TFTC: A Bitcoin Podcast - #402: The Fed Is Losing Money with Lyn Alden

Episode Date: March 10, 2023

Join Marty as he sits down with Lyn Alden to discuss the state of the Federal Reserve and inflation. Follow Lyn on Twitter: https://twitter.com/LynAldenContact 7:12 - The myth of inflation and unemployment 13:39 - The problem with CPI as a metric 21:59 - Does the US have the fiscal capability to handle Fed policy? 26:04 - Nations abandoning USD reserve 31:30 - Bitcoin not yet big enough to settle international trade 34:07 - Lyn's view on current bitcoin 38:03 - Fedi pools and other centralizing factors 41:06 - Emerging markets driving adoption 44:44 - Supply side issues 47:38 - Fed unprofitable 51:39 - Glimmers of hope 55:52 - Will energy policy change? 1:08:58 - War drums 1:13:30 - Highlighting the solutions through Bitcoin 1:15:41 - Fed blindspots 1:20:16 - Wrapping up, plugs Shoutout to our sponsors: Unchained Capital River CrowdHealth Bitcoin Talent Co TFTC Merch is Available: Shop Now Join the TFTC Movement: Main YT Channel Clips YT Channel Website Twitter Instagram Follow Marty Bent: Twitter Newsletter Podcast

what's up freaks it's your boy marty here to introduce this rip of tftc i sat back down with lynn alden it's always great catching up with lynn talked about a lot fed policy fiscal policy energy bitcoin lightning fedements noster trying to front run the war drums that are beginning to beat get out in front of the people say hey they're trying to distract you here are the problems great conversation as always we have not posted the previous episode with kelly lennon yet that gets posted tomorrow tomorrow being the next day from the day i'm recording this ad read right now not tomorrow if you're not saturday if you're listening to this when this episode drops on

friday um so i have no boostograms as the long-winded explanation of the time and the recording was because i don't have any boostograms to read but if you are listening via podcasting 2.0 enabled app and contributing in the value for value model thank you we appreciate it i think this is a very boostable episode if you're liking what lynn's putting down send us a boost this rip was brought to you by our good friends at river river is here building a bitcoin company i do not call it an exchange logan i'm no longer calling an exchange it does have an exchange component to it but it's much broader than that it's much bigger than just an exchange it is a bitcoin company built by bitcoiners for bitcoiners they build all their own infrastructure they build

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TFTC as a promo code. You'll get $99 a month for the first six months on your subscription fee. Last but not least, this rip was brought to you by our good friends at Bitcoin Talent Co. Lynn and I talked about it, the layoffs in the tech sector. If you are one of those individuals who was in the tech sector, unfortunately got laid off and you're a Bitcoiner and you've been looking to get into the industry, but you just don't have the network to make it happen, go to bitcointalent.co, tell them that TFTC sent you. They have companies, Bitcoin companies building the future of the global monetary system lined up looking for talent. They're looking for you. They just can't find you. That's why Bitcoin Talent Co exists. So go to bitcointalent.co,

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tell them the tftc sent you and enjoy this rip with lynn alden you've had a dynamic where money's become freer than free If you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be.

Lynn, welcome back to the show. Thanks for having me back. it's been too long but i agree i agree but i'm excited we're talking today we were just mentioning that uh jerome powell's on capitol hill uh getting grilled i forget if it's congress or the house or the senate but he's getting grilled and we were just mentioning it's funny uh he essentially had to admit to kennedy that uh fed's policy is probably going to drive up unemployment unless the fiscal side comes in and helps them out with the inflationary pressures. But you were mentioning that this historical tie between inflation and unemployment doesn't really

materialize, but it is the Fed's mandate to really focus in on these two metrics alone. Yeah, it's a really weak correlation. You know, it came about back when labor was more domestic in general, right? Less globally interconnected. And, you know, the general idea is that if, the economy is running too hot. They can tighten money. They can raise rates to try to make it run a little cooler. On the other hand, if it's running too slow, they can loosen money and try to get more people back to work. And of course, there's been major decades of stagflation. We have high unemployment and high inflation. If you kind of map out the long-term relationship between unemployment and interest rates, it's a very weak correlation overall.

And yet the entire institution of the Fed is basically based on this relationship being extremely tight. Their mandates are basically price stability, which they currently define as 2% average inflation per year, the way they measure it, and optimizing long-term employment. And so they kind of inherently have this relationship built into their DNA. And so it's kind of like they're operating on a certain algorithm that might or might not be applicable. And more often than not, it's not particularly applicable, but that's kind of what they have to do legally. And so it's kind of – it's an interesting system, and it's – I think we're at the phase of the long-term debt situation, the long-term fiscal situation where interest rates and overall monetary policy are going to be increasingly politicized. The last time government debt as a percentage of GDP was this high was the 1940s, and the Fed was essentially captured by the treasury. Basically, they had to make interest rates at a level that was in line with how much debt and spending were happening at the public level.

They had to keep them low despite high inflation. And now, of course, we have a different degree of central bank independence, but I think that's going to be increasingly challenged. And the two interesting sides of that are, one, I think some of the challenges are appropriate in the sense that you can say, does your model even make sense? So they can ask Powell, does your focus on creating more unemployment, is that actually going to bring down inflation? On the other hand, on the public sector side, a lot of inflation we're seeing is fiscal-driven inflation. And so in many ways, their decisions over decades have contributed to this. It's part of the underlying money creation mechanism. And so they're kind of facing their own problems.

And so I think that's going to be a whole thing this decade. Yeah, it reminds me of a conversation I had yesterday with Kelly Lannan. We were talking about real estate market, but we dove into the railroad infrastructure and that being a shining example of something where the maintenance on these railroads has obviously been subpar. Railroad operators are like, all right, it's good enough to get it from A to B. But if inflation gets too high and you destroy any possibility of actually maintaining the railroads, you could have breakaway inflation because if they break down, you can't fix them. No matter what you do, you're not going to get supply to where it needs to be.

So if you can't buy something, it's just going to drive up the price. It becomes more scarce. Yeah, that's – I mean if you challenge the whole relationship between labor, unemployment, and inflation, basically it's – Who would look at inflation and think, okay, we have to make sure fewer people work now. We have to make sure fewer people are providing goods and services in order to get inflation down. That doesn't make sense. It's basically a very demand-driven lens. It's like we need fewer people working so they have less income to buy things.

That's kind of the assumption. But they're ignoring the fact that those people are also working, which are producing the supply of goods and services. You want maximum employment all the time if possible because that's where our supply side comes from. And so some of the things that they do risk hurting the supply side, which is a large part of where this inflation comes from. Basically, we have a tightness of real-world constraints, energy, labor, especially the types of labor we need, people that can build things and maintain things. On the other hand, a lot of the excess demand we have is coming from that fiscal component, which is not going to be affected by monetary policy. It's actually made worse by monetary policy in the sense that if you have deficit-driven inflation and you raise interest rates meaningfully and hold them there for years, then it's larger deficits. That's actually more money pouring into the economy.

And so it's just kind of an interesting dynamic. And I agree with you that basically the inability to build or maintain things is going – I think going to be a key theme for a while because that's not something that you can change very quickly. That's – we've kind of undermined our industrial base for decades. We've prioritized certain types of work over others by the nature of our system. So if you work in technology, healthcare, finance, government, you're doing pretty well. But if you worked in a physical trade, it's an uphill battle the whole way. And so we've kind of disincentivized that type of work. And so it's not shocking that we have pretty structural labor shortages in that type of thing.

Yeah. It's pretty alarming when you put it all in context. and then bringing it back to the Fed, again, with their dual mandate of price controls and stable job markets, it doesn't seem like they're achieving their goals with their aggressive interest rate policy at all. I mean, obviously, the CPI print has come down a bit the last couple of months, 6.4% in January. However, if you dig in to the individual verticals within CPI inflation, Food still above 10%.

Energy is around 8.2%. Yes, natural gas and gasoline prices have come down, but this could be a temporary lull in a bull market for energy, especially if you consider that China is going to open up their economy. So is this the last gas of the Fed? When I'm looking at it, it seems like their interest rate policy has been completely ineffective because CPI is coming in at 6.4%, that's growing on a bigger base that was set last year number one and then number two i've heard

um a newsletter about this last night like shrinkflation is becoming more and more prevalent as well which is not being reflected in the cpi either so i i think everybody who listens to this show and has been for years knows that i think cpi is completely bunk but even though it's well above the 2% target, I think it's severely underscored or not reflecting the actual inflation that exists in the economy. And if actual inflation is much higher than the CPI and the Fed is proving to be completely ineffective, where does that leave us? So I think, yeah, we definitely have to analyze the path dependence here.

So for one, I do agree that CPI has historically understated actual inflation. Basically, one of the biggest components is how they redefine shelter. There's also challenges obviously with hedonic adjustments. One of the things I like to do in history is look at a handful of things that just don't change, like beef, gold, bacon, oil, a bear of oil, and look at the price of those over a very long period of time. And some of those are obviously very volatile in a 10-year period because you have – obviously big supply comes online and then there's periods where there's not enough supply. But if you look at them over the course of like a 50-year period, most of those things have gone up faster than the CPI because CPI, you're basically – you're constantly adjusting towards cheaper things and you're factoring out some of the appreciation in real estate because they're using owner's equivalent rent instead of housing. There are brief periods where you could actually – CPI could ironically overstate inflation. Like if you have house prices stagnate for a while and their shelter component is like operating on a lag because it's kind of this like janky calculation, you can have this like brief window where like CPI is actually overstating inflation because real inflation is more volatile than their calculation will get to.

But the majority of the time, I think it's generally going to understate it. As for basically the path dependence here, my base case early last year was that they were going to tighten into a recession. They would probably get inflation down, and then because the underlying problems are unresolved, when they try to loosen, when they try to have another growth phase, that inflation is going to come right back. Until you basically fix the combination of structural fiscal deficits and fix the energy supply and transportation problem globally, as long as those two pieces are there, inflation is ready to bounce back whenever there's a period of growth. And so that was the base case. We're starting to see early signs that they might not even be able to get inflation down as much as they wanted before the next cycle of inflation. I'm not quite there yet in terms of saying that they can't. I still think they have a window here where they can cause so much private sector damage that they might be able to temporarily get inflation down.

But I think the main problem is that it's just ready to go. It's ready to come right back as soon as they have another growth cycle, as soon as they let their foot off the brake for a brief period of time. And basically, they're using 1970s monetary policy to fight 1940s-style fiscal-driven inflation. So if you look at over time, the inflationary decades that we've had in the United States and elsewhere have had very different reasons for why that inflation exists. So in the 1940s, banks weren't lending much, but instead the government was running absolutely massive monetized deficits, and that was the source of money creation and prices going structurally higher. In the 70s, you did have deficits, but they were much smaller, and that was the peak period for bank lending. So basically the credit multiple is constantly going up. Banks were lending aggressively. You had baby boomers were entering their home buying years. Then you combine that with oil shortages. So you had both supply-side constraints, and you had tons and tons of bank-driven money creation.

And so back then, one of the main tools they used was trying to slow down that bank money creation with tighter monetary policy. That's basically the Volcker playbook. They also did a bunch of geopolitical things. I mean they went after unions to try to get domestic labor from going up like it was. They tried to open up global trade. So they did a lot of other things in addition to monetary policy. But basically that type monetary policy made sense in an era where banks were doing most of the money creation. Whereas in the 1940s or the 2020s, when most of the money creation is fiscal deficit spending, when you raise rates, it doesn't really change what the government is going to do.

I mean they're going to spend what they're going to spend, and now they're just actually pouring even more money into the economy with their deficits because they're paying such high interest rates on them. And so it's kind of interesting to see them do the 1970s playbook for a 1940s problem. And in my mind, it just shows that even if they temporarily get inflation down, they don't fully understand the nature of the problem, and so it's ready to come right back. Yeah. No, I mean, the interest expenses on the debt have been a big theme in the news over the last few months, approaching a trillion dollars annually, which, what would that be in 2022? Or excuse me, 2021 tax receipts, 2022 isn't in yet, but we're tax receipts like four, four trillion around there. Yeah, it'll be a very big percentage. It's also rising as a percentage of GDP. Basically, ever since – when you look at public concerns around the debt, they peaked in the late 80s and the early 90s. So if you look at interest expense over time, it was going parabolic in the 70s and the 80s. And in the late 80s and the early 90s, it reached a peak as a percentage of GDP. And that's because you had rising deficits and you had high interest on that – on those deficits. And that's – for example, the famous like national debt clock was installed in the late 80s.

Also in the early 90s, you had some of the most successful – you had the most successful third-party candidate in American presidential history, Ross Perot. And a big thing he ran on was the debt. That was like a big theme that was like really – it got the public attention at that time. And a lot of that was kind of like three decades early because what generally happened over the next couple of decades was you had this rapid period of globalization, lower inflation, lower interest rates. And so even though debt as a percentage of GDP kept going up, the interest expense kind of stagnated, especially relative to the size of the economy, and it went down for a period of time. And so you had basically four decades of rising debt as a percentage of GDP and four decades of falling interest rates offsetting that. And now we're in the awkward part of the cycle where debt as a percentage of GDP is still going up, but those interest expenses are not going down anymore and might start trending higher. Certainly in the near term, they're trending higher.

and so that's when you actually revisit those concerns of late 80s and early 90s and say okay basically they were early but now we're actually getting to the phase where some of the things they're worried about are more structurally occurring now and there's a lot less wiggle room to deal with them yeah and it seems like it's only going to get worse like i was mentioning we were i was following up on pal's comments on capitol hill today i saw the probability of a 50-bip hike during the next meeting jumped from, I think, 39 percent to 59 percent during his hawkish comments. And so that's only going to exacerbate the problem. And the question is, does the U.S. have the political will to do what is necessary on the fiscal side? I'm not so confident.

How are you feeling about it? I don't think they do because, I mean, a couple of reasons. One is just the political polarization makes it almost impossible basically. They're not going to most likely trim any sort of intermediate term entitlements. A lot of these things are baked into the cake from decades ago and demographics. They're not going to probably trim military spending, especially what's happening geopolitically. I think you could ask reasonable questions like, do we need 750 foreign military bases? I would say no. You could probably trim that number down but i don't think that in this in this era is when they're gonna do that um and i also don't think you're gonna get much if any tax increases uh because it's you know the the

republican side is probably gonna be pretty adamant on that and so when you add both sides together all the you know one side doesn't want to cut military one side doesn't want to cut entitlement uh one side doesn't want to cut taxes and then if you look at um kind of the trump wing of the the republican party he's he's strongly in favor of keeping medicare and social security there that's kind of how he's been differentiating himself from other other players in the republican field that have historically been more in line with cutting those and so i think basically this is the current political environment makes any sort of meaningful cuts to the fiscal deficit very very hard to do and then a further complicating thing is if you just look at

kind of the history of debt to gp for countries in the world once you get this financialized and you get this high public debt to GDP, even if you were to do those cuts, it would probably also negatively impact GDP so much that even though you'd rein in the deficits at first, you'd actually probably still keep increasing debt as a percentage of GDP because a lot of that GDP only exists because of those deficits. You know, if you have like, say, 50% public debt to GDP and your deficits are getting a little wide, and then you do austerity, that works, right? Because you didn't let the problem get so big that your GDP is reliant on those giant debts and deficits. Whereas once you get

over to like 100% debt to GDP, austerity often backfires because your GDP is already so financialized. And so it's kind of this thing where it's inevitably going to go through a very hard period. And I think they might have attempts at austerity. We kind of saw that in Europe After the European crisis of 2012, all that debt crisis, there were like these attempts at writing in the deficits. I mean you got Italian deficits down to like 2 percent of GDP, which is their attempt at austerity. During the kind of the period where Obama was president but then there was a Republican power in Congress and Senate, you had that gridlock. And so you actually – for a while, you had falling deficits as a percentage of GDP as they kind of locked in the existing structure. But that started blowing out when you started to get entitlements, kind of that demographic peak started to come and manifest.

And then also you got Trump stimulus tax cuts that were not offset by spending. And so basically no matter what arrangement we have in politics, this kind of train is already going. Like the momentum is so strong for it. Yeah, we're in the damned if you do, damned if you don't stage. And considering that the 2024 election cycle is beginning to heat up, I find it very hard to believe that anything on the fiscal side will change moving forward. It's just too politically untenable during an election season. And that gets to the broader question, too.

We've been focused very specifically on U.S. policy. Obviously, over the last year to six months, many countries outside the U.S. have seen the sovereign reserve seizure of Russia. They've seen the turbulence here in our economy, and they're beginning to position themselves, particularly countries like Russia, China, and Saudi Arabia, to buddy up with each other and begin maybe defecting from the U.S. dollar reserve system in some way or another, slowly but surely? What do you think the ramifications of the turmoil we're seeing in the U.S. economy and our inability to tame inflation

is having outside the U.S. in terms of other countries beginning to look at alternatives? Well, I think in general, we're shifting towards a more multipolar world. If you looked at gold as a percentage of sovereign reserves, for example, or just even just the number of tons they have, they were on this structural decline from the 70s until 2008. Basically, you had rising dollar dominance, and you had falling gold dominance. And after 2008, when we basically just printed the difference, like when our bank system blew up and we just printed, you started to see this reversal, and foreign central banks started buying more gold again. And they've actually kind of gotten back up to like significantly pre-2008 levels. So that was like one factor.

Number two is you had China Belt and Road Initiative. When they launched that, it was something like 2013. They basically came out with an announcement, and they just said like accumulating treasuries is no longer in our national interest. And so what they started to do instead was take a page from the European and American playbook of like monetary – like neocolonialism. They said, okay, we're going to start – instead of like taking all of our dollar surpluses from trade, from the trade surpluses we're running with the Americans, instead of like putting all those dollars back into U.S. assets, we're going to start making dollar loans to African countries, Latin American countries, Central Asian countries, basically help them build infrastructure that kind of all leads to China, buying commodity rights, that kind of thing. If they default on that – any of that debt, basically some of those rights go over to China. And so they've kind of tied themselves into this global euro-dollar market to a significant degree instead of buying treasuries. And Saudi Arabia, instead of just constantly taking their petrodollars and putting them into treasuries, they're putting things into like their sovereign wealth fund.

Kind of these – for a while, they were really into these big tech growth type of stocks. They're doing domestic development. They're doing all sorts of partnerships. And so basically, a lot of these countries are saying instead of just this current system that was in place for decades, we're going to start investing our dollars elsewhere, at least around the margins. So it's not like we're dumping all of our treasuries tomorrow, but it's like we're just not going to keep accumulating our stockpile and might even trim our stockpile like China has done. And so I do think we're shifting towards a more multipolar world. There's obviously challenges there. I mean one – they can settle in gold, but they still have all these like payment centralization issues.

And so you see them working on like – what is it? Enbridge or something where they're basically – they have like this like blockchain thing they're working on with the BIS to see if they can like settle things outside of SWIFT. All these alternative payment systems, Russia has theirs. China has theirs, some of these collaborations. And there's ongoing frictions there. But I do think a general trend is there's a pretty adamant shift towards the combination of more multipolar payments and more multipolar reserve assets. Instead of just dollars, it could be gold. It could be yuan.

It could be others. If Bitcoin gets big enough, that gets interesting. But it's not right now at the size it is. They're not really – it's more about gold and currencies and equity types of investments. And I think that's the general trend we're on is that we're multipolar. But it's funny because there's like – there's weird frictions. Like for example, India is another country that has kind of broken out of the Western consensus, and they said, well, I mean we're going to basically buy all the spare Russian oil then, right? Because – and they literally said it.

They said, look what's happening to Sri Lanka. We're not going to have that happen here, so we're going to buy whoever is going to sell us oil the cheapest. So India started buying a ton of Russian oil, and they already had plans in place to expand trade with Russia anyway. And one of India's goals was to buy oil in rupees. And that was promising for a while, but the problem is now they're actually buying so much Russian oil, and Russia doesn't want that many rupees. Basically, India is running a pretty big trade deficit with Russia, and so that actually creates a settlement problem. And so there's always these weird frictions they run into when they're trying to have this big fiat barter system we essentially have in place. You know, we have 180 different fiat currencies and whenever they're trying to do global trade, it's kind of a nightmare for them to work through.

And it's a slow process. If only there was a politically neutral distributed monetary system that these people could use to settle their trades. If only, if only. Well, I guess that's, we could dovetail into like the whole Bitcoin conversation. I mean, I think we both agree that it is a superior settlement network. But with that being said, the liquidity profile of Bitcoin probably isn't where it needs to be to settle these types of trades on the international level. Do you agree with that? I agree.

I think you need a 10x, right? I mean if you look at oil trade, I mean it's – we're talking trillions of year in oil revenue that has to be settled somehow. And the depth of the Bitcoin market is not really in line yet with global trade numbers. um and so it's certainly possible for like these smaller countries to explore with it there's also just career risk right i mean if you're like the finance minister or the central bank you know executive and you say hey let's let's do bitcoin and you know then it crashes you know 80 and like you're the one that gets fired basically so it's like there's there's limited upside for you and there's plenty of downside for you so there's kind of this

institutional inertia that makes experimentation uh challenged they'd rather explore partnerships and things they can control more uh so i i think it's more of like this window where you know uh you know gold and and fx are kind of the instruments of the central banks and bitcoins kind of left for the people at the moment and i think you know if the people get it you know if they add another zero to it's like price and market cap and liquidity profile you know then Then it becomes harder and harder for central banks to ignore, and the more interesting it would become to them as both a payment rail and a savings instrument because the overall liquidity and robustness and kind of durability would be all improved in their eyes. So I think that's kind of what we're on now. If you look at China, for example, I mean they're trying to – like India's problem there of like buying too much oil with rupees and then Russia not knowing what to do with the rupees and therefore not really wanting rupees.

China tries to solve that problem by having Chinese convertibility to gold. It's hard to get money in and out of China, but it can go through gold to a certain extent. And so they basically said, well, if you get too much Chinese yuan, you can use it to buy gold. And so that's one of their mechanisms for trying to solve that problem, and I think that's a decent intermediate term mechanism that is interesting for a lot of countries. But yeah, ideally, you'd have something that doesn't rely on that type of centralization, that type of counterparty risk, and something like Bitcoin. It just has to be bigger, I think. Agreed. I actually don't mind this order of operations getting it into the hands of individuals first before the central banks adopt it like that.

And it's very interesting. Obviously, we're both deeply ingrained in Bitcoin. I saw you tweeting this out the other day, maybe last week. But everything we've discussed up to this point, the monetary and fiscal situation here in the US and the reaction to that situation outside the US in parallel with all this chaos going on in the macroeconomic and geopolitical landscape, people are building out the Bitcoin network. adding more accessibility to it utility to it what and beginning to inject it into other open protocols whether that be rss or things like noster what is your current view on what's going on in bitcoin so i'm i'm you know i'm really optimistic about it i think noster has been really exciting right because you're you know in addition to having open transfer of value you have open transfer of information, which is, you know, hard to stop. So I like these layers that are building and working with each other. I like the proliferation of lightning in general. It's still very small, but it continues to grow, you know, pretty rapidly from that small base. You know,

it's hard to measure some of the statistics with it, but, you know, there's been really good reports by Arcane Research and by River that kind of lift the veil on, you know, the part of the network that they can see and that they you know that they have exposure to uh combined with some of these other statistics we have looking at the network so i think that's really promising and one of the things i'm really interested to watch uh this year and in the years ahead is uh things like fediments you know these these other types of open source protocols that can you know shift some of the balance a little bit because one of the one of the problems you see in developing countries is you hear of all these great like statistics for like bitcoin

adoption and you know stable coin adoption whatever the case may be and a lot of it is like binance right a lot of it is like everybody has these you know custodial accounts with binance and so there's this gigantic global centralized honeypot that would would devastate millions if if you know that would all you know be taken from them or otherwise disrupted and something like fediment you know and of course there's companies built on it and there's other there's also other implementations of trauma in e-cash but basically these ideas of of using trauma in e-cash i think are interesting because it tries to localize some of the custody you know basically says well don't trust binance with your money don't trust exchange xyz with your money instead you know either

self-custodied or if that doesn't make sense economically yet or if you you know you want privacy benefits then basically it's tools to allow communities to build their own full reserve community banks with inbuilt privacy and convenient transactions so i i think that's one of the things i'm excited about is trying to decentralize and spread out some of those custody and other risks so you don't have like you know so-called decentralized protocol but everybody using these gigantic honeypots even things like you know as as cool as like say wallet satoshi is uh and you know it's super convenient but it'd be nice to see a more private version of that and like a bunch of those that are kind of split up so you don't have like all you know custody

kind of centralized and you say you get okay all the all the ux conveniences of that but you know with a better bread of privacy and a better you know more fractured custody situation no agreed and when it comes to fediments the private payments aspect is just the tip of the iceberg but the modular nature of the fediment protocol and the front ends like fetty they're being built on top of it is going to really expand the design landscape for more complex applications i mean the one obviously i'm very bullish on um just pure fedements for private quick payments with a better custody model than something than wild of satoshi but like the whole i'm not sure if you have read about the idea of feda pools like that's it yeah that's another centralizing factor within the

bitcoin ecosystem right now is mining pools and this concept of a fed a pool being able to spin up a federation of block constructors who can really distribute the risk of block construction at the pool level via a fedament and then provide more private payouts over lightning which is something that many miners have wanted for years the ability for something like that to come to market is massive and then you get into the whole concept of being able to create dlcs within these fedements more robust smart contracting capabilities like payments it's just the tip of the iceberg i don't think people realize um the power that's about to be unleashed with with these fedement front ends i agree i think people are sleeping on it and because a lot of them as

soon as they hear custody they're not interested um and i i think a couple way to break that up One is that custody is so centralized that breaking it up is just already a better step. Two, privacy in many aspects of dealing with ecosystems sucks still, right? And this is a huge privacy gain. And then like you said, basically the modular nature allows all sorts of stuff that we've not even thought of to be built if some degree of feddiment usage in communities start to proliferate. And even just as a user myself, I mean even as someone who does self-custody cold storage Bitcoin, I would like to use a Fediment wallet because the private incoming and outcoming transactions, and if the balance gets above spending cash, you pull it into cold storage. And so it's like separating what you use as your daily spender versus what you do for like long-term sovereign store value type of application. And I think the cool part about Bitcoin is that people can interact with whatever parts of the stack that are most useful to them.

If they want to have a few hundred dollars in savings, if they want to do a lot of payments, if they want a lot of privacy, something like Fetiment is really useful for them. you know, over time when this kind of proliferates more and these front ends develop a little bit more. And obviously, if you want to, you know, store Bitcoin for like a very long period of time, obviously, multi-sig, cold storage, that kind of thing is really important. And people can choose whatever parts of the stack are, you know, they need for their purpose at any given time. Yeah. More optionality is always good for all the Bitcoiners out there saying, oh, is terrible you don't have to use it um yeah it's a it's a i'm a big fan of more optionality and more functionality with this particular option i think is going to be massive

for bitcoin adoption globally which dovetails into another question is like what what are your thoughts on bitcoin adoption moving forward what will be the driver will be western countries trying to use it as a store of value maybe some people in the traditional financial system realizing that it is good collateral maybe if you mix it with some of the credit products that are looking desperately um doomed to fail in the u.s that it may catch on there or do you see bitcoin adoption in the next three to five years being driven maybe in emerging markets I would like to see emerging markets be the spearhead. I like that kind of decentralization of power. You know, they're the markets that need it the most. I think a lot of them, basically, if you're trying to send money in or out of your country, if you're trying to do work for global people that would like to pay you, then obviously something like Bitcoin Lightning is super useful. and so i think i think medium exchange can drive it in in areas that are lacking good payment

infrastructure uh and have all these frictions uh built in and currency problems and things like that i think i think fediment and various front ends can accelerate that by making it easier more accessible uh like you said in the west i think i think the for now the store value aspect is is more impactful for many people because they have relatively good payment infrastructure most of the time and so for them it's more just like this law they viewed as like an investment kind of like any other investment um so i think those two dynamics are going to drive it forward i think when we talk in that three to five year range rather than like say next year but if you look in that longer term range i think the problems you talked about earlier regarding kind of a

fiscal spiral become relevant on that kind of time frame because i think there's going to be a situation where you know it becomes apparent that no matter how high how high you raise raise interest rates you don't necessarily quell inflation over the longer term and in some context you could even exacerbate it because you're actually further blowing out the deficit driven inflation that that's happening and so if you get to a phase where the fed is still holding rates high but they have to resume some sort of qe for example to like you know fix like a treasury supply problem because there's so much treasuries being issued that's not really a problem like this year but it's like you know when you talk that about that three to five year time frame um

I think you can have like a global like oh shit moment where everybody kind of says like they're actually – they're not actually struggling to get this under their control and what can we buy instead? And I think that's where you see things like gold or Bitcoin, probably both, things like that catch a bid because there's this kind of – right now, the dynamic is whenever you see either stronger labor prints or stronger inflation prints or Powell talks about higher rates, you get stronger dollar. you get sell-off in these these other types of monies and they say okay well they're gonna have to get tighter then and i think there's a i think there's an eventual phase shift where they realize that that no matter how tight they go because it actually some of that tightness exacerbates the problem that it's not necessarily that that correlation they think it is and when that correlation breaks down i think that it gets really interesting for anything that's like alternative money right you know with bitcoin and gold depending on the on the types of markets

you're operating in being the you know the two like soundest yeah that's where you have the psychological light switch go off and people go they don't have control yeah right now it's yeah right now it's it they're adamant that basically raising rates is the solution and i think as long as that psychology is there it's hard for these other things to catch a bit yeah but like we mentioned earlier it's getting to a point where intuitively like that seems like a logical conundrum because if you raise rates i mean it's most uh heavily felt in real estate markets right now fed funds rates going up mortgage rates are going up towards seven percent but going back to like solving supply side issues particularly with like energy like if you raise the fed funds rate

up to a certain point like the cost of capital to get out loans to drill new oil and gas wells or start new energy projects gets prohibitive and then again going back to the problem we were discussing earlier that's where you have the supply side problem where there's not enough supply to meet the demand and then you have this inflation run away while you're raising rates exactly i think so and that's why the path dependence is is challenging here because raising rates can reduce you know demand and inflation pressures in the real estate market because they use debt so heavily. It also is having a big impact on unprofitable tech companies because they've been very reliant on structurally high equity valuations and constantly issuing new

equity in lieu of profitability. Obviously, that's fine for startups, but if you're a mature company and that's like your perpetual business model, that's malinvestment. That's a problem. And a lot of that's being cleared out right now because in higher rates, kind of like how real estate gets hit, that unprofitable, high equity focused tech gets hit. And then it compounds on itself because then you realize, okay, now that they have to raise prices to make up for the fact that they're not able to constantly issue as much high value equity. And when they raise prices, their growth rates go down because their growth rates were only at the level they were because of artificially low pricing due to not having a mandate to be profitable. And so real estate and tech are the

two areas that are adding some degree of disinflation to the mix I think going forward because you're going to have in some ways stagnant prices. You're going to have less overall activity in those areas. And I think the Fed is basically hoping that that's enough to counterbalance a lot of the other inflationary forces, which are energy, which are labor shortages among people who make stuff and maintain stuff, and the fiscal-driven inflation. And so I think we're in this awkward phase like now, maybe the next year, where those two forces, it's kind of hard to say which one's going to win over like a 12-month period. That's why I think we still could get this period of disinflation ahead. But then when you look out 24 months or three to five

years, I think certainly those inflationary forces are stronger and can override some of the tightening that they can do in some of the most interest rate sensitive industries. And when that happens i i think you get a trend shift in psychology i think you get big questions around fed independence and political politicization of fed activity and i think actually one of the things that the challenge is that is we're we're on the we're about a week or two away from the fed uh having negative tangible equity which is interesting because now they're operating at a loss and they've been operating a loss since september and those losses have now piled up such that they are about to equal their existing equity.

And so that's going to start raising independence questions, and it gives certain congressmen that don't like what the Fed's doing another avenue to kind of go after them. Look at them. They're unprofitable. We need to nationalize the Fed. This is something you've been covering since it started happening in September, which is, yeah, so the Fed is losing more and more money month on month as they raise rates and so who does this affect at the end of the day like so the fed member like

so who actually owns stakes in the federal reserve right it's a lot of the commercial banks and fed members does this affect them at all well the funny thing is it probably affects them positively because even though they own a stake in the fed those the fact of the so if you back up for a second the fed just like many other banks has assets and liabilities and for the fed the assets are things like uh treasuries and mortgage-backed securities which are on average longer duration and were locked in at these lower interest rates of old. Now, their liabilities are one bank note, which are the zero interest rate portion of their liabilities. So that's nice for them.

But then their other major liabilities are bank reserves and reverse repos. So banks store their excess cash at the Fed, just like we store our cash at the bank. And so they get paid by the Fed on those reserves and reverse repos. And the Fed's paying out very high interest rates. on those things which are ironically mostly going to banks banks and money markets um so all you know the fact that the the fed raised rates so much you know they spent decades in a period where their assets paid a higher level of interest than their liabilities so they were consistently profitable and they'd have to give their excess profits to the treasury um and now because they've

raised their interest rates interest rates so much the interest rates on their liabilities exceed the interest rates on their assets. So they're operating at a loss. So the first fatality of this whole arrangement is that they're no longer sending money to the treasury. So the treasury had $100 billion a year income source from the Fed that is just gone now. And it's gone for quite a while. And $100 billion doesn't seem like much these days, but that's four nasa's worth of income right that's like that's four times nasa's annual budget uh that's just it's just gone you know fairy dust it's gone um and instead it's going towards the banking system right so the banks are actually doing okay with that arrangement um and so i think you're

gonna event and then you know the the longer term threat is that you're gonna get senators and congress people being like hey why are you trying to squash labor and by the way why are you paying all this money to banks and why do you have negative equity negative tangible equity because they're actually using accounting kind of tricks to hide the fact that their equity is going down right they actually record all their losses as assets so it's kind of like magic but basically that's why i say tangible equity like if you actually you know factor out their weird accounting it's negative tangible equity or at least about to be in about a week or two and i think that You're going to get politicization of the Fed in the sense that you're going to have basically really easy ways for like Congress people that don't like the Fed to troll it better because you're like – you have those two avenues to attack now that you didn't necessarily have in the years prior.

It's so tiresome. It's the back and forth. Because that's where it's like puts you in a position. It's like you can see why the Fed is doing this. Their hand has been forced to a certain extent, not primarily, but definitely materially driven by the inability of the government on the fiscal side to clean their house up. It just seems like we need to get away from this back and forth interaction between the two, maybe separate money from these institutions altogether. because, again, the way you describe all this, it's hard not to be a bit pessimistic about the future of the U.S.,

particularly from a financial standpoint, economic standpoint. What is the silver lining here? Is there one? Do you see a glimmer of hope moving forward for the U.S.? I think the silver lining is that the foreign sector is a mess too. So if you kind of go through the list of major economic blocks, I mean in the United States, we have the problem of structural trade deficits, very high levels of political polarization because of some of these imbalances in the system, and the fact that if foreigners stop buying our treasures on a structural basis as they kind of already have, especially at the official sector, that gets really ugly for the United States pretty quick. That's our downside.

But our upside is that we have a lot of natural resources. We have still some of the best rule of law and some of the most dynamic kind of entrepreneurial tech-driven ecosystem. So we certainly have strengths. We have basically the best geography in terms of agriculture, river systems, access to coasts, friendly borders compared to the number of borders that China has to deal with. So we have both strengths and weaknesses. If you look at Europe, they have a worse demographic situation than the United States. They have now a worse energy situation because they've lost their access to cheap Russian gas, and now they have to rely more on LNG, which is more expensive. They have to build all this infrastructure.

They've kind of – the German model has been reliant on arbitraging cheap Russian gas to make all these products that the rest of the world, especially China, consumes. But a large portion of the world, everybody buys Mercedes. So that's – I'm not very bullish on Europe in general. They also have a more complex fiscal and monetary arrangement because – like imagine if the United States instead of having – like basically it's like if all the states had their own like social security systems and some were – like obviously they have that in the pension side. But imagine if you had even more debt on the state level and the types of polarization you'd have from different policies. That's basically the problem over in Europe. You have basically a monetary union without a fiscal union that I think is kind of destined to run off the rails in a significant way. So I think that's challenging them.

I mean if you look at China, I mean one, authoritarian, genocidal state, so there's that. But even just from a pragmatic standpoint, they have a demographics peak. They have like some of the worst demographics going forward in the world. And so they have strengths like the power of their industrial base. I mean they produce more electricity. They have a huge industrial base. They're effective at building infrastructure, including for projects around the world. but they they do have a a demographics problem and uh you know like a freedom problem um and so

there's really no center of power really that's like better than the united states it's just i think that it's it's it's becoming less u.s dominant instead of like u.s being the only game in town like it was after world war ii and for several decades it's just increasingly this multi-polar world and so i think there's going to be spots that are better than others But I think it's just a challenge that the world has to work through in terms of energy and failing money systems for the next decade or more. Yeah, there's trouble all over the world, freaks. It's like bringing it back to energy. Do you think the lessons learned last year particularly are going to drive a tectonic shift in energy policy moving forward or do you think it hasn't been enough?

I don't think it's been enough yet. I think the rhetoric out of Europe shows it's not been enough. I think in the US, we're not seeing a sea change yet. I think basically until you see a radical kind of push towards like nuclear, I think that as long as that's not happening, then it's not – there's been no sea change. Even things like OTEC, ocean thermal energy conversion, I think those types of technologies are interesting to explore because it's actually kind of stored up energy that's accessible. The fact that there's still kind of lackluster interest, most people don't know what it is. I don't think people realize just the challenges that are ahead of us in terms of global kind of dense energy sources, and there's been really no sign that this is underway. I still see people talking – when they talk about energy transition, they always are focusing on solar, wind, and batteries, and they seem to underestimate how much metals you need for all of that and how much hydrocarbons it takes to get all those metals, let alone if you just do the math on copper and say, okay, well, how long does it take to build a copper mine?

How many copper mines do we have? How much copper would we need if X, Y, Z assumptions about electrification happen? And it's like the gap is just enormous by the time you get out into the late 2020s, into the 2030s. And so I think there's not been yet a realization about the importance of dense energy and kind of like reliable plans for long-term sustainability rather than – that the emphasis is always on like scoring points over the next couple quarters or saying like, hey, I do this and therefore I feel good even though what I did isn't necessarily helping anyone, right? that kind of thing i think we have to get out of that mindset and and towards long-term engineering which is like how do you make nuclear better uh can you get o-tech economical can you you know advance geothermal right can you you know improve energy distribution infrastructure i think that that kind of stuff's just still not serious no i completely agree and that's particularly here in the states it's one thing like watching the all-in podcast over the last few weeks chamath

has been really leaning into like solar is like the cheapest energy that we have right now like it's going to drive this cheap energy revolution that we don't understand and number one like you mentioned i don't think he's being completely honest about the bridge necessary in terms of the rare earth metals needed to actually build out that infrastructure and all the energy and infrastructure that would be necessary for that and then number two i think what does the public a mass disservice particularly from solar and wind is they they leverage this uh metric lcoe like the levelized cost of energy which isn't wholly reflective of the actual cost it's just the the cost to produce as it's producing it doesn't factor in uh the the cost of the natural

gas plant that needs to be spun up overnight to supply energy when when the sun's not shining And there's just like a lot of confusion and rhetoric being pushed that is doing a disservice to humanity at the end of the day, I believe. Yeah, the cost to having continuous energy or energy on demand is obviously a very different metric than the cost of highly variable energy that is there kind of when nature allows it. And it's – a lot of people point towards that cost curve of solar over the past decade, but a lot of that is you were in a massive commodity bear market. So the cost of commodities to produce these things went down a ton. Making solar panels is very energy intensive, and you had a multi-year energy bear market, including coal for a while. Something like 80% of solar panels are made in China with coal. And so you had this kind of structural downward curve in solar, which is in the past couple of years now an uptrend because the inputs are more expensive.

And if you want to have your solar panels made domestically rather than in China, that's going to add a big cost layer as well. And so it's not that I'm opposed to solar, especially in certain environments. We have very, very strong sun and where you want that degree of generation independence. I think Africa could be a pretty big solar market, for example. I think solar is a potential mix, but I think the problem comes when people assign too much to it and kind of push something that is not going to work on a market scale while ignoring some of the more dense energy sources that can work all the time, things like nuclear, for example. Yeah, nuclear is such a no-brainer. There has been some positive developments here in the U.S. particularly. I think one of the companies building out small modular reactors

has gotten through some of the red tape and will begin deploying some of those reactors at some point this decade. But I completely agree. There needs to be a massive shift in leading into nuclear. Like, hey, this is the densest form of energy we have. We obviously need more cheap abundant energy. I think, yes, Chernobyl was bad, Fukushima is bad, but those are lessons we can learn from. There are ways to do it much safer than we were doing decades ago.

Yeah, it's like the statistics of plane crashes, right? Plane travel is very safe, but obviously every once in a while there's like this headline incident that is like horrifying. And so that kind of gets into our psyches. The same thing is true for nuclear. If you run the numbers, even if you assume the worst like death toll, smaller radiation from those nuclear disasters, it's still way, way, way fewer people like the number of people that die from coal like every year, for example, just from like the pollution from particulates, right? So it's like we understate – and this happens like with driving cars too. We underestimate the risk of driving a car on a daily basis while we overestimate the risk of air travel. And similarly, we underestimate the risk of either not having enough energy or some of the dirtier types of energy. And we overestimate the risk of things like nuclear because they're scary.

They're unknown. I mean they go wrong and they really go wrong. and then there's the other factor that you know most of those that even though those instances occurred in different decades they were all with like 60s and 70s technology uh you know they were all kind of the same era of technology chernobyl in particular was a dumpster fire i mean they didn't even have like basic safety precautions uh that allowed it to get is what allowed it to get so bad whereas now modern plants and then you know the additional development of small nuclear reactors i think is a huge thing like imagine if if we just never shifted away from uh from nuclear

like we did if we had better r d this whole time and more professionals working in it i think we'd be further ahead than we are now but even now we have very very promising technologies that if we were to be serious about them i i think can you know at least smooth out a lot of the energy problems that we face in the years ahead and i think it's just i think the like you said there's early signs of an awareness of this um and i think that you know if you have a handful more energy crises i think that they're going to be cumulative in the sense that more and more people will want to learn about energy and want to know how to solve these problems that keep happening to them and i think that they'll they'll be become more aware of nuclear become more aware of other dense

energy sources um you know hopefully become more aware of like you know bitcoin mining as like like demand response, for example, I think there's this kind of all of the above that has to take place. And I think there's going to be this like kind of harsh period that has to kind of wash out misconceptions people have around energy. Yeah. So do you foresee a harsh period coming in the coming years? I mean, obviously a lot of people have been talking about China reopening, stoking demand for oil and gas, particularly in driving up the prices of those commodities which could lead to energy crises are you seeing that as well or is that just a meme i mean i think it's a factor it depends how how fast they try to open right so

for example you've seen a pretty good resurgence of domestic uh chinese air travel uh they're still you know their their international air travel is still you know significantly below prior trends um you know their level of construction we shouldn't probably expect as you've seen before because you know they've already got you know that now that their population is basically you know flat down um but i i do think it is around the margins a factor um and i think the longer term factors are that countries like india and others uh that are just kind of using more and more energy every year are going to continue that just step by step by step pace and more and more energy um and so i think i i think if you look at region right so natural gas is kind of

this more local market i think you know there's still a couple winners of challenges ahead for Europe, they have to really kind of get this LNG online. Luckily, we're building a lot of LNG export in the United States that can help smooth that out in the coming years. But I think there's still kind of a danger period. But I do think that potentially the global issue is kind of the price of oil. And I think that I don't have a crystal ball for the timing, but I think until we see a significant supply side response to kind of structurally higher prices, I think we're going to be in this period where whenever we try to have a period of global growth, you're going to get basically oil price coming right back and being a problem. And so I do think that we're

going to have kind of waves of energy crises. Hopefully nothing as bad as what Europe had at the worst phase. But I do think you can have periods like that where certain energy commodities go like vertical in price because just the supply side is messy in terms of both production and distribution and i do think this is it's going to be a just a recurring set of lessons we have to go through that's probably pretty harsh for five ten or more years yeah yeah it's uh it's crazy that we've gotten so far away from reality as a society where many people in positions of power don't realize the importance of energy and what it means for the quality of life for all humans on the planet.

And that is the weird paradox that the West finds itself in now trying to virtue signal about climate change and moving towards this green energy revolution. Then, like you mentioned, you have countries like India that are pulling themselves out of poverty, and they see what we've done here in the West. They're like, hey, we want to get on par with you, so we're going to do the same thing that you did,

leverage these hydrocarbons to fuel our economy. And there's just like this weird political rhetoric that puts the U.S. in a bit of a paradox. Like who are we to build up our economy with hydrocarbons, become the largest empire the Earth has ever seen and turn around and say, no, you can't do that. Yeah. And the same thing happened with Europe. I mean, they were like, you know, trying to convince a lot of countries to like use less coal, use less hydrocarbons in general. And as soon as they had an energy crisis, they were like, OK, we need all the coal now. right yeah and it's like it's like well like they that they want it even more because they they have they're using less of it now and they want you know the basic quality of life that comes with

you know a reasonable amount of energy um and i do think that's going to be a big theme and i think that you know good times allow for luxury beliefs to proliferate and going through harder times kind of scratches away those luxury beliefs and the risk in my view is that it can also create extremist beliefs uh and and blaming the wrong group for the problem right and and that's kind of the steam that reoccurs in history that you know when you go through harder times you really have to focus on what the actual problem is which is things like energy supply and broken money systems uh and things like that whereas i think the risk is that you end up blaming all sorts of other groups often the most disadvantaged groups to begin with

and that's that's not good for anyone right and so i i think that's another key risk is is when you analyze how bad things get versus how you know promising things could get i think it's it's how society handles those those challenges do they identify the correct problems quickly enough or do they go off on weird tangents things like that not i think particularly right now it's very important to get this message out there because we're finding ourselves at a point where the u.s economies sort of teetering on the edge the global economy is sort of teetering on the edge and we've seen it in the last two months very acutely is the saber rattling the war drums are slowly beginning to beat and that's typically what happens when governments lose control of their economies and

other societies they distract the populace with with war in some foreign land and that seems to be the trend that's growing right now which is a bit scary and something i think about often is like how do we get out in front of that get to people and say hey look they're trying to send you the war your problem's not with those people in the far off land it is these structural problems the energy systems the monetary system um and the fiscal problems that that you have in your own country like i mean i'm rambling right now but it's like how do we get that message out there to the wider populace to really not go down the path of war because war at the scale that it would be today

would not be good for anybody on the planet. I think – I mean I don't know the answer. I think it's just one person at a time. Two messages I would have is one is that inflation leads to war and war leads to inflation. So you really don't want to – like basically when the pie is not growing, When there's supply-side issues, countries are more likely to fight for those remaining supplies. But then ironically, because you're creating all those frictions, you're now shrinking the pie.

So you might get a bigger piece of a smaller pie if you're victorious. And if you lose, you get a smaller piece of a smaller pie. And so that's just one challenge. And then the other one is that the costs of war are often abstracted away from us. And I did a recent tweet maybe a week ago or something like that where I looked back on the cost of the war in Iraq, for example, because it's more relevant now because a lot of the cost is actually the accumulated debt we had from it. You had all these military operations. You had all these other things, and a lot of it was financed by debt, and now the interest on that debt is being refinanced at higher rates. So actually the higher interest rates go, the more, in retrospect, that war was expensive to us. And it's up to something like an estimated $5.8 trillion, all factors considered, and the forecast up through like 2050 or something like $13 trillion because those debts and other things keep – what we owe to war veterans in terms of healthcare and what we owe on the debt compounded over time will keep growing.

And at the time, in 2003, something like 76% of Americans at the peak were in favor of invading Iraq. But it's like if you then re-ran that poll and said, OK, do you want to pay a 10% income tax for the war to cover the cost now, what would that number be? It's like if the cost is abstracted away from them, they're like, yeah, I don't know. Go do war. I'm a patriot. But if you actually say, okay, here's the actual breakdown of what this means, let alone ethics and violence and all that. It's just like if you had to actually pay for it, how does this impact your life? And I think one thing we want to focus on this decade is like if people either get aggressive internationally or they start getting tribal at home, it's like, well, let's actually examine the cost of what you're proposing. um and that's that's something i'm going to try to keep hammering on yeah here's a picture of your future paycheck with the uh the war tax taken out are you sure you want to do this yeah

yeah i have hope i think in the age of social media and immediate communication technologies and the proliferation of more open communication protocols like noster we will have the ability to get these messages out um some people think i'm naive to think that but i do i do think it's possible i do think we have seen examples of this in the last decade particularly around syria i do think social media played a role in in curbing that war but it's really getting out there and educating people about the structural underlying problems that wars use as a distraction from um and there's a lot to be hopeful for particularly with bitcoin like there's so much to build there's so much promise there's so much accessibility from a from a global perspective

that i think as bitcoiners i think that's one thing we need to and not we but one thing i try to be better at is highlighting the the opportunity that exists uh building on top of the bitcoin protocol i agree that's i mean you know if i if i didn't have bitcoin to cover i'd be more pessimistic because i'd be covering just basically problems with with fewer solutions and instead it's kind of this mix of pessimism and optimism because you're covering problems uh but you're also covering potential solutions and so both in energy and in money you know there are severe problems in the present but there are you know technologies that make this better over time and so the goal is kind of like okay here's let's write about the problems let's write about some

of solutions let's let's you know be honest with some of the risks of these solutions and so what what hurdles are still there like let's explore this and i think this the more people do that the more hopeful people can get about you know how to fix this and part of that is understanding the problems of the current system so i i i do try to be optimistic i'm generally optimistic and it just it just basically comes down to i think going through a period of hard times and making sure people don't learn the wrong lessons from those hard times and that instead they learn the right lessons from the hard times because then you have an era of hopefully abundance after those hard times.

Agreed. Actually, I think the silver lining to a lot of these tech sector layoffs is going to be there's a bunch of Bitcoiners at a lot of these companies who are very talented and don't have time to actually focus on a solution and go build products that bring a Bitcoin standard about. I did have one question that I wanted to ask earlier, but I do want to ask it. It's sort of disconnected from the train of thought that we're on right now. But it ties in.

I forget who I was discussing this with yesterday. But how much does going back to like employment and Fed policy, like there's many people who are working two or three jobs now. Is that factored into any of the policy decisions that the Fed is making? And if not, how is it creating a blind spot for them? So I do think they try to look at different types of metrics to make sure that things are measured and not wrong. I don't have a high assessment of their probability of reading the data accurately. I mean generally they're looking at lagging data. There's also – there are – you can look at job openings.

You can look at temporary jobs. You can look at overtime hours. You can look at full-time employment. You can look at, like you said, multiple jobs. You can look to see are there certain areas that are booming and ones that are not. And I generally think that they're probably not going to take into account that data very well. Right now, if you look at the labor market, what's pretty weak is temporary help services and overtime hours. Those have drifted downward, implying kind of – they're like early leading more volatile signs of labor softness because if you're a business, the first thing you're going to do is hire less temporary help and reduce your overtime before you consider laying people off.

And so I think we're seeing early signs of labor softness, but I think the bigger problem with how they measure this is just the entire thesis that unemployment and inflation are somehow inversely correlated. There are periods of time where they can be, but they're often not, and I think probably the biggest risk that the Fed faces is the idea that they're deliberately trying to have fewer people working, which means less products and services. … and higher interest on the government debt, which means even more money pouring into the private sector from that source of money creation. And that's probably not the right mix that they're aiming for in terms of getting prices down in a way that you can get them down temporarily. But it's like what everybody wants when they say they want low inflation is they want disinflationary growth. They want things to get better and for prices to be stable. whereas if they're trying to do a trade-off between inflation versus like a recession it's not a very attractive arrangement and so i kind of questioned their whole premise of operation

and but i think that's something that they have to go through instead of kind of complaining about it it's like well let's see how this plays out and we'll see what lessons people learn from it over time um and i think that overall that'll be more people challenging the fed question the fed And I don't really blame Jerome Powell too much. I mean I think ever since he came in, he's been trying to be more hawkish than his predecessors. He's been trying to tighten up monetary policy to varying degrees. He's more transparent with some of his descriptions of things than some of his predecessors. There's limitations on how transparent you can be when you're running the Fed. But I think he's – it's not that – I don't think he as a person is a problem.

I think the premise of the institution is kind of the problem. But I think that that – in some ways, it's a good thing for that to get explored and made more transparent because then more people see the problems. But it's also going to be a hard time as people go through the problems. And everybody has like an armchair opinion on what the Fed should do, and it's like, well, they're going to do what they're going to do. we're going to see the outcomes and right now i think the outcome is that they're they're sticking to this idea that inflation and labor are kind of inversely correlated and that raising rates will quell inflation because i think they're they're fighting 1970 style inflation with 40 you know with you know they're fighting 1940 style inflation with 1970s policy which i don't think

it's going to go well um but yeah i don't i'm not very optimistic on their ability to navigate this well yeah don't hate the player hate the game and the game is going to force a very expensive lesson on the american economy and the global economy at large um yeah fun times yeah thank thank god for bitcoin i agree yeah got something got something to distract us and work on and uh you know be optimistic about yes extremely optimistic and thank god is there to keep me busy because like you said if i were forced to be immersed in just doom and gloom day in and day out i don't know how that would be for my mental health or my outlook on the future tough times yeah we'll create stronger we'll

create stronger men and women in the future so i think uh tough lessons we need to learn and luckily we have people like you getting out there educating people about the structural problems and the core of these problems so that they can better understand and make better decisions moving forward so lynn i want to thank you for taking some time to sit back down it's been too long i agree yeah hopefully we'll run into each other at one of these conferences one of these one of these days it's not too late to book a ticket to the the bitcoin takeover event here in the commons in a couple weeks it's actually next week i'll look into it um where can people find out more about what you're where you're writing um where you're where you're sharing

your thoughts uh lindald.com is my hub uh for most of my content i'm also active on twitter at lindald and contact so people can check that out i i do also i write for swan but then after a while i do republish them on my site as well so i i recently wrote an article about um open monetary information networks you know kind of just observations around the implications of what things like Bitcoin and Nostr mean compared to the existing kind of closed siloed systems. So people can check out that. Go check it out.

LynnAlden.com and if you're not following Lynn on Twitter you're doing yourself a disservice so go follow her. And I'm on Nostr I'm on Nostr too. I should actually it's pretty relevant. Yeah I'm basically on there I try to be active I definitely like to explore over the past

few months I've been exploring that ecosystem. I'll I'll let you pull out your phone you can pull up your mpub and read that to the freaks as well I'm kidding go follow Lynn on Noster Lynn you enjoy the rest of your day yep you too

alright that's all we got today freaks peace and love