Time for politicians to be honest about our monetary problems

Transcript

Intro

there is a lot of disinformation online the problem I would have with it is that politicians are a source of a lot of that disinformation I do think that big centralized social media uh with either censorship or just algorithm control is is a is a danger I'm not very optimistic long-term on the Euro uh it's a very challenging project because it is a monetary Union without a fiscal Union if you're running a corporate treasury if you're running a pension fund if you're running a central bank um I do think it makes sense to hold a nonzero amount of Bitcoin the country where it has moved to a Bitcoin standard now that's very challenging to do I think we're going toward a more distributed Reserve backing which is different than a gold standard it's basically country saying

uh you know maybe I shouldn't have all my eggs in one basket uh because that basket can get frozen or confiscated the first step is kind of a politician that's willing to speak honestly about the problems [Music] [Applause] hello everybody my name is Paul and welcome to reinvent money a podcast about money and power today my returning guest is financial analyst founder of Lynn Alden investment strategy and author Lyn Alden who wrote the book broken money I got it here hi Lynn thanks so much for being on the show again happy to be back thanks for having me yeah last time was uh was in 200 uh 21 already uh yeah three years ago ago

um so how have you been how's how's the book um being um received by the audience how many have you s so far uh I've been well uh the book's doing really uh good we don't really discuss um kind of exact numbers um but it's uh we're approaching 100,000 um and uh you know I kind of I kind of check on it once a month or so and there's like a bunch of different versions of it the audio book has done better than I thought we were kind of originally not even maybe going to release an audio book because we figured that um the diagrams were so important uh but uh people actually really like it on audio and we give a separate uh chart book uh with it that people can check out um so it's kind of surprising that the audio book outsold The ebook wow um

but yeah the the reviews are good people like it uh and I generally find that it's um it's reaching a different audience uh than some of the other books in the space reach uh it kind of reaches a little bit more into the mainstream um because it kind kind of speaks a a pretty broad language and then pulls people into Concepts that might otherwise be uh a little bit outside the Overton window yeah because it's not a Bitcoin book it's more it's more a general book about the history of money how our mon monetary system came about and and of course also there's heavy emphasis at the end in on bitcoin but in general it's it's it's more comprehensive I would say than some of the other books out there so I really liked it I I definitely um recommend it

to my listeners um will there also be a Dutch translation by the way I got a few people on X asking about that so we are working on a bunch of translations um I believe that's one of them I don't have the list in front of me um but we are working on a bunch of uh translations so so far all the numbers that we've had are purely with the English version um and that the translations have been in the works uh but they you know they take a while especially for like a 500 page book yeah I can imagine well of course we're going to talk about uh the book and about broken money why our financial system is failing Us and how we can make it better which is the subtitle um but let's first talk a bit about um the freedom of speech because I know you've

Freedom of speech, decentralized media

been quite vocal about that too you've been tweeting about that and it's something that worries you I would say the the fact that freedom of speech is under Fire in in many parts of the world at the moment with X being particularly attacked for example in Brazil but also we saw pav durov the founder and CEO of telegram arrested in France um so let's talk about that first do you think as a first question that centralized platforms such as X have a duty to block accounts um of of people for example post lies or who threaten other people when asked to buy authorities well I think in the in in certain realities they they don't really have a choice I mean if they're if

they're operating in a jurisdiction um the best they can do is either push back on public opinion or use the legal system uh which which Twitter's done in the past I mean under prior management for example when India would say to remove stuff they would often go to the courts in India and really push back on it um and one of the interesting things is under the the current ERA of of Twitter ownership um you know musk uh has opened up Twitter more in the US but then he's actually been more um agreeable to takeown requests in other countries like India and turkey if you look at the statistics um so the fact that he's pushing back in Brazil is interesting um I definitely think that you know my opinion it's good when centralized platforms push back W with

whatever tools they have available um but they're inherently vulnerable um you know the way that I kind of put it is that you know there's certain there's certain things that are outright illegal you know threatening people uh doxing people uh you know uh things that cross into like you know liel like that that kind of thing um that's different than just quote unquote disinformation right because the the truth is a very comp Lex multifaceted thing uh no one really has a monopoly on Truth there there there are things that are more objectively true than others there are you know there are for example there are videos that are intentionally edited to change how they operated that that would be

that's a fairly objective type of disinformation so there there is a lot of disinformation online the problem I would have with it is that politicians are a source of a lot of that disinformation right I mean state state propaganda is one of the original disinformation pedlers uh and now we have more decentralized disinformation which means the government can do it as well as individuals or groups can do it uh and they can do it both for their own citizens or they can you know some country will plant dis disinformation in another country to try to increase polarization um so I do think that there's um it's the responsibility I think is increasing on the people to be able to spot disinformation to think critically uh to sort out right from wrong themselves rather than a government um kind of mandating you know

like restrictions on things that are actually otherwise legal to say like a lot of the things that governments remove from these centralized platforms are not crimes in real life like you can say these things in real life and not be um under pressure because they're not actually legal they're not threats they're not doxing they're not like liable they're not you know they don't cross into those those areas um but they just don't like the fact that they're spreading online um one of the solutions I've been a proponent of is Noster which is decentralized social media and the the important thing there is that it's not it's not as though it's without restriction there are still algorithms that help you sort out spam from real content and things like that but the interesting thing is that the user gets

the choice of algorithm so different you know there's like this open source pool of information out there that no one can really kind of inherently censor kind of like you it's very hard to censor the internet itself uh nost is kind of like that uh and then different clients can access it uh and so and different clients have different algorithms and even some clients can have algorithm marketplaces um so you can you can pick your own way of of filtering through content um and I think that's that's a really helpful way of thinking about it um so it's obviously a very complex topic but I think technology eventually moves in such a way that it it almost becomes moot like you know they can they can censor centralized platforms but

then there are decentralized ways to go around it and then the question is where do most people get their information from if they get their information from the more censored or or um pruned areas they're going to be prone to certain biases which is not just the government's bias but also whoever is running that platform can tweak the algorithm to support things that they want to support or or push down things they want to push down so whether it's governments or corporations I do think that big centralized social media uh with either censorship or just algorithm control is is a is a danger yeah well for years we've been of course hearing about decentralized social media and and hopefully we're finally getting there

but how big is Noster for example because we in the past at mustard D and blue sky and some of the others is noer already gaining any traction is it big enough already to make to make a dent not in the not in the bigger picture um I so it's it's still small it's mostly in the bitcoiner space um but I what I find interesting about it is it is probably the most technically Dynamic of all the alternative options so a lot of these other ones you know Mastadon is Federated meaning that you know you you know different different parts of it will be run kind of like by their own dictator uh and if you get you know banned in one it's it's really hard to to move around nost is interesting because it's it's more tied together while still being decentralized you know

you can you can basically bring your identity and your followers around uh and there's no like areas of control really um blue sky is kind of like that in theory but then in practice it's it's it's more centralized whereas Noster is actually this kind of bottom up more truly decentralized one um so it's still it's not like big enough that it's really making a dent uh broadly but it is making a dent I would say in the Bitcoin space and so for one one of the kind of the um useful outcomes of it that makes it different than just pure social media is uh it makes Bitcoin wallets better so for example if a bunch of bit Bitcoin proponents and they you know they go to dinner and one of them pays and the other ones want to pay them back it used to be that the one who paid

would have to like set you know send lightning invoices to everyone or you know say what their onchain addresses whereas now with with Noster it gives venm mod like capability for Bitcoin Wallace meaning you can just look someone up and pay them if they're on Noster and it just happens at at the current time because noobster was invented by um uh people in the Bitcoin space it happens to be kind of a a Bitcoin adjacent or Bitcoin dense ecosystem so a lot of people are on it and it's it's it's it's very useful for them it's it's just not big enough yet yeah okay well let's let's all then use it and and make it big uh let's let's talk about money uh the main topic of this show uh and how broken our money is I live in the Euro Zone and I believe

Sustainability of the euro

that uh the monetary system over here is particularly one that that looks like it could break um maybe it's not broken yet it functions but it it does look weak um because Fiat money Works albe temporarily provided there's a strong Sovereign behind in a central bank that's willing to defend that currency and in the Euro Zone we see more and more um tensions especially people in the North in in Germany also in recent elections and in Holland there's a tendency that people say look we don't want to for example support uh South Europe anymore when it comes to their High Deb positions so every time I feel like yeah something like the EUR EUR

crisis that we saw earlier in 2010 12 something like that could happen again and I'm not sure if if um if this time the Euro Will Survive another crash like that what are your thoughts on on Euro and and looking at your standard timelines let's say 180 months which you use as an as a time frame and also five years plus what is the prospect of the Euro and in your analysis so I'm not I'm not very optimistic long term on the Euro uh it's a very challenging project because it is a monetary Union without a fiscal Union um and uh that that's inherently it's hard to run that in the United States for example we we have a lot of our own problems with our currency uh including for example big structural trade deficits larger uh

fiscal deficits as percentage of GDP than than many European countries uh but one thing that makes a little bit easier is that each individual State generally doesn't have a very high debt to GDP ratio because they're not running their you know their Retirement systems are smaller they're for like state workers and stuff um they're not for like all the citizens in their state and the retirement stuff is more on the federal level uh so our big Insurance apparatus is on the federal level um so there's less kind of state byst state like you know uh competition there um whereas in Europe uh there's a lot of debt obviously on the it's on the Sovereign level um and so you have you have countries with very different Dynamics in the same monetary environment um and

I think one of the things that has changed recently is the um the manufacturing in Germany so so for a while a lot of this was kind of power powered by strong manufacturing out of Germany but as Europe increasing runs into kind of you know structurally higher energy prices uh some concerns around energy security uh we generally see manufacturing now leaving like energy intensive Industries are like if you're kind of starting a new uh expansion usually Europe's not your first uh Choice and then there's even some there that are going elsewhere to China to to the US to to multiple different places and if you don't have that that engine uh that starts to become a problem um I you know I I

wouldn't really predict anything significant in 18 months uh that'd be kind of an aggressive call I mean it you know things can happen but it's I would I wouldn't really um picture something in 18 months but when you look out five years or more um I do think that the project is is is increasingly um threatened I mean basically there's more and more waves of populism both in the United States and Europe um and the more they take hold uh the more some of the Euros skeptic voices you know potentially get into positions of power um I don't follow European Politics as close as I follow American politics but the structurally I don't really view the Euro as soundly designed um which which is the case for a lot of currencies

obviously but um among the developed currencies it's got one of the more complicated structures yeah I would already like in general it's it's it's difficult uh to maintain a f on currency in a proper fashion for a longer period of time of course we we've maybe the pound has been in existence for a long time but of course the structure of the pound is changed as well but when you have a a a Euro structure behind it with all these countries that need to be aligned all the time despite being in in different stages of their economic cycle and despite having different trade um Dynamics it it just it just doesn't seem to be a sustainable setup and like you say we have a monetary Union without a fiscal Union and also so it's not um

obeying basically uh the conditions that form a an optimal currency area um so but I wonder if if we all we can agree on the fact that in the long run um it's difficult to pinpoint the exact time but in long run it's not a sustainable currency how should a government like the Netherland for example hedge and prepare for a post Euro World um of course we we can we can talk about Bitcoin but more possibly more practically should a country like Holland given also all your knowledge about how to design a currency should we ready prepare for a a new Gilder for example or perhaps um already start conversations with Germany and come up with a a different construct where

How to prepare for a post euro world

Germany and and Holland going to the same currency Union after the EUR crashes what kind of advice would you have for for governments in the Euro Zone it's a good set of questions I mean the short answers it's very hard because of how intertwined things get um and there is generally friction like you can if you can see why it was done because for example right now in Africa there are over 40 currencies and that's a friction uh and then there's over 30 currencies in Latin America every every border is basically this unnecessary friction if if the United States had 50 different currencies for different different states that would be quite a mess um and and so you can see why they they wanted to have a more unified currency back if you go back far enough we we ironically had more unified

currencies in the form of gold and silver uh you know they had different um denominations and stuff but they were you know they were generally translatable uh with fewer frictions um and so you know I I think that obviously once you start making plans for uh it to go down uh that's that's generally probably later stage um in general owning owning scarce assets on the central bank balance sheet uh is a defense if you're looking at it from a government perspective if you're looking at from an individual perspective uh again you know you use you use banking obviously where you need to but you don't really use banking as a store of value uh it's your working capital it's it's your liquid Capital it's you know you're plugged into the system because

that's how things work uh but you kind of take it with a grain of salt um and and hold you know scarcer assets uh including some in self- custody where where they're not really liable for confiscation or balance or you know kind of press of a button redistribution type things it generally takes more friction and more expense to Red redistribute things that are actually held by someone um and just you know kind of try to think a little bit more locally where possible to in the extent that one can do so in a very interconnected system yeah as an individual there are several ways as a family to to hedge against these types of events by by buying real

assets and trying to limit your your exposure but as a as a government as a country uh how would you prep how would you hatch uh because of course you can plan for something and then if you keep it uh um within a small circle of experts and and and people within the government you possibly can already start start reducing your Euro um assets perhaps even increase your EUR obligations to that once the the eventually breakdown of the EUR comes that you are not exposed anymore in that sense um but have other countries be exposed to you then by having big Euro liabilities but on your asset side you

have a lot of real world assets and other currencies could that be a strategy the country could follow yeah I think in general anytime someone is structurally bearish on a currency um basically shorting it to a somewhat safe degree you know longer term you know stuff uh and then owning scarcer things uh versus that currency is a good way of doing it um and then you know you can own for example scarce assets on the central bank balance sheet uh you can uh I don't know the details of Euro European Bank regulations but for example to the extent that it's possible you'd want banks in your country to have more Assets in in your own stuff and not not not have their assets be spread out so much that that they're vulnerable but then like you said have you know

liabilities in the broader thing that might that might be devalued uh but in general just being less intertwined uh especially on your asset side is a type of Defense um in the extent that um in the extent that you're kind of in that existing system now yeah but of course at some point people will probably find out the market will find out and then it could become a self-fulfilling profy yes yeah yeah and in the US people talked about Trump also about having a strategic Bitcoin um Reserve um would that something you would advise countries to do as well also in the Euro zone for example I mean I think that any large pool of capital if they analyze Bitcoin and they become

A Bitcoin Standard

bullish on bitcoin uh it makes sense for them to have a non-zero Bitcoin position right so if you're running a corporate treasury if you're running a pension fund if you're running a central bank um I do think it makes sense to hold a nonzero amount of Bitcoin basically it's a it's a it's it's a scarce asset it's incredibly well performing uh it's got a very strong Network effect you know 15 consecutive years is by far the the largest uh cryptocurrency um backed by proof of work and a very simple design um obviously large pools of capital don't really go all into things they don't really expose themselves to tail risks in that way uh but I think for them the first step is to just not have zero uh

so yeah if I was if I was running any particular pool of capital whether it's a big private pool of capital or public pool of capital uh one one start is you just have a nonzero Bitcoin position uh but generally um people in these positions think in terms of career risk so it's more about what makes them look bad or what what risks their job and their perception versus what is you know kind of strategically useful for the country over the next 20 years um and so those types of decisions tend to be very slow uh the the funny thing is in in financial markets uh being wrong together is generally not that bad for your career whereas being wrong alone is bad for your career so if you make a

contrarian decision and it doesn't work out uh even if it works out in the longer term if it doesn't work out in the shorter term let alone if it doesn't work out at all um that's how you get fired that's how you get bad outcomes whereas if you're kind of wrong but in consensus uh you know then then it's fine no no one gets fired for not having Bitcoin uh on the balance sheet right uh and so that's that's kind of the safer play from the career perspective even though from the pool of capitals perspective I I think having a nonzero amount of Bitcoin is is prudent and if the Euro would cease to exist would you think it's uh possible for any country that now has the euro to to go

to a Bitcoin standard even to to to get away to get rid of Fiat completely I think that's a that's a long-term Prospect because right now Bitcoin is still um not very widely held uh and so it is quite volatile and it's still in like this strong appreciation phase right it's still you know there's there's a total adjustable Market people have different views on how big that market is uh but there's a total adjustable Market um and Bitcoin is is you know reaching that total adjustable Market um and so during that phase it's hard to actually use it as your only currency um because of that volatility and so what a lot of people do is they you know they they they treat it more

like a savings asset uh sometimes they'll use that as a medium of exchange uh whereas they still use these more stable kind of centrally managed curve CES while this smaller one is kind of growing up into what it's going to be so if a country where it just moveed to a Bitcoin standard now that's very challenging to do um whereas if Bitcoin is 10x bigger or more um and is just more widely held and therefore less volatile um less kind of price like an option uh because people are kind of like is this thing going to go up to the moon or is this thing going to crash right on once it's around for 20 30 years rather than like the 15 years it is now um I think that's when it starts

to become potentially more more realistic uh generally speaking whatever is the biggest most liquid thing is what get treated as unit of account right so right now in any given country that's usually their fat currency uh globally it's it's it's mainly the dollar um these are kind of the big liquid unit units of account that people kind of use as they're denominated for other things but that can eventually flip like so for example the dollar used to be thought of in terms of how much gold it could buy you and once the dollar system flipped gold it became a bigger and larger uh Network by most metrics than gold we now price gold in dollars or gold in Euros uh so that kind of flipped and I think you could see the same thing with with

with you know fiat currency over time but it's a it's a very long road uh ahead so if I understand you correctly then your advice would be shoot the Euro Seas exist for for a country such as Netherlands or Germany to for now produce a new fiat currency but of course better managed than some of some of the other Fiat currencies out there so with a an independent Central Bank uh um with with decent fiscal policy instead of already going full uh full on bitcoin and but perhaps at the same time allowing for people to to use as many currencies as they want to to allow also a market of of currencies at the same time so is that the way forward I think that's probably a realistic path I mean

you know I'm not a fan of central banking in general but in the era that we're in I think that's that's generally what likely happens in that scenario and the easy first step in addition to just owning some Bitcoin is like you said make make Bitcoin legal tender right so give people the option like in El Salvador I mean interesting and this this kind of shows how early we are El Salvador has Bitcoin as legal tender uh but people there still use dollars more than they use Bitcoin even though they you know if I if I if so the the only thing that really holds me back from spending Bitcoin more than I do is capital gains taxes that it introduces an accounting burden uh and a cost burden but mainly it's the accounting burden of if if you just do all your little transactions and and each one of

them is technically a a a sale that triggers capital gains taxes that's a mess and it's it's left like that on purpose because governments don't want anything other than their currency being treated as currency um so I think uh you know if if someone were running this from a you know bullish Bitcoin perspective the first step is to make it legal tender or another step is to say well the first you know ,000 or €2,000 spent per year are not taxed right so it's like okay if you're going to sell a million euros then maybe we'll tax that but if you're going to sell a thousand Euros of it because you're actually buying stuff with it that'll will kind of erase that accounting burden and you can increase it over time until it

becomes legal tender basically you know there's obviously there's political realities in in a country and the consensus is nowhere near the things that we're talking about now so this would be this would be very considered outside the Overton window kind of like how Al Salvador is this kind of outlier uh in in the global space even though they're they're getting good results from having done it yeah and how intertwined are the dollar and the and the Euro so if if the Euro would um would would crash and would cease to exist how much would that affect the dollar and or perhaps would the dollar then also collapse as a domino I think not not for the most part to the dollars in a different position because there's over $13 trillion worth

How intertwined are the dollar and euro

of dollar denominated debt held outside of United States uh ironically it's not even mostly owed to United States it's owed to lenders in China lenders in Europe lenders in Japan lenders you know everywhere including some in America um and and so that it's a I would say it's a rather different network in that sense if anything the dollar could be temporarily strengthened because you'd have a fall of like the second or third biggest currency depending on what metric you're looking at um and you that that disperses somewhere and it wouldn't disperse just entirely in the say gold and Bitcoin it would it would probably disperse into other workable competitors as well as whatever currencies emerge from that um again the the the the

cation of the euro to exist is not on my near-term bingo card uh these things can obviously happen sometimes they can take longer than you think and then they can happen faster than you think uh but those types of outlier even though I don't I'm not bullish on the structure of the Euro I think it has structural problems um I still wouldn't expect it to to go away anytime anytime soon I can imagine it's it's uh it can be just like Le and um quite a shock to the system and of course it's mud bigger than than Leman um in the meantime central banks of course have devised all sorts of emergency uh plans and they're probably better able to handle a crisis like that this time around but um it would be of course much bigger than than the the

Leman crash we saw and and the chain of events that that followed that that crash um let's talk a bit about the the public debt problem uh that we uh see in in in the US in China and in the Euro Zone U could you paint a picture of of of how the coming years will be like in terms of inflation and and should we get used in in the west to to double digit inflation like like you see in your your uh one of your favorite countries Egypt uh so I think that persistent double digit inflation will probably take a while uh I think we can get double digit inflation uh the next time you have an energy crisis uh it gets a

Our debt problem

little bit harder to get to double digit uh kind of persistent inflation um but I do think we're in a a higher structural inflationary environment than we were in the 2010s um because if you start with the United States for example we are running like 7% of GDP deficits during a period of low unemployment and and and an economic expansion let alone that those are like recession numbers outside of a recession um and they're not going away anytime soon that is very locked in and one of the disadvantages that the United States has compared to Europe and elsewhere is that our tax receipts are more financialized which is to say that uh you know in Japan or Europe uh many other places if the stock market doesn't do well that you know that can obviously

affect tax receipts but it's not a huge variable for tax receipts whereas in the United States you can almost map tax receipts to stock market performance you know with like a a 12-month lag and they're basically the same chart um because so much of our tax receipts are one tied to uh executive compensation uh capital gains taxes these types of things um so we we've financialized our compensation and tax receipt system ever since the 9s more so than most other countries so the ironic thing is even if you try to do austerity in the United States you'd probably then have have slower asset price performance and therefore you you probably widen the deficit anyway um or at least fail to shrink it

um there's there's really it's a very hard to untangle that gordian knot um and a lot of this is because these these systems were structured decades ago with the kind of the Ponzi economics of the next generation is always going to be bigger than the one that came before and so we're going to grow forever um but as we actually have smaller Generations coming after larger generations and we have population slow down and in some areas population shrinkage um those those get very hard to service um and I I I think you know kind of worldwide whether it's Japan United States Europe elsewhere we're going to go through a structural period of persistent currency devaluation relative to equity relative to harder assets relative to things that

are currently under owned um and I think it's it's a long-term process it's not one that's going to be done in two years it's a longer term process China is a little bit different in the sense that I would I would put them about a decade behind in that sense they're more in like the 2008 scenario so in in the United States for example we had a big private debt bubble and then it over a period of time we kind of transferred a lot of those private debts onto the public ledger so we recapitalized our banking system uh and then in in in covid again we kind of poured out money to all these different sectors of the private sector and we shifted a lot of that debt burden onto the public public sector that's also what Japan did over the past 30 years um they had kind of

the wildest example because of the sheer size that their bubble reached over three decades ago but so Japan went through that process uh then really the United States uh and Europe have been kind of going through that process um and China is more in like that prior step which is that their private Deb bubble was in the process of popping there are real estate sectors around the margins deleveraging going through a a very rough time their so their government has been more hesitant to shift that onto the public Ledger it's happened around the margins but they've been less uh quick to do that because they're trying to internationalize their currency um so they they are more emphasizing on protecting their bond

market than protecting their Equity market for example or their real estate market um and I think over time that's probably what we're going to see a a very grad ual shift from the private debt bubble in China more toward the public side um for example some of their state-owned assets can be sold uh to the private sector uh as the local governments try to deleverage because that's where they have they also have debts um and eventually if it if it becomes you know stagnant enough you could see the central authorities take some more of that debt onto the onto the Sovereign level um but I think that they're just earlier in that process than we've seen in in Japan the United States uh and in many parts of Europe

yeah and in the west so we should brace ourselves for for uh periods of of of higher inflation than we're used to although of course in recent years we had some high inflation uh because that's the only way they can they can deal with with the dead loads because they're not going to ride off the debt so that's um that's the only way I guess they will try to deal with it and then but that's something we could at some point of course say no to or we we that could lead to revolts in the street or people not accepting these high inflation rates so how how would it eventually trigger then a a possible debt crisis yeah I think I mean I think that's it takes a while I mean you mentioned Egypt for example Egypt has had persistent double-

digit inflation for quite a while uh it's obviously a mess in that sense but life is still going on it's not like as soon as they got the double digit inflation there's a revolution same thing how did how long did Argentina take until finally politics kind of the pendulum swung in the other Direction and people were like this is clearly not working um it it takes a very long time usually uh for a kind of Banana Republic finances to work themselves out or Emerging Market finances to work themselves out uh the first step is you know people are debating about where the source is it the government money printing is it corporate price gouging there's all this kind of like shifting of the blame and it's you know you kind of like just people people are people are not even arguing about what the the

source of the problem is let alone deciding to move against the source of the problem right so that and that's a that's a long process the same thing happens in Emerging Markets they say this is uh you know our currency failing because outside speculators are attacking it and therefore that's why we're going to do Capital controls and there's all sorts of kind of scapegoats that they could put on things other than just the money supply going up uh too fast um and I I think in developed countries we're still in the early phases of that uh it's it's probably going to last a longer time the more polarized a place is from a starting perspective the potentially shorter that outcome could be because they're already pretty polarized um but I think that's a long process that basically we go through a period where this is playing

out for quite a while large structural deficits that in many cases are monetized um and the consequences from that are hitting the economy if if if productivity growth is low It generally shows up in consumer prices pretty readily uh if productivity is high let's say for example AI is is kind of keeping White CER wages down because we're adding all these kind of effectively more labor sources to the market in the sense that uh a lot of people have ai assistance things like that let's project that over 10 years um if you do get a lot of productivity growth you can you can kind of keep a lid on consumer prices or at least certain segments of consumer prices to make that aggregate

CPI not look too bad uh but then instead the the money printing shows up in in scarce asset prices so it shows up in real estate it shows up in high quality equities uh and then you kind of grow The Divide between the rich and the poor uh and you potentially lock people out of the housing market for example uh that's a problem we've seen recently so it can show up in different places depending on where the bottlenecks are but basically there's this kind of structural background you know fiscal driven in monetary expansion uh and then that will show up in different places and people will spend a very long time arguing about why it's happening how to stop it and just like an Emerging Market it it just goes on a lot longer than

people think before it kind of reaches a crescendo yeah maybe people get used to it at some point as well just like in in some of these emerging markets and they they adjust their lives to live with 20 or 30% a year inflation yeah yeah when we talk about like double digit inflation in developed countries people imagine like a Mad Max scenario and it's like no that's a normal Tuesday in large parts of the world they they adjust to persistent double digit inflation uh uh sometime I mean in Egypt when I when I was there last time we were 40% official inflation let alone whatever the real number was structural money supply growth over 20% per year um and that's I mean that's just the unit of account

that people uh increasingly come to to deal with uh and that's that's not the worst place for currency and obviously if it gets bad enough that's when it really you know if you have an outright failed State uh and and true hyperinflation that's a different level of misery than persistent moderately High inflation that people become accustomed to there's obviously problems with it but people adapt and earlier we talked about the Bitcoin Reserve uh proposals but I also noticed the other day that uh Norway and and Switzerland through their respective central banks bought shares in in micro strategy um Norway for for over $20 million dollar so um is that then the first official uh step in in in which

where the um developed central banks are buying indirectly Bitcoin then or how how do you how did you perceive that news so you said I I didn't follow the news they said you said they bought they bought micro strategy or sold mic strategy they bought micr strategy shares yeah I think I mean that that is indirect ownership so basically uh it's it's very normal for them to buy equities uh and so it's it's uh you can kind of buy Bitcoin without buying Bitcoin if you just say oh yeah we have like a lot of other stocks we have a little slice of micro strategy um that's actually you know before the Bitcoin ETFs came out that was one of the ways that a that any sort of portfolio manager whether they're Sovereign or or institutional could express a bullish Bitcoin view if you were a stock picker

running a stock fund and you happen to be bullish on bitcoin then either Bitcoin miners or micro strategy were kind of your vehicle to do that um and uh that also LED people into trouble which is that some of the pensions when they get into VC Investments for example they said well you know Bitcoin seems kind of risky but we'll own VC of these like crypto companies including like FTX right so and that that ended up being a a big problem uh so but anything kind of Bitcoin specific um is usually a decent proxy uh for entities that are maybe still shy around owning Bitcoin itself or owning a Bitcoin ETF or things like that and they can instead say no I own

an operating software company that uses Bitcoin as a treasury asset it's it's you know 0 1% of the portfolio whatever the number May might be for them uh and it it just you know it's part of it and as more corporations slowly add Bitcoin to their treasury Holdings uh so micro strategy is like obviously the most uh thorough example but in the US we have a handful of other other publicly traded companies that that are not Bitcoin miners that own a little bit of Bitcoin on their on their on their balance sheet because they they viewed as a a treasury asset uh now there's one in Japan um I'm not sure what the European market Market is right now but I think over time this this becomes more normal in a number of jurisdictions and then so ironically

sovereigns that that own equities which is not a lot of sovereigns but the the ones that have these kind of sizable Sovereign wealth funds they they own quite a bit of equities they indirectly get Bitcoin exposure in them even if they're just basically owning a proxy of the S&P 500 or a proxy of you know large and midcap uh liquid equities yeah interesting and of course central banks have been buying a lot of gold lately over the past few years more than 000 tons perom um are we in a certain way going to a a new defao gold standard you think I think we're going toward a more distributed Reserve backing which is different than a gold standard it's basically countri saying uh you know maybe I shouldn't have all my eggs in

A new gold standard?

one basket uh because that basket can get frozen or confiscated in the United States's case or any other any individual country so there's basically a couple options one is they can diversify their their Fiat exposures to say well you know obviously I these are all centralized but they're not all the same Source um or they can they can buy gold and then literally have self- custody of their own reserves that other than Invasion can't just be unilaterally um you know taken um same thing can technically be be the case for Bitcoin as well although it's a smaller more volatile market like we discussed and there's there's career risk but we are seeing around the margins um you know countries that are are not the not on the most friendliest terms to the US uh

saying we saw what happened with Russia and even though we're not doing anything like what they're doing things could change in the future uh and so maybe want we want to diversify our Holdings uh you know in addition when you look at Fiat currencies in in the developed World they historically grow at six to 8% per year in terms of broad Supply so uh in the in the Dollar's case it's about 7% per year over the long term uh whereas gold Grows by you know 1 to 2% per year uh according to most estimates uh now with with uh you know US Treasury bonds you do get a yield but if you basically add you know if you subtract the yield from the money supply growth that's still often a bigger dilution

rate than you're getting diluted by owning gold um the the the place where that was most not true was with the the 1980s kind of the the the more you know kind of the post vulkar era um that was of High real ratees that was actually you know where the dollar and dollar diamed assets held up really well versus gold um that's also why gold was in a long beer market after after kind of hitting a bubble territory um but going forward given how indebted sovereigns are uh it's very hard for them not to dilute their currencies um so both in terms of dilution protection as well as in terms of just confiscation protection uh I do think it makes central banks to diversify their Holdings including in to

into gold yeah that's in your latest newsletter you're also bullish on both Bitcoin and gold uh same with me I like them both a final question Lynn um you know so much about a monetary system and and I really um enjoyed your book thoroughly what kind of policy prescription would you give um let's say U Trump or or Harris in terms of of of our monetary system what what can they do like one action what could they do to to perhaps improve um the system we have so forget about Bitcoin but looking at the US dollar system what what would you advise them to change to make it more Equitable lasting and better for

Lyn's policy advice

everyone I mean the the funny ANS is I don't think there's much that they're going to be able to do um that's why my um my Outlook uh is mostly unaffected by the election you know around the margins there's there's impacts industry specific impacts uh so maybe I can say 20% of it depends on Election details whereas the other other 80% is pretty much locked in um because they you know the in the United States the the the main people who vote reliably are the older demographics they're the ones receiving Social Security they're the one receiving Medicare um it's it's uh you know it's unpopular for either party to cut defense spending they just argue about where the defense spending goes

but neither side really wants to meaningfully cut it um about about a decade ago during the Paul Ryan era of the Republican party they were more in favor of kind of privatizing and trimming Social Security uh but the current Republican platform has become more populist um and so they they actually put it in their platform we don't want to touch Social Security which used to be a Democratic position and now the Democrats are are that plus more uh and so one of the few things that that they agree on in polarized politics is you can't cut any of these big spending sources in any material way um and even if you had someone elected that did uh they probably would not get elected a second time uh because that's who votes um and so the way that the incentive structures are set up um

there's not a I think that it's mostly locked in uh Nothing Stops this train um and you can you can just kind of you know minimize the impact uh I would do things like make Bitcoin legal tender or at least um allow people to spend it AB below a certain limit you know without kind of the accounting overhead of taxes um I would have it as a strategic Reserve um I would kind of um prepare for the currency not working out um and I'd be honest with the people about hey we got into the situation these these problems accumulated over decades right so when people see the deficits now or they see the inflation now they often think whose fault is this

is this is this Trump is this Biden is this greedy corporations no one kind of goes back 20 years and thinks Maybe we shouldn't have invaded Iraq right because that's where a lot of our public debt came from and that's why we're paying interest now on our public debt that's pouring out into the economy or they go back another several decades and say maybe we structured our entitlement system with unrealistic future modeling uh no one's no one's blaming those people they're blaming the current environment and that's why this works the whole way F currency works is you you push things a generation ahead um and so you're and then you you're kind of detached from the situation Until It Breaks yeah Until It Breaks and then you get stuck holding the bag so I think that the the first step is kind of

a politician that's willing to speak honestly about the problems which which very few are yeah and we saw a little bit with uh with Kennedy uh he was quite honest about it let's see if he can if he can um really a message or or influence Trump and his uh campaign and policies afterwards in any case thanks a lot Lynn for your insights and I I fully agree with you that honesty is is the first step and and secondly we should just prepare for something better unfortunately there are many tools available including Bitcoin um so keep on keep on doing your your great work and with educating people and thanks so much for coming on the show again um people should go to linen.com to to find out about your newsletter to to order

the book can also be ordered online on at Amazon and um to my viewers please like this video if you like my work subscribe to the channel and and hopefully um I get to tell to Lynn again next year or so thanks much uh Lynn thank you