Bankless - 48 - Death of Dollar Dominance | Lyn Alden

Episode Date: January 18, 2021

🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI ❤️ JOIN PRIVATE DISCORD: https://bit.ly/2UVI10O 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/ ----- DEBRIEF OF THIS EPISODE (Member-only): https://shows.banklesshq.com/p/exclusive-lyn-alden-debrief ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️ AAVE - BORROW OR LEND YOUR ASSETS https://bankless.cc/aave 🚀 GEMINI - MOST TRUSTED EXCHANGE AND ONRAMP https://bankless.cc/go-gemini 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 📱 DHARMA | MOBILE ONRAMP DIRECTLY INTO DEFI https://bankless.cc/dharma ------ 48 - Death of Dollar Dominance | Lyn Alden Lyn Alden of Lyn Alden Investment Strategy has quickly risen to fame in the Bitcoin universe for her sharp analysis on long-term macro trends and brings plenty of data to back up her analysis. She’s one of our favorite macro and economics minds. Global macro events have such a strong interplay with crypto. In order to understand crypto, we need to understand the big picture We ask Lyn about the changes forces around the US Dollar, as demand and supply of the Dollar is less understood and less stable than ever before. We also ask Lyn about the relationship between the position of the U.S. Dollar as the world reserve currency, and the social unrest found inside the U.S. borders. It turns out, that the U.S. Dollar as the world reserve currency is not the best situation for those that reside inside the country! We bring up Ray Dalio's Long Term Debt Cycles mental model, and ask Lyn to connect it to the Fourth Turning Theory, in an attempt to discover some of the hidden forces behind the social unrest found in America. Fourth Turning Theory: https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generational_theory Highly recommended Lyn Alden piece on the Future of the Dollar https://www.lynalden.com/fraying-petrodollar-system/ Sign up for Lyn’s monthly macro newsletter https://www.lynalden.com/january-2021-newsletter/ ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case

Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David, this was a fantastic episode with Lynn Alden. What were your takeaways? Yeah, Lynn Alden has just been the rising star, I would say, of the second half of 2019. and definitely going strong into 2020.

She said she got notoriety when she started talking positively about Bitcoin on macro podcasts. And the feedback she would get when she would talk about Bitcoin and micro podcast was way stronger than this, the typical feedback. As you would imagine, Bitcoiners tend to be like that. And so she has just gone around the gamut with just producing content that is very macro focused using Bitcoin as a frame and positioning Bitcoin into the macro. context. We actually got her on a pod, got her attention when we were talking to her about, she had some questions about Ethereum and kind of how nodes work and centralization questions, kind of the typical questions that you get if you find yourself inside of Bitcoin circles. And that actually that conversation led to this conversation here on the bankless podcast.

We do touch on that subject at the very end. But something that we have in common on the bankless podcast with Lynn Alden is discussions about the concept of the fourth turning or people. and societies just perception shifts or some sort of crisis event where people choose to just perceive value elsewhere and access order in the world from somewhere else that's from their previous institutions. Lynn Alden is privy to that conversation and she speaks in similar terms with the fourth turning as with Ray Dalio's long-term debt cycles. And so we get into that conversation with her about how this money foundation is shifting beneath people's feet and that is

creating a tumultuous societal environment in this present moment. That was my big takeaway, Ryan. What about what about you? Well, yeah, I just think the listeners, if you guys are interested in trying to figure out how to position yourself for the next decade, both in terms of investing, but in terms of kind of life and in terms of crypto, this is definitely the episode to listen to. Lynn has a fantastic mental model that I think will prove to have predictive qualities for it. And I also, I think David was really good to discuss with Lynn, sort of the Ethereum perspective as well. We kind of challenge some of her ideas on Ether as NASA and DFi.

So make sure you guys listen to the end. And if you want a full debrief of our after the podcast conversation just with David and I, where we talk about the episode that was and we dump sort of our thoughts out, that is available for full subscribers on the bankless premium. feed. We will include a link in the show notes to that if you are a bankless premium feed subscriber. David, I've been enjoying these debriefs. It's kind of good. What's your take on them? Yeah, it's been pretty fun because we would have these debriefs anyways after the podcast. As soon as the podcast was over, like we would hop into Discord calls. Discord has a great calling feature, by the way. And we would just talk about the podcast for 20, 30 minutes.

And then we realized that people really want those conversations. And so those are some of the conversations where, you know, not only did I learn a ton in the actual podcast recording with the guests that we had on, but I also learned a lot with the discussion with you about how to, you know, integrate that into, you know, other theses that we have, like the bankless theses, the triple point asset theses, depending on whatever the subject matter is. So that's actually where a lot of learning happens for me as well. And I'm pretty happy that we're figuring out a way to share this with the bankless full subscribers. Yeah, just like you guys, we are figuring this out as we go. I commented recently on Twitter and this very much of what we

do with like kind of education around crypto, like sort of like three-year-olds teaching two-year-olds. Like we're all just figuring this stuff out as we go. So this conversation with Lynn is a key part of that. And before we get to that conversation with Lynn, we want to tell you about our fantastic sponsors. If you are looking for a product that connects your Fiat bank account with defy tokens and products, you need to download the Dharma mobile app. Dharma is a non-custodial smart contract wallet and comes with a bridge that connects you right into your bank account. Dharma is the fastest and most efficient wallet between your fiat and your bank account

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Bankless Nation, I want to welcome Lynn Alden to the show of Lynn Alden Investment Strategy. She's quickly Rosen, risen to fame in the Bitcoin universe for some sharp analysis on long-term macro trends, and she's got a ton of data to back up her analysis. Her blog is one of my favorite places to hang out to understand macro and economic trends. And because global macro events have such a strong interplay with crypto, we wanted to bring Lynn on to help us understand the big picture here. Lynn, welcome to Bankless. How are you doing today? Hey, I'm good. Thanks for having me. Lynn, some people thought that our financial system sat atop a house of cards before COVID hit. So our first question to you is, is our global financial system in a precarious position right now?

In a sense. I mean, it depends on what parts you're looking at. I would say it was in a more precarious position right back before the great financial crisis. And that's where we saw a lot of the kind of the internal bailouts happening there. Because if you look at, at, for example, you know, how much bank reserves, you know, banks had relative to their liabilities, that's actually, you know, when they hit an all-time low. Since then, they've been a lot higher. So it's kind of like the core banking system's already been bailed out. But now we have kind of a more broad kind of social issue, wealth concentration, high debt levels, all sorts of things like that. And so in many ways, what happened, you know, about 12 years ago mirrored a lot

what happened in the early 1930s after the, you know, the famous 1929 crash. Whereas kind of the environment we're going in now, looks a lot more like the 1940s, you know, hopefully without, you know, the war that they had, but basically in terms of a fiscal environment, like a massive kind of spending environment and kind of a broader bailout of society. And that's so, so that kind of one-to-punch kind of a private debt bubble and banking crisis followed by like a public debt bubble. And, you know, that tends to be more inflationary. But then aside from that, we also have, for example, the way the global monetary system is constructed, that's a whole other beast entirely. And so, you know, if you go back, you know, before 1940, you know, a variety of different gold standards.

And then from 1944 to 1971, you had the Bretton Wood system that eventually broke down in the late 60s and, you know, kind of officially broke in 1971. And then since then we've been on the petrodolar system. And science are starting to show that the petro dollar system is starting to, you know, basically fall apart as well. And so that's somewhat different than the debt problem. But it all kind of comes to a head probably here, you know, over the next 10 years as we sort some of this out. So does that mean to say that you actually thought that the financial system was more precarious before the 08 crisis and the 08 crisis reset ourselves to some degree? And we're actually perhaps in a better place than we were pre-2008? I think it depends on which part of the system you're looking at.

And so, for example, in terms of the way the global monetary system is constructed, so, you know, the whole way that the international countries do trade with each other and what currency they use, that's in a worse date than it was 12 years ago. However, if you look at, for example, the domestic U.S. banking system, it's more capitalized than it was back then. And it's because it basically imploded about 12 years ago. And due to those bailouts, it's at a much higher level of capitalization now. And so by that particular metric, it's far less fragile.

And that's why, for example, in this crisis, despite the fact that this was a much bigger economic impact, we haven't seen a lot of bank failures like we saw back then because that was specifically a banking failure, whereas this is a broader solvency issue. So it really depends on what aspect you're looking at. This broader solvency issue that you're talking about where we start to get into kind of like what is money and reserve currency status and that sort of thing, is it a harder problem to solve, like more difficult than what we faced in 2008? Yeah, I think so because what we faced in 2008, basically there was a handful of actors that could be billed out. And of course, there are all sorts of issues like that. We saw Occupy Wall Street and other sort of kind of pushback against that because, you know,

you had people lose their homes and they, you know, they generally didn't get billed out. But then you had the banks that, you know, we're going to lose their homes, but they're the ones that often got billedouts. And so, but in terms of basically how they capitalize the system, that's an easier problem to fix. Whereas how to, you know, basically restructure society is a much harder problem. And if you go back in history, you know, after you get the banking crisis, that later part actually tends to be the hardest part. And so that's kind of where we are in the cycle. And, you know, it feels a lot different. So a lot of people, you know, they fight the last battle so that, you know, they always think that the next recession is going to end up being like the previous one before it.

But it ends up being, you know, basically imploding from another area. And so rather than having another banking crisis this time, we had, you know, a much different area was impacted. It was not the leverage in the bank system that was the issue. It was some of these other broader trends. So many people, and perhaps we could call them Dumers, if some people would call them Dumers, think that there was going to be some sort of event, again, pre-COVID, that would destabilize the global financial system. And it doesn't matter what that event was.

And it was going to create this a financial crisis, no matter what the actual pre-crisis was. And so now with COVID, we are saying that there is a health crisis. Yet the vaccine is starting to be rolled out. It kind of feels like we're maybe in the sixth or seventh inning of a health crisis. Yet some of these people, some of these Dumeers might say that we are actually just in the beginning of a long-term financial crisis. And maybe you don't feel so strongly about maybe the crisis word. But I have read some of your writing that you do believe that we are in a very transition phase change. There's a transition period where we are going from one spot to the next.

What are you seeing ahead of us that we are transitioning into? And what are the kind of the macro forces behind that transition? Yeah. So I think kind of the main crux of it is that in the 2020s, I expect a significant current devaluation because we're at the point now where, you know, if you look back, for example, in the 90s, you know, you had the implosion of long-term capital management. And basically you had systemic issues among hedge funds. And basically you had a bail out of that.

You kind of kicked it up a level. Then you had the equity bubble in the late 90s right after that. And of course, when that imploded, they cut interest rates and they kind of kicked that up to the housing level. And then when that all blew up, that's when they transferred the leverage to the sovereign level. And so at that point, it doesn't really have any further to go other than a current T devaluation. And so that's generally what you see at this stage in the cycle. And there's a couple ways to accomplish that. I mean, basically they can run massive fiscal deficits.

The central bank buys a lot of the bonds to finance those deficits. And then if interest rates try to rise to compensate for any inflation that can happen, they can potentially lock yields below the inflation rate. And even right now, for example, the treasury markets, you know, pricing in 2% inflation, but the yields are like 1%. And so anyone holding treasuries is currently, you know, slowly losing purchasing power. And of course, there's different ways to measure inflation. So it could be faster than that.

And that was somewhat different than we saw back in the 2010s decade. That was a more disinflationary decade because you didn't see a broading, you didn't see a rapid increase in the broad money supply. Instead, you saw a rapid increase in bank reserves, which are more about capitalizing the bank system under the surface, whereas now you're seeing it at a broad money supply. So the amount of currency in circulation, the amount of currency that people hold in deposits and banks, that's all rising rapidly, which is a somewhat more inflationary outcome. But of course, we also have this big deflationary shock in the form of people, you know, they're not traveling, they're not spending on things. And so, you know, we're kind of held up in our homes right now still to some extent. But, you know, as you look out, you know, deeper in the 2020s, we kind of have the situation now where we have structural fiscal deficits in many places of the world and high sovereign debts that can't support positive real yields. And so people all around the world have a store of value problem.

And then there's deeper issues for some emerging markets. and the way that energy priced around the world, because we have kind of these dynamics of the global reserve, you know, petroddollar system is starting to kind of have issues around the corner. And the main issue there is that, for example, all these foreign countries have dollar-dominated debts. And so whenever they can't get dollars, you have a problem. But in addition, the U.S. banking system, you know,

even though they were well capitalized, they ran into issues back in 2019. because there were such an oversupply of U.S. treasuries that they were basically forced to buy. And so I think if you look at, say, doom and gloomers, they're always talking about a crisis from the corner. I think one of the key things, you have to take into account policy response that happens. And so, for example, some of the more sophisticated analysts say, here's a problem, and that's why we expect a response to happen. And so, for example, there were starting to be a lot of signs of financial stress under the surface in the U.S. Bank system in 2019. and that eventually manifested itself with a spike in the repo rate in September 2019.

And for people that don't know what that means, that's basically an overnight lending rate between banks. And it just kind of sprung a leak and literally tripled overnight. And so the Federal Reserve had to come in. They ended quantitative tightening. And they started doing quantitative easing and basic spinning their balance sheet again to push that leak back down. And then, of course, in early 2020, we had a much bigger issue. And if you look at, you know, of course, we had all the COVID stuff. We had the shutdown.

We had this, you know, massive thing happened. But for people that were following bank liquidity, you know, following kind of, you know, some of the financial markets, you know, behind the stock market, the actual kind of debt markets and stuff, what you had happened was you had to scramble for foreigners to get dollars to service those dollar-dominated debts. And in order to get those, many of them had to sell treasuries, right? So you have foreign exchange reserves all around the world that hold treasuries. And so they started selling some treasuries in order to get dollars. But that rendered the entire U.S. Treasury market illiquid. And so the Federal Reserve had to to come in and buy a trillion dollars worth of the treasuries in three weeks and basically reliquify it. And so you can read all the Federal Reserve like meeting minutes. I mean, they had emergency meetings to try to, you know, stop this. And I think I basically think that one of the main issues that people have, you know, in terms of doom and gloom is that you always have to take an account the policy response. So that basically left unaddressed was a doom and gloom scenario, but then you have to take an account what happens when it's printed trillion dollars. And that that opens up, of course, its own set of issues, but it's not the initial crass.

it's what happens later. And that's why whenever you have these kind of deflationary debt-based shocks, instead of, instead of all kind of unraveling like a house of cards, usually you get inflationary response, and then it usually kind of grinds itself out through inflation, you know, later in time. So, Lynn, I want to jump in here because your prediction, when David asked about what are the 2020s going to be like? Use this term currency devaluation. And then you made the apt point that everyone always thinks the next crisis is going to be similar to the last crisis that they lived through or even the one before. And the trouble with something like currency devaluation is we all know all listeners like they felt

2008 at some level, right? You know, most of them were their kids or like a little bit older. But I'm guessing the vast majority, maybe 95% of our listeners today, Lynn, they have no idea what the 1940s felt like, right? And the type of currency devaluation that you're talking about, you liken a bit more to the 1940s rather than kind of the 2010s or maybe even the 1970s. Can you paint a picture for us of what you expect in this term currency devaluation in the 2020s, what you actually expect that means for, I guess, ordinary people living and investing and trying to save money in this world? What were the 1940s like that are going to be similar to the.

the 2020s. Yeah, sure. So if you look at, you know, over the past century, the United States has had three inflationary decades or two of them so far and, you know, we're potentially like moving into a third one here. So if you look at the 1940s, you know, they had just come out of the Great Depression, right? So you had this big kind of deflationary impact.

But going into that, you know, in the 1930s, there was a big private debt bubble. And that all unraveled. There was farmer debt. There's business debt. There's financial leverage. And a lot of that unraveled. It was a big deflationary shock. So what the United States government did was they devalue the dollar relative to gold.

So the dollar was backed by gold and they changed it. So it was backed, you know, like one dollar was worth less gold. And that helped the banking system recapitalize because they hold gold as reserves and a lot of their liabilities were dollars. And so if you change that ratio for how those work, suddenly they have more dollars worth of reserves because their gold reserves are worth. more dollars. And so that was a devaluation. But it wasn't very inflationary because, again, that was mostly inside the banking system. And so all that did was kind of undo a deflationary spiral. It wasn't until the 1940s that you saw actual inflation. And that was because the U.S. government started to run massive deficits, like 15, 20, 25 percent deficits here. And because

there's so much Treasury's issue to fund those deficits, the public couldn't buy them all. So you had the Federal Reserve basically print money by treasuries. And because sovereign debt was so high, so federal government debt was over 100% of GDP, you know, when you started to see inflation, they couldn't raise rates because it would, you know, would render the U.S. government insolvent because when you're running, when you have 100% debt to GDP and you're running 20% deficits, you can't have high interest rates on that. And so they just said, no, no, we're going to lock yields at 2.5% or less. And we're going to buy any treasury we need to in order to maintain that peg.

So you had inflation going to the double digits, even as industry rates stayed at 2.5%. And so anyone holding cash or treasuries, you know, you got all your money back nominally. No one defaulted on you if you were holding that safe paper, but you lost purchasing power compared to commodities. So let's talk about that for a minute because like I said, none of our listeners have lived through that, right? So like, T-bills are a safe bet right now. That's kind of common knowledge. But what you're saying in the 1940s is they were not a safe bet. bet. You could end the 1940s by storing all of your value in U.S. T bills, essentially, and have a lot less value than when you started the decade. What was the move to make in the 1930s and in the

1940s as kind of an investor that's just trying to store wealth and store value through those decades? Who are the winners and the losers? So most of the moves to make back then would have been basically to buy equities or to buy commodities. And, And that's because, of course, throughout the 1930s, equities were very cheap because growth was slow. Everyone was pessimistic. And then when you're fighting a war, not many people are buying equities. And so they were very cheap there. And so it was basically the right move was to buy equities by commodities because those were all in demand.

And as the war kind of went on, you had, of course, you first you had commodities spike in price. And then as the war ended, the stocks did very well. And so the worst move to make was basically to hold money in the bank or to hold treasuries because even though you did get all your money back, there was no nominal risk. It's not like the U.S. Treasury defaulted. It's just that, you know, you got all your dollars back. But at the end of the decade, they lost roughly a third of their purchasing power. So you could buy about one third less of a home.

You could buy a third of the amount of copper. You could buy what, you know, there's different ways to measure it. Some things were more or less. But overall, it was about a third of your purchasing power, which, you know, over a decade is terrible. I mean, over a decade, you'd expect to grow your purchasing power. but with those kind of paper investments, who said lost about a third of it.

And you think, Lynn, something like that could happen in the 2020s. So I have $1,000 and I want to store my wealth for the decade. At the end of my decade, my nominal value may be higher, but my actual purchasing power might be 70%, might be $700 rather than $1,000 at the end of the 2020s. You think something similar could happen. I think potentially, I mean, even if you look at over the past decade, if you held, for example, T-bill, so the short end of the treasury curve, you lost a few percent of your purchasing power compared to CPI or compared to assets.

Like you can buy a little bit less house. You can buy less of Apple's market cap. Whatever the case may be, you basically can buy less stuff than you used to. The one thing you might better buy more of is certain commodities like oil, for example, because you've been in a commodity bear market. But, you know, in terms of official CPI, which of course has its own flaws, you can buy, less stuff with your $1,000 held in T-bills because it just failed to keep up inflation. But of course, that was a very, it's a very small loss. It wasn't a very large loss. Now, in the 2020s, I do think it could be more significant. I think at the very least,

you're going to get another one of those decades of just, you know, gradually losing purchasing power. And then it's possible that you can get more like the 1940s or the 70s, you know, in terms of losing 10%, 25%, maybe more. Lynn, I think it could be really helpful to take a pause for a moment and define different types of inflation for our listeners. Because when people say inflation, they end up in perhaps an argument that is more of a semantic argument rather than a fact-based one. Maybe you could, for our listeners, give us your mental models about how you can define inflation in different ways and in what ways are those definitions useful. Yeah, so there's one core way and then it can manifest itself in two ways. And so the core way is an increase in the broad money supply.

And that's basically that there's just more and more dollars out in the system. And so, you know, in the 1940s and 70s, the two inflationary decades, you saw a big increase in the money supply. And, you know, in the past few years, again, you've seen another big increase in the money supply. And that's why I think we're leading up to a more inflationary decade. Now, where that inflation manifests can vary based on what the fiscal policies are, what the, you know, the kind of economic environment is.

And so if it manifests itself in consumer prices or commodities, that's when you get what is kind of more commonly thought of as inflation. That usually comes about because you have some sort of commodity shortage or you have rapidly rising wages. There are a couple of different ways that can happen. And so in 1940s, it happened due to very large fiscal deficits that were monetized to fight the war. In the 1970s, it happened because you had the dollar go up the gold standard. And then you had oil, you know, oil scarcity. because OPEC was squeezing us. And so you had that issue there.

And so the other way it can manifest is an asset prices. And so if you don't have commodity shortages and you don't have rising wages, we still have an increase in the money supply. Then instead of what you has is that the money velocity decreases and that money kind of just pours into financial assets. So stocks, houses, gold, all these, you know, in this decade, cryptocurrencies, all these different. kind of anything that's kind of somewhat scarce.

So it could be fine art, it could be wine, it could be classic cars. All those things go up dramatically in price. And so, for example, if you look at the price of a Super Bowl ticket, you know, the past 20 years, that's gone up dramatically, even though it's the same venue and it's the same, you know, sporting event, but because it's a scarcity. And so anything that's really scarce, that will go up, even though you won't have, say, increases in, you know, the cost of bread or the cost of copper. something like that.

So we've had, over the past decade, we've had definitely this asset price inflation. We've not seen the CPI related consumer price index related inflation that you talked about. And we've absolutely seeing the monetary supply inflation. We can include some links to some graphics in the show notes, particularly with COVID. But I would say, Lynn, that it seems like the investing world and the financial world is not blind to this. necessarily, but it is probably a common belief that if you want to, like, hold value during this asset price inflation, you could buy things like real estate or you can buy things like equities and stocks. I heard you keep making the case of the 2020s, like the 1940s,

of things like that are scarce, things like commodities, right? Those aren't necessarily equities. Maybe it's real estate to some level. But do you think that that paradigm that I think is probably a common belief that, hey, if what you say it's true, the 2020s are going to hold a lot more currency devaluation, that inflation will manifest itself in asset prices. So I better hold a whole bunch of stocks essentially and real estate, right? That seems to be what Wall Street's thinking anyway. Do you think it'll play out like that? And did it play out that way in the 1940s? I think it'll play out a little bit different. And so, for example, if you look at the 1940s, like I said before, the benefit the

stocks had was they weighed into that decade at very low valuations. And so when you had an increase in the money supply and you had their earnings go up, you had a lot of room for those stocks to go up in value. And, you know, whereas if you look in the 1970s, for example, the stocks would into that decade at very high valuations. And so when you had inflation, you had rising interest rates, which was different than 1940s because in the 70s, debt was low. and they were able to rise interest rates to fight inflation.

And that's a killer for stock valuations. So that, you know, stock valuations went near record lows. So in this period, we're, of course, entering this with extraordinarily high stock violations. Real estate's more mixed. I mean, if you look at, for example, a penthouse in Manhattan, it's very expensive. But the, you know, residential house in many areas is not particularly expensive. So it's kind of a mixed bag there.

I think kind of if you go forward, looking at commodities, that's kind of a more, kind of a high probability bet on inflation. And then, you know, same thing with digital assets and things like that. Whereas I think some of those traditional assets, they're far less certain. You also have to kind of break it down by sector or geography. So we've had a very kind of sharp period of U.S. equity outperformance compared to the rest of the world and particularly growth stocks. And that's because you've been in this kind of disinflationary environment. But if you have that reverse, you start to have kind of more money flowing to, say, the world. working class or middle class, maybe Green New Deal, whatever the case may be, sort of getting an actual

increase in CPI inflation, that's when you would generally see value stock outperformance compared to some of these gross stock outperformance. And that's, of course, that's what you also saw in the 1940s and 70s. If you look at under the surface of what the index was doing, is you saw that kind of rotation happening. And so I would expect to see more international equity outperformance and value outperformance in this decade, which would be the opposite of what happened in the 2010s. It's kind of interesting because what you're saying is like people thought that this, that what you're saying was going to play out actually in like 2009, 2010, you know, with broad currency devaluation, gold price shot up. And it didn't play out that way. Why is this time different? So a lot of it's because the broad money supply is going up this time. And so back then, bank reserves went up, but not broad money supply. So if you look at broad money supply, it didn't really change. You feel like at, you know, where it wasn't. 2006, where it wasn't 2007, 8, 9, 10, 11, there wasn't a big change. You just kind of kept

going up on this normal trend. Instead, the bank reserves are going up underneath the surface, which just recapitalized the banks. What we're seeing now is that you're, in addition to seeing quantitative easing, you're seeing the federal government hand out checks to people. They deposit them in the bank, and you basically get a rise in the broad money supply. Combined with the fact that, you know, back then we're at the kind of the peak of a commodity cycle. So we were kind of had, we were in a period of oversupply for commodities. Whereas, you know, outside of oil and gas, we haven't had a lot of kind of commodity production come online in the past several years. And so we're looking at potentially more scarcity for things like copper, uranium, all these kind of other commodities that

are important for key industries. So I think that 2020s could be more of a, you know, combined with broad money supply and some degree of commodity scarcity, that's when you can get actual inflation. So one of my favorite topics in the crypto industry is, and as a, you know, I think almost everyone talks about this, especially Bitcoiners, is that the powers that be, mainly the Federal Reserve, but then also go fiscal policy from Congress, is going to be forced into a corner to issue new currency. And I want to turn the conversation to the Triffin dilemma and the relationship between the U.S. dollar and the petro dollar and why we almost are forced into a corner to issue new

currency. And I'm hoping you could frame this conversation in a way that. connects manufacturing inside the United States to the relationship between the primacy of the dollar as the reserve asset of the world. Yeah, so if you go back to the Bretton Wood system, there are a bunch of economists that point out in the beginning that that system would fail just because of its own kind of instability. And so the way that system worked was that the United States dollar was backed by gold and all other currencies in the world or most of them peg themselves to the dollar at a fixed exchange rate. The problem is that over time, you know,

United States increased the amount of, you know, dollars in circulation. They increased their treasuries, but they didn't increase their gold reserves. And they actually drew down gold reserves as people redeemed their dollar for gold. So at the time you got into the late 60s, you started to see a period where, you know, gold was lower and, you know, dollars liabilities were much higher. And in that, the international community started to realize that. And they said, okay, we want to take the gold. And eventually, you know, Nixon had to go off the gold standard because it would have just drained all the gold reserves. And so that system was just inherently unstable.

Now, in the petrod dollar system, we've kind of moved the instability to another area. And so the dollar is not backed by gold anymore, but instead it's kind of indirectly backed by oil. And the way that works is because in the early 70s, you had that chaotic period of all these, currencies were floating exchange rates, a big mess. Nothing was backed by anything. And the United States made a deal with Saudi Arabia and the rest of OPEC and said, okay, will provide military protection. We can do trade deals, but you need to price your oil only in dollars. So whether we're buying it, whether Europe's buying it, whether Japan's buying it,

whoever's buying it, only sell to them in dollars. And so that makes it so that those other countries, if they want to buy oil, they need dollars. And so either they can sell their products and services in dollars, so they get dollars and buy energy, or they can exchange their currencies for dollars. So essentially, the world, the U.S. in one stroke, made U.S. dollars the unit of exchange for the world. And they used that leverage of the might of the U.S. military to get that done. Yes. Right, to protect oil exports.

Yeah, but then like the Bretton Wood system, that had kind of a fundamental flaw within the system. And so that makes it so that the whole world needs dollars. Everybody needs dollars. Now, if you look at most countries, they, you know, if their currency gets too strong, it makes it so that their imports or, you know, they have really good importing power. but their exports become less competitive. They start to get a trade deficit. And eventually what happens is they have some sort of financial crisis,

recession, whatever the case may be, and they usually end up having a significant currency devaluation. And that makes their, you know, it's really painful when it happens, but then it makes their exports more competitive, and it makes their imports, you know, weaker. They can't import as much, and it kind of forces them to self-correct. So in order to keep the dollar stabilized,

we need to continue to issue new dollars. because of how much global demand there is for dollars because it's denominated for oil purchases, for gas purchases. But then that means that because the U.S. needs to export dollars, it's making big purchases of the same goods and products that are made inside of America. It's purchasing those things from external to America so that it can export those dollars to keep that dollar price down, which is actually harmful for local domestic U.S. industries because as a result of needing to export dollars, we've kind of made.

neglected our own industry. Is that the right take? Yeah, basically, it's forces into a position where we have a structural 50-year trade deficit. And so the dollar never weakens enough to make our import-export balance more appropriate. And so our manufacturing capabilities are always kind of uncompetitive compared to the rest of the world. And so, you know, to some extent, you've had that happen to many developed markets to emerging markets. But, for example, if you look at Germany, if you look at Japan, they have current account surpluses. I mean, they're still able to sell a ton because they don't have the same issues the United States has with its manufacturing base. And so, you know, unlike Europe, unlike Japan, unlike China, we've basically exported a large portion of our industrial base to the rest of the world.

And it's starting to hit ahead. That's where we're seeing more rising populism and things like that. It's so interesting here because, like, people would say, and I think rightly so, that the U.S. having its dollar as the World Reserve, currency is its superpower. But you're saying at the same time, it's also it's kryptonite. Yeah, I think one way I phrased it, you know, because people often describe it as an exorbitant privilege. And in the 90, you know, in the 1970s it was. I mean, we were in a cold war with Soviet Union. We wanted to have as much international leverage as we could. And but then, you know, focus on who wins and who loses. So if you're in the United States and

if you work in finance, health care, technology, or government, you don't really get any of the side effects. You don't really get any of the downsides. But you get all the upsides of living in the hegemon, of having a strong dollar. You know, you basically all upside, little downside. However, if you work in manufacturing and some other fields, you know, you either lost your job or your wages went flat for like a decade because you were always at risk of being outsourced to China or Mexico. And so, sure, some things got cheaper for you because they're made in China, but also your wages suffered. And so we've had that kind of separation between, you know, people that work, you know, in either like higher margin industries or, you know, or, you know, financials and things like that,

versus people that make physical things. We've had that really kind of a gap. And so I think a lot of people that are in that other group, you know, are more oblivious to some of the stuff that's happening to people that have been more affected. Lynn, I was a big follower of Andrew Yang in this election season. And Andrew Yang ran on a platform saying that Donald Trump got elected by answering to the needs of the people who worked in manufacturing jobs in the Midwest. And he would go through just this stump speech of, you know, these states like Pennsylvania, Wisconsin, just all these big manufacturing towns that overwhelmingly went for Donald Trump because they lost their manufacturing jobs. Now, when you, when we talk about the, the petro dollar and the need to export our dollars

in order and at the same time neglecting our own manufacturing. My brain goes to the fact that the primacy of the dollar is actually the, was one of the main incentives behind putting Donald Trump into office. Do you accept that connection? I think so. And actually, if you look at, for example, some of the states that flipped, right? So Trump's victory was a surprise for a lot of people. But for example, some of the, you know, the Midwest states that are somewhat more traditionally blue, a couple of them are swing states, a bunch of them went red, which surprised a lot of people. But that's actually the hardest hit region by this whole problem. And yeah, I think Trump spoke to them in a way that many other politicians were avoiding. And the way, of course, it worked out of the next four years is actually

the trade deficit got bigger. And so none of the actual kind of core issues were addressed, but at least they were spoken to and people heard that. And therefore, you know, it gave them hope that maybe the system's starting to turn. And I think. that there were already some kind of gear starting to change, you know, we started to see rising populism in a couple different forms. So you saw, you know, you saw the Tea Party, you saw Occupy Wall Street. We had the rise of Trump. On the, you know, the Democratic side, you had the rise of Bernie Sanders compared to some of the establishment politicians. And so we started to see that, you know, there's, because populism isn't just right or left. There's multiple types of populism.

And I would even argue that the cryptocurrency is kind of a techno populism. It's busy people rising up against the established system and saying, we want self-taxious. sovereignty, we want privacy, we want to just go our own way. And so there's, you know, there's, you know, ways that are more sophisticated than others and different political persuasions, but they're all forms of populism pushing against, you know, the established system that is no longer working for a lot of people. So let's make this connection. How does the relationship between the petro dollar and wealth in the, wealthy inequality in the United States, how do the, how are those things connected? Yeah, so as I said before, basically it makes it so that the United

States never closes this trade gap in a way that most other countries do. So most countries, if their trade deficit gets too wide, some sort of crisis ends up devaluing their currency and kind of self-fixing that. However, the United States, because there's kind of all this external persistent demand for the dollar, it never kind of realigns consumption and production. And so we always have this persistent trade deficit. And so, you know, literally 50 years straight, ever since the early 70s, you pretty much every single year have a trade deficit. And it's, most part gotten worse and worse. And so that's put a disproportionate pressure on our, you know, manufacturing workers,

both skilled and, you know, lesser skilled workers across the, you know, kind of the spectrum there. But however, if you work in technology, if you work in finance, government, healthcare, things that weren't outsourced as much, then you benefited. Then, of course, there's always fiscal policies like, you know, who you're taxing. You know, the United States is the highest health care per capita spending in the world. So that hurts a lot of small businesses. That hurts a lot of people that have to pay their own health care, things like that. So moving forward into the 2020 decades, we've talked about the perceived likelihood of further dollar devaluation.

And aligned with that, I think also comes with an assumption of increased asset prices because devalued dollar means that higher asset prices. How do you think that this is going to impact social dynamics moving forward into the, 2020's decade because not only is are we talking about the removal of you know stable manufacturing jobs but we're also talking about you know if things are inflating away and amazon stock goes you know three x over the next year yet the average wage of the american individual is roughly around 60,000 dollars while they're making the same nominally but they can access you know one third of the size of the american economy that they previously did like how are you perceiving changes in the U.S. dollar with social dynamics moving into the next decade.

So in inflationary decades, normally growth stocks don't do very well. It's, you start, you know, you don't see at, you don't see price appreciation across the board. Now, if you have extreme inflation, like if you have Argentina level inflation, then yes, every stock is going up dramatically because if you're getting like 50% inflation a year. But let's say you're getting 10% inflation, right? So you're getting a higher degree of inflation, maybe 5, 10, you know, up to 20, spikes of 20% like you've had in kind of developed countries, then normally what happens at that point is that you get certain types of assets going up and other ones going down. And so,

you know, stocks that are priced like 50 times earnings that are extraordinarily highly valued based on the premise that industry rates are going to stay at 1% forever, you know, those tend to get, you know, decreases to their evaluations and therefore their price. And so that, you know, that can take the form of that stock going down or it could just go sideways for a decade. And so, you know, an example I like to use is that in 1960s, you had something called the nifty 50, which is like, you know, these 50 big blue chip companies that people said, you can't go wrong with. You invest in these companies, you're going to do great. And they were companies like Coca-Cola, Disney, you know, things that are well known, Xerox back then.

And of course, those companies absolutely dominated the next like, you know, 30, 40, 50 years. They did do phenomenal. But their stock prices got killed for like 10 to 15 years through the 70s because they went into that decade. it extremely highly valued based on the premise of super low interest rates. Whereas, you know, some of the commodity stocks, the real estate, that's the kind of stuff that went up in price a lot. And so you had that big rotation from growth stocks to some of those value sectors. And so the way I would, I'd expect it, if you were to see, you know, three, four, five, six percent inflation, whatever the numbers end up being, I would expect to see some of the rotation where you see

more international stock performance. You see more value stock. performance. You see higher commodities, higher real estate, at least outside of major cities. But you could, for example, see things like Apple, Amazon, you know, some of those trends sideways, you know, be choppy. And, you know, you could have kind of the S&B 500, not particularly do very well for like a five-year period, even though you see those other areas going up. But that would actually be close to my base case. You guys, there is so much left in this interview with Lynn Alden. We bring up the conversation about the connection. between the social unrest and distrust in institutions that we find in rampant in today's society.

And then we link that to Ray Dahlio's mental model of long-term debt cycles. Linaldon, I know it is a fan, and so am I of the fourth turning theory, which claims that roughly every 80 to 100 years, a grand shift occurs where people turn away from previous institutions and migrate their attention and their trust to alternative new institutions. We ask Lynn how she connects Ray Dalio's theory of long-term debt cycles to this concept of the fourth turning. Then, of course, we turn the conversation to Bitcoin and how Bitcoin as an option to store one's value might change the course of history, migrating through the economic story of the 2020s, as well as Ethereum's ability to serve global dollar demand. Lastly, we finish up with Lynn's opinion on Ethereum.

What makes Lynn hesitant about Ethereum? And then we have a conversation as to what is actually going on with Ethereum as it relates to the outside world. So much left in this interview. I hope you guys enjoy. We have to take a moment to pause and talk about some of these fantastic sponsors that make this show possible. If you want to live a bankless life, you need to get a Monolith Defi visa card. Monolith is a one-two punch of both an Ethereum smart contract wallet and an accompanying Visa card that lets you spend the money that you have in your Ethereum wallet everywhere where

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talked about, right? And I tweeted this out recently. I feel like everyone's angry at each other, and I wish we were more angry at the underlying system, which is, I mean, this anger, the political anger, the social unrest, the wealth inequality is all a result of the underlying monetary structure that we have in place. And it's almost predictable from that perspective. So I feel like the first order thinking is, I'm angry at everybody else, right? You took away my manufacturing job. And so I'm voting for the populist candidate, right?

Second order of thinking is like, no, this anger is a product of our system. And if we could change the system, then like we could change everything. But there's also a third order thinking here that I want to ask you about, which is like, maybe this just has to happen. Like maybe this is what human society has always done, where we've had these debt monetization cycles and every every once in a while, every few generations possibly, we have to have the reset. We have to have the year of Jubilee. And because human nature doesn't change, this is going to repeat forever. Can you talk about these cycles that we've seen in history?

And maybe weave in a little bit with David and I have talked on the program a little bit, like the fourth turning and some of these things from a social perspective that like we often see repeating. Do you think this cycle is just inevitable, essentially, that we're just going to keep repeating this whole thing, and there's nothing we could do to stop it, and so we just better get ready and brace ourselves? Can you talk about that? I think it's nearly inevitable to some degree, but I think, you know, society can mitigate it based on, you know, how knowledgeable they are, kind of how cohesive they are. And so, you know, if you look, I think the fourth turning is a great book, because that, you know, that shows it roughly every four generations, you know, just when, just when a

generation's kind of old, you know, no one's alive from the previous crisis, that's when they have the next major crisis. And so, you know, they point out that every four generations, roughly 80 years or so, you tend to have a really big shift in in politics. You usually get a rising populist movement. You get a big change in how things work. And that, you know, the system that kind of comes from that could take a darker path or it could take a positive path based on who won. And if you actually you go back and look at the fourth earnings, they're all long-term debt cycles. You know, that book focuses on the social political element, but for people like me that focus more in the financial element, another way of saying it is that they're all just kind of,

you know, debt bubbles that are, you know, multi-generational debt bubbles rather than just a cyclical debt bubble. There's another book called The Lessons of History. It's like a hundred pages written back in the 1960s. And that literally documents that it's going back to 2500 years ago in ancient Greece. and they show that these debt monetization cycles, you know, that, you know, multi-generational cycles that can be 50 to 60, 70, 80 years, they do keep happening all throughout human history, all sorts of different monetary systems, all sorts of different geographies. It's almost inevitable because you kind of have that pendulum swing back and forth where you get, you know, more and more wealth concentration kind of gathers. And, you know, as you get more wealth concentration, that enables you to influence politics more. and so that gives yourself more and more power,

and it kind of has that kind of virtuous cycle for that group until the people that are on the wrong side of that, you know, hit an absolute breaking point, they push up against it, and then either one or two things happen, either you have an outright revolution, or the, you know, they kind of want to mitigate that ahead of time so they, no, no, don't burn everything down.

We'll give, you know, we'll rearrange some things, we'll fix some things, and that kind of shifts some of it back. And so some of the most successful societies have kind of managed to thread the needle, where when it gets to the point where the, you know, the pitchforks are coming out, they, they rearrange enough chairs to kind of level things out again and kind of restart another cycle, whereas ones that don't thread that needle very well end up getting totally, you know, overrun and they kind of rebuild up from there. And examples like that would be, you know, the French Revolution or the Russian Revolution. Whereas, you know, for example, the 1930s,

United States was one of the ones that was able to thread that needle in such a way that, you know, the system kind of kept going with less extreme of a, you know, fluctuation. Although we did suffer a war of the 1940s, possibly as a result of this populism and authoritarianism that resulted from it. Yeah. And a lot of that was because, you know, some of the, what was happening in Europe, some of those places threaded it less well. And so, you had some of them kind of go down that darker route.

And then, of course, you know, the whole, the war in the Pacific was a whole other thing going on, you know, you know, leading up to that, United States was involved in. Japan, we kind of forced them to open trade. That gets into colonialism. But basically, that was a whole bunch of different factors. But yeah, that shows that that was kind of an issue where multiple countries were going through the cycle together, and they all handled it in different ways. So you had UK handle it in one way. You had Germany handle it in another way. You had the United States handle it. And kind of as they came out of that system, some of them were better positioned than others based on how they handled it. And of course, who won the war. So Ray Dalio speaks about

long-term debt cycles, which he quotes between like 80 and 100 years long. And I think that's what I hear you speaking about with this topic as well. And what's interesting is that, you know, the fourth turning talks about the staculum, which is also, you know, 80 to 90 years long. And that's, you know, kind of an interesting coincidence that those things are roughly the same spans of time. And they are both predicting a crisis and a rebirth after the crisis. That's interesting to me. What I, what I see is evidence today is that both in 2020, both the social left and the social right rioted for different reasons, right? The social left rioted because of the Black Lives Matter movement. The right rioted because of, you know, a populist movement to keep Donald Trump in office and actually broke into the state

capital. That's a crazy event. And I actually think it's crazier and not yet talked about that for completely separate reasons, both the left and the right took to the street in the same year. And so do you see this as perhaps validation of Ray Dalio's long-term debt cycles and the fourth turning theory? I think so. I mean, the fourth turning pretty much said that would happen. And, you know, as I point out, the fourth turning is all aligned with, you know, long-term debt cycles that Dalio would recognize. And so, you know, all those kind of forces, they all have, you know, what you said before is that everybody blamed each other. And that's, of course, because the underlying problems are very complex and multivariable. And a lot of people want to, you know, have a simple explanation.

It's their fault or it's, no, it's their fault. And we kind of have this kind of us versus them mentality. And so different cultural groups interpret the problems in different ways. And so that can manifest itself, you know, through social issues. But a lot of the underlying causes is due to, you know, really kind of big divides in terms of wealth concentration, people having trouble paying for health care, people having trouble, you know, just kind of maintaining a status quo. And so, for example, there's charge that show, if you look over the past 40 years, if you look at the median male income. And so, you know, there's the middle 50% male.

And they use male just because it keeps kind of a trend line because women, you know, economics were different 40 years ago. But if you look at median male income and you look at, you know, the key expenses like health care, transportation, housing, education, that used to be a smaller percentage of his income. But then over time, those grew a lot more quickly. than his income. And so now it's at the point where they take up all his income and he has no income left for anything else and it can barely pay for those things. And so once you kind of have that crossover point and people are just kind of in debt and they, you know, they have like $50,000

dollars of student debt and, you know, they just lost their job and they're being told they, you know, they can't, you know, by the government, they can't, you know, say open their business or, you know, whatever the case may be. That's when they say, okay, I'll just, I'll grab my pitchfork and, you know, because I don't have anything. I'll go, I'll just go, you know, mess around the consequences are lower when it seems like no matter what you do, you can't make ends meet. And you don't have a job because you lost it because you were to manufacturing. Yeah. So, Lynn, I feel like this is building to a crescendo where we start talking about crypto

because I think listeners want to know, okay, Lynn, if everything you're saying is true and it looks like these cycles are repetitive and they may have some predictive powers, then how in the world do I position myself going into this decade? So I want to take that as the context that we've talked about. But let's talk about this populist social movement. And I like your lens on it, your framing of it, called crypto, because that's what we're a part of. So bankless is about using crypto as tools and decentralized finance tools to live a self-sovereign life without a bank. We don't need an institution.

It is a, in some ways of a populist social movement in the way that you're saying. And there's a store value aspect to that. There's also the ability to do things within its decentralized economy that maybe someone would prohibit you doing outside of that economy. So let's get to crypto. Is this the reason? Is crypto well positioned, particularly maybe Bitcoin. We'll get to ether in a minute too.

Is crypto really well positioned for this coming decade? What's your take on it? I think so because it's harnessing decentralization through technology. And so for example, if you look at the Genesis block of Bitcoin, it reverence is a bank bailout, right, right in the Genesis block. And of course, partially that's the time stamp the block to show that there's no pre-mine, but it's also clearly a cultural message towards what's happening in the world. And so we have this kind of way to kind of go around the system in a way that would have been

much harder before. And so, for example, if you look at United States history from the 1930s to the 1970s, it was illegal for Americans to own gold, which is funny to think about. They were like, no, no, you cannot own on penalty of jail, this yellow metal that's harmless. You just can't own it because it just, we don't like how it competes with the dollar system. And so this is basically a attempt to make an international network that basically says, you know, governments can try. They can make it illegal, but they're going to have a really tough time stopping the actual underlying transatlantic. actions from happening. And of course, you had a bunch of other digital assets come in its wake. And they all basically, you know, I think a lot of them are scams, but a lot of them are

attempting to give tools to people to, you know, kind of figure out what works, what doesn't, to go around kind of the existing systems as much as possible. An example for is stable coins, right? So, you know, basically depending on how they're structured, like there's a different to say, you know, tethered or die. But, you know, you have kind of a, you might have a trusted third party at one point for custody, but then the actual trading of them can be permissionless. And so there's all these different technologies that can let people kind of go around existing systems in a way that they couldn't do before. Lynn, reading and understanding your analysis about, you know, the last hundred years

of macroeconomics, you are frequently give out the line, you know, history doesn't repeat, but it rhymes. And you've also said the line, well, with regards to the COVID economic crisis, quote, unquote, this time it's different. And I think one of the big things that's different about this time is that Bitcoin exists. Like we never had Bitcoin in 2008. And maybe we did technically. It came like six months a year later, but it wasn't really mature to the point where it is today.

You know, now Bitcoin is like almost a trillion dollars in market cap. You know, it's got its network effects. How will the decade, the next decade, be different because Bitcoin exists as an option? You know, I think it's tricky because the last time, if you go back to find a decade, it's kind of like how this decade is shaping up to be, you know, even if we just put aside kind of speculations of social political issue, just look at the fiscal situation and the monetary situation. The 2020s look a lot like the 1940s so far, whereas the, and in 2010s look a lot like the 1930s. So even just looking at things in number terms, we have to go back to 1940s to

find a similar situation in terms of fiscal deficits, fiscal debt, you know, persistently low interest rates. And so, you know, back then, people didn't have a lot of options. I mean, you didn't have the internet. Obviously, you got your information at the speed of newspaper. And so you didn't know, you couldn't just go up in real time and look at what inflation is doing and be like, oh, maybe I should get out of bonds or, you know, you couldn't do that. Whereas now you're in a situation where people have all this real-time information. They have social networks that are telling them either information or disinformation in some cases. but either way, things are circulating a lot faster.

And so people are going to interpret that in different ways. And so I think a lot of the reaction functions can be a lot quicker. And so, and, you know, those could be positive, you know, interactions or negative ones. And, you know, I think digital assets are one more tool that people have now, for example, to opt out of a system. And so, you know, back then, the tools were limited, right? So gold would have been the obvious one, but that was banned. and it was actually hard to enforce. So even though it was illegal to own,

there was actually rather few, you know, kind of charges against people for, you know, basically very few people got in trouble for it because it's not like they sent people with guns to every home and checked everyone's gold. It was just, so, you know, kind of going into this decade, people have all these different stores of value. They have gold.

They have, you know, they can do commodities. They can do, you know, art, wine, houses, crypto, whatever the case may be for, you know, what they analyzed to be the best. But I think digital assets give people an international network effect to basically go into in a way that uses 21st century technology and kind of goes around a lot of the impediments that existed before. Can we take a quick side quest here?

Because I'd like your take on this, Lynn. So some people are skeptical that the final boss government will allow crypto holders to essentially keep their crypto. And you've referenced several times. the 1930s, of course, the U.S. famously banned citizens from holding a certain amount of gold. And it's interesting that that wasn't lifted until the 1970s, which is very fascinating. So can you talk about this? Of course, there are ways that, you know, it's difficult for a government to confiscate private keys, right? At the same time, for a network like Bitcoin,

a massive amount of liquidity actually happens in regulated crypto banks, as we might call them, a Coinbase or a Binance. And that certainly provides a choke point potentially for a government who doesn't want you to store your value in this foreign asset. Any takes there on how the government might stymie this? Some people we've had in the pockets like Ben Hunt, for instance, He'll say something like, hey, you're never going to get away with this, basically. Big government is going to come and take away your crypto and relegate you to some sort of

side show and have you live there. But you're not going to do anything large scale with cryptocurrencies. You can't assault the government's position on money. You can't take that power away from them. Any thoughts here? Yeah, I have a couple of thoughts. I think one is there's a common thing that argues that the bigger they get, the more likely they are to be blocked, whereas I think it's actually in some ways the opposite. The bigger they get,

I mean, then you start to get more attention. But if they hit a certain level of escape velocity, the games kind of want. And so if they get big enough, they're actually really hard to ban. And we've seen some countries, for example, try to ban digital assets and then backtrack on it when they realize like, okay, so all the innovation is just going to leave their country and people are still going to use it anyway. And then it's just, you know, it's so they're like, no, no, actually, we were just kidding. we just want to regulate a little bit. Come back. We promise we'll be nicer.

And so you've had some countries kind of backtrack on that. And so I would argue that I think you can have a spectrum of regulation, right? So you could have one extreme outright banning, right? So say you have United States and Europe and Japan, I'll say we're going to ban it. That's an extreme outcome. Now, we've actually seen moves in the other direction. So, for example, we see that, you know, banks can officially, you know, custody digital assets, We've seen more acceptance of stable coins.

And so they are trying to integrate that into the system because they've seen that outright blocking it just doesn't work because they don't want to fall behind in terms of integration or innovation. We've seen, for example, Singapore's largest bank is getting into digital assets. They want to custody things like Fidelity's doing. They want to have a exchange for accredited institutional investors. And so countries don't want to miss out on this pie. And so go ahead. This is kind of our argument to the Ben Hunt. I'm wondering if you also agree with it, basically the game theory means that no single country

can actually ban something like a crypto. And I think I've seen you tweet recently that even Russia, the central bank, is starting to acquire more gold than US dollar type reserves. You know, it would be an interesting counterplay for a country to start stacking Bitcoin or ether cryptocurrencies, right? Well, another country bans it would be like an interesting game theoretical play. Do you think that sort of prevents single country bans? I think that's absolutely what prevents it.

And Russia has been one of the examples that flip-flops on it. And so now they're looking into potentially allowing certain custodies of digital assets in 2021. Their main kind of partially state-controlled bank, spur bank, is really interested in getting into certain types of digital assets, including stable coins and including potentially custodying other existing assets. And so you have that kind of game theory going on. And then in addition, you know, if you start to get the donor class heavily invested, then it's game over because politicians are heavily funded by, you know, donors. So, for example, if, you know, if digital assets are a small thing that only retail invest in, you know, I think that there were periods in history over the past decade where governments

might have been more successful trying to kill them if they move quickly enough. Like if you had a coordinated ban, it could have prevented it from growing to a large degree. Once you kind of hit escape velocity and you have like, you know, Stanley Drucken Mill, says you own some and you have Fidelity cussing it and you have you know a NASDAQ listed company owns a billion dollars worth of it that's really hard to say we're going to ban that now so instead they say okay we're not going to ban it but we want to we want to try to track it as much as possible so we want to K-Y-C it we want to we want to have control over the gateways for it we want to regulate it but I think they're past the point where you know they can easily ban it I think that

I think they're starting to realize that as well so writing in the coattails of the technology that Bitcoin, you know, provided to the world, a global public layer of value transfer are stable coins. And I think that's a very interesting conversation to have in a world where, you know, dollar demand is global. Maybe it's, maybe it's declining in the face of alternatives. Maybe it's not. But yet Ethereum and the payment rails on Ethereum for stable coins offers some very interesting, you know, global liquidity for dollars. How do you think stable coins on public blockchain infrastructures, how do you think that will, uh, manifest itself in the next decade.

Well, I expect to see significant growth. And, of course, because people, they want to have a unit of account, but they don't want to, you know, they don't necessarily want to have something that's volatile. And so for them, stable coins are one of the major things. And then, of course, they can use that to arbitrage differences in prices and other digital assets between exchanges. You know, they can get around certain kind of, you know, gateways that exist now. And so we kind of see this, you know, historically, you know, a lot of the financial

pipes you can call them or basically all go through New York. And we're seeing over time that, you know, first of all, more countries are at the state level are interested in going around those systems. So, for example, you see Russia starting to price their oil in euros against the kind of 50-year petrol dollar system and going around some of that to make themselves as sanction-proof as possible. You're starting to see China roll out central bank digital currencies because they want to build it to buy their commodities in their own currency with some of their trade partners. and we're starting to see a private proliferation of stable coins, which can go around existing bank systems.

And so as the world gets more decentralized over time in terms of financials, whatever tools that people have available to them, they're going to use. And so I expect to see a growth of stable coins. So, Lynn, we actually got you on this podcast after a back and forth on Twitter about the details about the Ethereum protocol. You had some criticisms or some questions. about Ethereum and its ability to be decentralized. So I actually kind of want to pick up where that conversation left off.

And I just kind of want to start the conversation off of what questions about Ethereum do you have? Or what do you question about Ethereum? Well, so I get a lot of questions. For example, I've been investing in Bitcoin since April 2020. So when it dipped down and had that big liquidity crash, I bought a decent chunk of it, then dollar cost average into it. So I'm pretty bullish on Bitcoin at this stage.

And so naturally, I get questions from people like, you know, do I invest in altcoins? Do I invest in Ethereum? And of course, Ethereum's as the second largest one and the only other one that really has some degree of a network effect, that's, of course, the one that people ask about the most. And so my answer so far has been no, I don't invest in Ethereum because even though I think that the platform is enabling some interesting things, I haven't seen a really strong case for the kind of the risk-reward ratio of owning ether. And there's a variety of reasons for that.

And I think that the main thing I would point out is that it's just, you know, you can argue that Bitcoin is essentially a finished product. I mean, they're still doing updates. They're still doing security updates, privacy updates over time, but it's no longer in a period of rapid change. So you can argue that, you know, maybe in 2010 when they fixed the initial inflation bug, maybe it was a finished product then, or you can argue, you know, 2017 after Segwit, maybe since then it's been a finished product.

But either way you want to define it, it's not in this period of kind of rapid change. And we're starting to see, for example, some development in an ecosystem like, you know, newer hardware wallets, Bitcoin-only hardware wallets, you know, kind of security solutions, some things happening in the Lightning Network. And so there's still development in the ecosystem, but the base layer has pretty much been sorted out. Whereas Ethereum, you know, it's a newer technology. And of course, now they're switching to Ethereum.

Ethereum 2.0, which is a very long process. And so I'd argue that it's still in the alpha development stage, let alone beta. And so basically investors would be going into something, it's still in rapid change. And, you know, depending on what exactly you want out of the protocol. So of course, Ethereum enables a lot more things than Bitcoin on the base layer, but they have to make certain sacrifices to do that. And so the big question is, are those sacrifices worth it? If it works out for enabling certain things, does that necessarily mean that the token appreciates in value. And so I think, I think there's still a lot of questions there for people that want to get into Ethereum, because there's a lot more moving parts that

have to come together in the next several years for that to have a high probability of appreciating a price. Hang on, Ryan, you hit that button twice. I think there is an element to what you say, Lynn, about the age of these projects, right? It's almost like a 10-year-old versus a five-year-old. And that, you know, it happens to be their actual, like one is much more, you know, and mature. The other is still growing, but both of these systems haven't yet become teenagers. I want to ask before we talk a bit more about Ether, too, to get your full take on this, what do you make of Defi? And I will tell you, you know, David and I have been around in the space for a while through 2017, the space when Ethereum launched. And basically the sentiment at that time

behind Bitcoin proponents, maybe, you know, some might call them Bitcoin Maximus, was basically like Bitcoin would eat up all of the use cases. And this thing that you were creating called Ethereum would never work because the smart contracts that you're envisioning have no use, no utility. There's absolutely no value being created. You're creating Goldberg machines, right? This was part of the criticism back in 2015, 2016, when Ethereum launched. And yet, and yet, now we see a blossoming defy industry with all of these decentralized protocols. Things like Uniswap just in the past year surpassed Coinbase in terms of a volume, trading volume. A project that's 18 months built on a protocol with like 120K grant and like a handful of developers.

Quite amazing. What do you make of this defy thing, Lynn? So I think there are a lot of useful cases for it. And I think that the one I always mentioned stable coins, right? So if you go back to stable coins, that's the most obvious use case. And lately we've seen, as you point out, the rise of decentralized exchanges. And then, of course, after that, then you have a lot of liquidity providers for those exchanges. So people that want to borrow or lend, earn a yield or use leverage to kind of support those exchanges.

And so you see a lot of different projects. I think, you know, at one hand, it's really interesting because I think, you know, people should be to build whatever they think will work. Then people can test it and the market will decide whether or not it wants it. And so on one hand, you know, executing lines of code on Ethereum is more. expensive than a centralized system, but if some things benefit from decentralization, then maybe they'll work over time. On the other hand, you know, they could be, you know, to go back to the bear case, it could be that, you know, it works for a period of time, but then say, say that, you know, throughput to the system's too limited, it gets too expensive, people who's

interesting and kind of go somewhere else after time. And I think that's what that's to sort out. I think if I would express a concern about defy is that it's somewhat circular. And so there's a lot of use cases about, you know, trading crypto tokens, providing liquidity, earning yield on crypto tokens, gamification of crypto tokens. But so far, there's, you know, and stable coins, I think, are the big exception. They're the ones that I think have the most demonstrated use case, potentially outside of the kind of the crypto universe. Whereas I think it becomes more sustainable if they can kind of go away from the somewhat speculative routes. And so, of course, they're very good in the area of speculation. And, I,

Of course, whenever we see a bull market, it's very well. I think the big question is what happens after a couple of these cycles. Will these cycles, you know, with Bitcoin, for example, each four-year cycle is much bigger than the one before it. And so it has these boom-bust cycles, but it keeps building on each other. And I think the big test for defy is as you have these boom-and-bust cycles, will it keep building on itself and growing up larger and larger, or will it kind of go through the sine wave and kind of stagnate and kind of go through these kind of, you know, maybe it's too circular,

maybe it's too expensive, or maybe it does take off in a way that some of the bears think it won't. Yeah, so one of the common criticisms of the defy and Ethereum since day one, you know, plagued by the branding, the negative branding that Ethereum got in 2017 with like the ICO mania where people would just issue a token, tell you that we're going to do something with this token, and then the token would pump, and then people would exit the space. You know, very, very bad stigma, not something that we consider sustainable. I see it much more sustainable nowadays with Defi as people are building out protocols and applications first and then token second. But still, I will absolutely admit that this is absolutely like financial

engineering experimentation going on. Like we are learning about what this like open sandbox of financial innovation is is something that we've never really had before as a species. We never had the ability to have open source financial engineering. One of my favorite lines about this industry is that we are trying to speed run the history of economics, money, and finance over the last, you know, millennia, and we're trying to cram it into as small of a time period as possible, right? You know, Bitcoin is, we've invented money with Bitcoin. And then on Ethereum, we are inventing financial tools. Like, we have yield curves starting to develop. We have money markets starting to develop. We have loans and credit. And all of these things that, you know, we've created over the last

thousands of years, we're cramming into as short of a time period as possible. And as a result of that that's where you get the speculation from because you know there's no way that you speed run through 10,000 years of economic history without you know significant upsides for the people that figured out what sticks and what and what doesn't stick. That's that's what gets me really, really excited. And I would totally, as somebody who comes from the macro perspective, Ethereum, obviously I would say is too young, right? If you are trying to preserve wealth and not gamble and speculate, I would say the things going on in theory might be just too young, too juvenile, not yet mature. However, framing this back into the original conversation, or the conversation that led into this was the conversation around the fourth turning,

where society is looking for alternative institutions. And in a time where trust in institutions are at an all-time low, the promise of Defi offers trustless institutions. And while they are kind of largely based on financial speculation and getting rich quick and pumps, I think there's a larger, broader conversation. Maybe it's not yet manifested in the real world. But people like me and Ryan who are kind of idealists see this as a potential future of large-scale social scaffolding using smart contracts on Ethereum, which run in a trustless fashion or trustless manner. That's our bull case for Ethereum.

as as people remove their trust from previous institutions, they need a place to deposit that trust into. And we think, you know, Bitcoin is a great receptacle of that trust, but Bitcoin does one thing and one thing only, which is transfer bitcoins. Whereas Ethereum and the actual like ERC20 token represents more modular or more flexible ways of capturing that new trust. That's our kind of narrative. And I kind of want to get your take on that. Yeah, so I mean, the way I look at it is, of course, innovation is a good thing. You want to have this camera explosion of innovation. Like just kind of how like the Internet in the 90s enabled all sorts of, you know, trial and error, things that work, things that didn't work, things that became overvalued that, you know, for example, Cisco became radically overvalued in the late 90s.

And the actual products went on to work for decades. I mean, it was a very successful company, but people still lost a lot of money if they bought it in 1999, even though it did go on to pretty much manifest all the stuff they thought it was. do. And so there's somewhat of a separation between, you know, what, what price you're paying versus the actual underlying utility that that thing will provide. And so I think there's, you know, overall, I would say that it's good that people are experimenting, seeing what works, you know, as we go through cycles, we'll see what works and what doesn't. And I think, you know, a lot of investors kind of come into a space uninformed and, you know, they risk getting scammed, they risk having issues. And I, you know, even for example, and this is unrelated to Ethereum, I just see, I've had

had this massive uptick on Twitter of various, you know, fake accounts trying to scan my followers of Bitcoin, for example. And, and even just that, even just tricking them into sending them Bitcoin is just a nightmare. And it's something I have to report a new account like every three days. And so, and of course, when you have this broader defy movement, you have underlying protocols that, you know, some of them are, don't have good security issues. Some of them are just kind of, you know, as you point out, scammy things in the, in the ICO era or, you know, exit scams, basically all these ways where the founder of riches themselves. And so there's a lot of landmines and there's, you know, the very high failure rate in that industry. And so I think,

you know, I think that there are areas where very informed people can, can, you know, make speculations or dabble in things. But I think the broader people have to be very cautious with that area and investing in alpha products and kind of make sure they know the risk reward of what they're getting into and know some of the downsides related to security or, you know, kind of the problematic incentive structures that can exist for some of the founders and things like that. Yeah, totally agree. One thing that we often say on bankless is that this is the frontier. It's kind of like heading west, you know, right, on kind of an Oregon Trail type of situation. There's lots of ways to die. There's lots of ways to get your money stolen. Like you could get dysentery. Be careful out there.

absolutely. I want to jump to you like kind of the potential here. Back to what David was talking about in the potential of DFI, this whole internet of finance type thing. Let's imagine for a second, and I fully admit that it is still early. We're only five years into this thing. But two years ago, we had less than 10 million locked in DFI protocols. Now, today we're here. We just we just went over 20 billion, right? So there is some trust being deposited into these D5 protocols. And let's say this thing does play out in a way that it becomes kind of the internet of finance, right? David and I think that ether is also a candidate for a store of value in the same way that that Bitcoin is a candidate for store of value. And as ridiculous as that

might seem to someone, you know, coming from kind of macro or the outside before Paul Tudor Jones, you know, makes a big purchase or micro strategy makes a big purchase of ether on their balance sheet. As ridiculous as that sounds right now, that's the way Bitcoin sounded back in 2015, like, like, so five years ago, too. So can you talk, do you think that that is a possibility in kind of your macro mind? Maybe for you, you have to wait a few cycles to see D.E. how it plays out to see Ether transition to proof of stake and the whole ETH2 thing kind of come together. But is it a possibility in your mind that ether can become like a Bitcoin and be a reserve store of value asset in similar ways? It already is that for the defy economy. But even as

the defy economy grows, could it become that? I think it's the possibility because to say otherwise would be trying to prove a negative, which I don't try to do. But it's more like looking at probabilities. And so if we look at Ethereum, for example, they've had different changes to the monetary policy over time. And now they're potentially going to roll out this partial inflationary, partial deflationary monetary policy. But we'll see if that sticks. So it's possible that they introduce that and then they find out they have to change it again. So I think if you get to a situation where that, you know, ETH2 has been in place for, you know, three, four years. You haven't had the monetary policy change once in that time.

And you're starting to see kind of use cases that are maybe less circular, less about speculating and crypto tokens, and it's more about providing actual utility to, you know, kind of a bigger percentage of the, you know, the kind of the use case of the foundation. Then, sure, I think you could see appreciation. And, of course, you can see appreciation before that if people front run that or if you have these speculative boom bus cycles leading up to that. But I think, you know, until you get to that point where you have consistent monetary policy and non-circular use cases to a much larger degree, that I think it's kind of still in that early alpha phase. And so I think a lot of things have to go right in order for me, for example, look at Ethereum as a store of value rather than as a speculation. Whereas Bitcoin, I think, has crossed the line into, of course, it's still an emergent store of value. So it's still a highly volatile project. But it's, you know, it's essentially a finished product in the sense.

that it's out and it's getting updates, but it's no longer an alpha or beta development. And so, you know, again, I wouldn't try to prove a negative. I just think that there's still a lot of work to do, you know, for Ethereum. One of the frequent questions I hear about when people try and get into this space and understand something beyond Bitcoin, because, you know, while Bitcoin is complicated, it's also relatively easy when compared to other things in crypto and especially some of the crazy stuff going on on Ethereum. You know, the narrative behind Bitcoin is simple.

You know, hard cap. monetary supply four-year cycles of issuance having on Ethereum, it's different. And the reason why there's no monetary policy on Ethereum is that the goal of Ether, the asset, and the monetary policy of Ether, the asset, is to support Ethereum the network. And all these DFI protocols like Uniswap or AVE or Compound or anything that is meaningfully built on Ethereum needs Ethereum itself to be secure in order for those. things to run. And so the difference between Bitcoin and Ethereum is that the Bitcoin blockchain and the Bitcoin technology is meant to serve BTC the asset. And the Ethereum monetary policy is

an ether, the asset is meant to serve Ethereum the network. Ether is only valuable if the Ethereum network is strong. And so as many things in the Ethereum ecosystem, the developers are interested in tinkering in order to find the best value peak. know, the best optimization for both the network and the monetary policy. And so they are willing to, you know, increase inflation, decrease inflation, implement this burning mechanism because if they get things right, then ideally that would incentivize a lot of development on Ethereum because of the assurances of long-term security over the Ethereum protocol.

Now, me and Ryan are particularly bullish that the actual optimization of the Ethereum protocol using tinkering with the Ether monetary policy actually does, create long-term value capture into ether the asset. But that does require some sort of belief about the future, right? Some sort of speculation that this is actually going to play out. So Lynn, I'm excited to see your, I'm hoping to see you watch Ethereum and kind of see that development ecosystem grow. And hopefully that the ether, the asset, you maybe I'm hoping, if mine and Ryan's thesis

about Ethereum plays out, that it will be included. in, you know, non-sovereign store value assets alongside Bitcoin. That is our long-term perspective here, is that there are two major crypto monies. You know, one is a digital hard-cap ultra-secure proof of work blockchain, and one is a, you know, flexible monetary supply network that hosts, you know, orders of magnitude more economic activity that we, then we see today. Do you see, for example, Ethereum moving outside of the financial speculation realm and getting into industries that are non-financial. Do you see, you know, say tens or hundreds of billion of dollars of economic value being captured by Ethereum? And like, what would, what would some of

the use cases be? Yeah, absolutely. So I recently put out a piece on CoinDesk titled Ethereum is the last bastion for yield. And I think yield is going to be the killer app that Ethereum offers to the world. As yield is disappearing from, you know, from almost every market everywhere, as we've talked about in this podcast, you know, yield in Treasury notes are drying up. yet people are getting anywhere between, you know, 10 and 30% APY on their dollars in different, in different applications, right? I just onboarded my father to put a couple thousand dollars into AVE, so he could just like get some of that yield. And so he took money out of bonds and he put them into, you know, money markets on Ethereum. And if you want to keep your dollars denominator

or your value denominated in dollars, you can get 10 between like 10 and 20%, you know, pretty consistently. If you are willing to expand your asset denomination into perhaps both dollars in Ethereum, liquidity providers to Uniswap received a 35% APY on a hybrid 50-50 US dollar ether position by supplying that liquidity and collecting fees. And so I think the very first initial use case that we are going to see really mature in Ethereum in the short term, the short term being you know, one to three years is that people are going to come to know Ethereum as the place that receives yield. That's going to be, I think, the biggest driver in the short term. And then the other big driver is just asset issuance. Ethereum is a place that democratizes access to assets,

right? Ryan and I, we not too long ago, minted 50 tokens and made them redeemable for 50 t-shirts. And, you know, that's not going to upend the financial system anytime soon. However, it is pretty cool that, you know, these two podcasters minted 50 tokens that represented assets that we fulfilled claims on those assets. People would burn a token and we would send them a t-shirt. I think that's a very early stage of something that could be much more powerful. But really, the powerful thing is that Ethereum offers you tools to create scarcity. And so this kind of feels like an oxymoronic statement, but I'm behind it 100%, is that Ethereum makes scarcity abundant. as in everyone has access to scarcity tools.

And I think that is something revolutionary that I think we just need more experimentation and development in order to really see that feature manifest into something that the whole entire globe can get behind. Yeah, I think it's good that the tools are available. And I do think people should experiment to see what sticks. One thing I point out about yield, because, you know, one thing is there's a lot of people are interested, for example, coming from the stock world, a lot of people are interested in, you know, high dividend stocks, for example, especially because treasury yields keep going lower. And so people that are 50, 60, 7 years old, they want that income from their investment.

But one of the traps they fall into is that they'll buy the highest yielding, you know, kind of stocks out there. And of course, those are the ones that, you know, they're not having consistent earnings to cover their dividends. They might be over leverage. And so it works really well for like five years. And then the six year comes along and say oil price goes negative. or something implodes. And of course, that's when you lose five years of kind of value accumulation in like a

three-month period. And so, you know, if you look at, say, the long-term history of the Treasury bond, for example, there are periods, you know, we've talked about earlier in this podcast, there are periods where inflation is much higher than the yield you're earning. And there are other periods where your yield your earning is much higher than inflation. And so one of the whole, you know, the way that fiat currencies work is that the reason people want to earn yields, of course, is because the currency is losing value over time. And so you have to earn some sort of income or yield to basically compensate you for that inflation. Whereas if,

hypothetically, if you had a more deflationary situation, yield becomes less important because the actual underlying value of the item goes up over time. And that's why, for example, you see people owning things that might not earn income that still store value, like, for example, fine art or fine wine or collectible cards. is because even though they don't earn a yield, they go up in value. And so I would just recommend that people be very careful about chasing yield and just kind of emphasize, try to always emphasize chasing total risk-adjusted return in whatever form that may be and whatever asset class that may be.

Because just because your earning yield doesn't mean that, you know, the underlying thing is safe, doesn't mean that it's going to, you know, persist over time. And if you're earning yield, you do have to compare that to the underlying, say, inflation rate of that particular token, whatever the case may be. Because a lot of people, they might be happy, you know, there are certain, say, in the 70s, you might have been happy earning, say, 8% on your treasury, but if inflation's 12%, then it's not exactly as good as if you were earning 5%, but inflation's only 2%. And so that would be the concern I have with kind of yield-focused things.

Because, you know, for example, as a stock investor, I often like dividends because it basically means that the company's returning capital that they feel that they don't have the capability to invest for high returns. So they invest the capital that they can. They give the rest back. And so there is a place for yield and dividends and things like that. But I just think investors have to kind of keep in mind kind of the ups and downs. You know, that's why I'd view it.

And so in the Bitcoin ecosystems, there's less focused on yield because it's more about owning a, you know, a token that, you know, ostensibly goes up in value over time. I think that's a great point, Lynn. And we definitely like risk-adjusted yield is really what you need to be. optimizing for when you're looking at yield. One thing that's different from kind of the ICO speculation of 2017 is we would argue that there is a new type of asset being born here. So a new asset superclass essentially, which is the crypto capital asset. So this is sort of, you know, in 2017, you had all of these ICOs and their value accrual mechanism for their token was basically like,

oh, yes, use me as an arcade token. I'm your Chuck Echise token. And when you're in my ecosystem, when you're in my arcade, that you use me instead of using dollars, right, which is obviously a fairly flawed, we call them futility coins, value accrual mechanism, right? This time, you have something different. You have what we would call the crypto capital asset. So you could think of like a uniswap, possibly if it transitions from like, you know, governance to a fee structure where owners, of the Uni token actually receive a portion of the transaction. So a portion of revenue, a portion of profits in some ways from all of the uniswap activity, right? You have something similar playing out with ABE and compound. So what's being birthed here is essentially you

could consider it like defy bank stocks essentially. And that is different than 2017. That means there is, of course, all of these, like even Bitcoin goes through speculative manias, right? But the speculative mania happening in defy this cycle, some of the last cycle, but more pronounced, is actually being used to prop up an entire banking, protocol banking layer here with real tokens that have cash flows, crypto capital assets, defy capital assets. That is one thing to pay attention to as well as you're looking to the space. Do you think there's anything to that? Partially, I think, you know, for example, I do think that if you have tokenization that looks more and more like equity, then basically what you have is, you know, kind of a technology transfer from,

you know, how equity is currently managed now. Like if you own stakes of equity, how do you manage that? Like, you know, is it stock certificates or whatever the case may be versus owning tokens that they give you access to ownership of something that they can generate value. And so I mentioned before that, you know, Singapore's largest bank was getting into it. They're also interested in getting into tokenization of different assets. And so, you know, something that might not be publicly traded could potentially issue tokens that represent ownership stake in that thing. And so I do think there's, you know, potentially a space for that. You know, but I guess one thing I'd just be cautious about is, you know, say you have a bank

that, you know, they take depositor money and then they put out loans to people. It could be that they want to, you know, take out a loan to buy a house or could they want to take out a loan to start a business. And so you have that kind of that lending environment that's for real productive use. So it's going to basically fuel people's lifestyles or their business prospects. Now, on the other hand, if you had a bank and all that bank did was say lend to speculators in the stock market. So you had some people depositing their money in.

And then you had that bank with just lending to people to kind of speculate, you know, and then say it's speculating on shares of other banks that are doing kind of the same thing. So you have a group of banks that are speculating on each other. And so my concern there is that if, you know, order for that system to become sustainable, more and more of that kind of equity-based thing has to be towards non-financial or non-speculation things rather than kind of this big circular speculation thing. So I think there's something there. I think people should explore it. I just think it has to become more and more sustainable if it's kind of become a more permanent

feature. Lynn, I think you were right there. And certainly right with the bankless nation, We definitely believe a real economy is going to be built on top of these financial tools as well. And we do think Bitcoin and Ether are going to be important assets. Lynn, you've taken us through so much. It's great to hear your macro mind on all of this stuff. And it has been a pleasure speaking to you. Thanks so much. Yep, thanks for having me.

Fantastic. All right, bankless listeners. We're going to leave you with some resources in the show notes, as we always do. first thing you should do is read one of Lynn's articles recently about the Petro Dollar system. We will include a link in the show notes to that. It was absolutely mind-blowing article and covers a lot of what we talked about today. Secondly, we will include a link to Lynn's monthly macro newsletter. I think there's a free version of that and also a subscriber-only version of that. You need to check that out. Just fantastic insights. I'm a subscriber to that as well.

that would be the second action item. Lastly, David, we're in a bull market. We need some bull market reviews of this podcast on iTunes. Do we not? Absolutely. We are looking to climb the iTunes charts. We are trying to scrape our way to the top of business and investing categories. We are not there yet.

And the way that we get there is those five-star reviews. Wherever you listen to a podcast, it would be a big help to grow at the Bankless Nation. Guys, risks and disclaimers, as always, none of this was financial advice. We have no idea truly what the 2020s will hold, but I hope you got some insight onto what they might hold today. Bitcoin is risky. So is Eats. So is crypto. You could lose what you put in, but we are headed west.

This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.