inflation environments, by sending value across borders or carrying it with them using a simple private key.
U.S. Fiscal Deficits
This conversation focuses on the persistent and growing fiscal deficits of the United States government and their implications, particularly for Bitcoin. Lyn Alden introduces her concept of "nothing stops this train," referring to the continuous increase in US fiscal deficits. She argues that this trend, exacerbated by pandemic spending, is now deeply entrenched due to factors beyond single catalysts.
Factors Driving the Fiscal Situation
Demographics → The aging baby boomer population in the U.S. is shifting from contributing to drawing benefits, impacting Social Security and increasing external debt.
Rising Interest Rates → Unlike past decades, increasing interest rates are significantly raising debt servicing costs, potentially surpassing defense spending and even Social Security.
Defense Spending → After a period of decline, defense spending is now flat or mildly increasing, further contributing to the deficit.
Healthcare Costs → The US has the highest per capita healthcare costs globally, with Medicare being a major driver of retirement expenses.
Tax Receipts Tied to Stock Market → US tax revenue is highly dependent on stock market performance, making austerity measures potentially counterproductive if they negatively impact the market.
Counterarguments and Historical Parallels
Lower Interest Rates → Alden acknowledges the possibility of lower interest rates, drawing a parallel to the 1940s where financial repression and demographic/productivity booms helped the US manage debt through inflation.
Stablecoins (Tether) → The discussion leads to the limited impact of stablecoins like Tether on the overall US debt burden, viewing them more as a transfer of seigniorage and a way to bypass currency restrictions.
Consequences: Default by Devaluation → Alden predicts that developed countries with liabilities in their own currency will likely experience "default by devaluation," where inflation erodes the purchasing power of bondholders.
Tariffs and Globalization
Disruptive Impact → Tariffs are seen as highly disruptive to international supply chains, hindering long-term optimal decision-making for companies.
Decoupling of Assets → Tariffs could lead to a decoupling of Bitcoin and NASDAQ performance, making non-corporate assets like Bitcoin or gold more attractive as corporate margins are impacted.
Shift Away from Globalization → The discussion highlights a move towards a more protectionist environment, which is considered less productive and beneficial for neutral reserve assets.
China's Economic Strength → Both speakers emphasize the need to acknowledge China's significant advancements in manufacturing, electricity production, and human capital, asserting that underestimating its economic capabilities is a mistake.
Is Bitcoin the New Way Forward?
In this video, Lynn Alden, an investment strategist and author of "Broken Money," discusses the evolution of money through technology and its implications for financial systems. She emphasizes that writing her book helped her better understand the subject, particularly the importance of speed in money.
Alden explains that the telegraph and subsequent technologies created a mismatch between transaction and settlement speeds, centralizing power in nation-state-endorsed ledgers. She argues that central banks primarily exist to fund the sovereign, a role they often deny. This funding mechanism, known as seigniorage, allows governments to spend without immediate, transparent taxation, pushing the costs onto future generations.
The discussion highlights how fiat currency amplifies seigniorage, enabling governments to engage in activities like wars without direct public accountability. Alden uses the Iraq War as an example, noting that public approval for the war might have been lower if a direct "war tax" had been imposed.
Regarding Bitcoin's impact, Alden states that its current market capitalization is too small to significantly affect nation-states' ability to engage in war. She believes Bitcoin would need to be at least ten times larger to start taking away seigniorage from nation-states. She suggests that a meaningful percentage of the population would need to prefer holding Bitcoin over fiat currency for it to have a substantial impact.
Alden also touches on the historical context of bonds as safe havens, noting that this perception is relatively recent, primarily from the 1980s to the 2010s. She argues that we are now in an environment similar to the 1940s, where bonds and currency are not defensive assets due to structural debasement.
Finally, Alden discusses the concept of "late-stage fiat," characterized by exponentially rising debt. She believes that while the system won't hyperinflate in the near term, it will continue to operate in a "weird middle ground" of running hot but still moving forward. She concludes that a significant shift will occur when an asset like Bitcoin becomes liquid and fast enough to rival traditional treasuries, making it less viable to hold nation-state-issued assets. She also mentions that central bank digital currencies (CBDCs) represent the "capstone" of surveillance in fiat currencies.
Opinion
In an age where financial systems are increasingly opaque, voices like Lyn Alden’s offer a radical yet thought-provoking lens through which to critique and reimagine global monetary frameworks. Her argument—rooted in a deep understanding of engineering principles, economic history, and digital innovation—centers on a fundamental belief: today’s fiat-based systems are structurally flawed.
While Lyn Alden has long championed Bitcoin as a viable alternative to fiat currency, her messaging has at times bordered on relentless. From the outset, she’s remained steadfast in promoting this vision—reiterating it in virtually every discussion and interview. Lately, however, there are signs she’s acknowledging some of Bitcoin’s growing pains: its volatility, scalability hurdles, and persistent regulatory headwinds that make it an imperfect solution—for now.
That said, the U.S. dollar’s dominance as the global reserve currency won’t be displaced easily. I agree that Bitcoin—and to some extent, stablecoins2—are likely to infiltrate and embed themselves in global monetary structures. But expecting a smooth transition without significant friction is, in my view, overly optimistic. The transformation Alden envisions won’t come without upheaval.
Bitcoin advocates often understate the risks embedded in this new paradigm, particularly around social inequality and access. Unequal digital infrastructure could deepen financial divides. Moreover, in a world where the money supply is capped—like Bitcoin’s 21 million coins, many of which are already lost—how will the broader population benefit once adoption reaches maturity and most of the asset is concentrated among early adopters?
There are still more questions than answers. Bitcoin may indeed prove to be a revolutionary first mover—or a bold technological experiment that ultimately doesn’t deliver on its promise.
Consider joining DiviStock Chronicles’ Referral Program for more neat rewards!Please refer to the details of the referral program.
https://cryptopolaris.substack.com/p/bitcoin-the-best-performing-asset?r=mww66