The Wolf Of All Streets - The Future Of Bitcoin & Why The Dollar Will Collapse | Lyn Alden

Episode Date: July 28, 2024

In this must-watch episode, Lyn Alden unravels the mysteries of fiscal dominance, revealing how the Federal Reserve's policies could shape the future of the U.S. economy and Bitcoin. Dive into her riveting analysis of potential inflation waves and the looming challenges for both traditional and crypto investors. Discover Alden's visionary insights on Bitcoin's role as a future global reserve currency and the groundbreaking technologies driving its adoption. Lyn Alden: https://x.com/LynAldenContact ►► Sponsored by iTrust Capital Invest in Bitcoin, Crypto Assets & Gold with Your IRA Using iTrust Capital. 👉 https://bit.ly/itrust-scott ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/ ►►OKX SIGN UP FOR AN OKX TRADING ACCOUNT THEN DEPOSIT & TRADE TO UNLOCK MYSTERY BOX REWARDS OF UP TO $60,000! 👉 https://www.okx.com/join/SCOTTMELKER ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. USE CODE ‘25OFF’ FOR 25% OFF WHEN VISITING MY LINK. 👉 https://tradingalpha.io/?via=scottmelker ►►NGRAVE This is the coldest hardware wallet in the world and the only one that I personally use. 👉https://www.ngrave.io/?sca_ref=4531319.pgXuTYJlYd ►►NORD VPN GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets Follow Scott Melker: Twitter: https://twitter.com/scottmelker Web: https://www.thewolfofallstreets.io Spotify: https://spoti.fi/30N5FDe Apple podcast: https://apple.co/3FASB2c #Bitcoin #Crypto #trading Timestamps: 0:00 Introduction and Overview 0:28 Problems with Legacy Systems and Bitcoin 1:16 Discussion on the Federal Reserve and Interest Rates 2:13 Economic Indicators and FED Policies 3:25 Financial Stability and Inflation 4:19 Public Debt to GDP and Interest Rates 6:46 Challenges for Crypto Investors in the U.S. 7:51 Importance of Fiscal Policies 9:11 Market Reactions to FED Policies 10:33 Historical Context of FED's Actions 12:17 Fiscal Dominance and Inflation 14:27 Stagflation and Economic Outlook 15:29 Political Challenges in Addressing Fiscal Issues 17:32 Historical Perspectives on Debt and Deficits 20:11 Refinancing Public Debt 21:31 Should Governments Control Money? 23:30 The Role of Technology in Monetary Systems 26:25 Incentives for Centralized Authorities 29:29 The Future of Decentralization 32:22 Global Economic Collapse and Transition 34:24 Alternatives to the Dollar 36:22 Impact of BRICS and Other International Efforts 39:22 Trump's VP Pick and Economic Policies 42:01 Political Implications for Bitcoin 44:08 Path to Bitcoin Standard 47:04 Readiness of Bitcoin for Global Reserve Currency 50:36 Custodial and Self-Custody Solutions 52:36 Scaling Solutions on Bitcoin 55:02 Immediate Future of Bitcoin and Crypto Innovations 58:23 Money and Communications Integration 59:13 Where to Follow Lyn Alden The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

So historically, over the past 50, 60 years, Republican administrations have run larger deficits than Democrats. And that's because Democrats tend to raise spending and taxes, whereas Republicans tend to raise spending and then cut taxes. That's what we saw in the 70s, correct? If you look at the 70s and ask where most money creation was coming from, it was from that bank lending side. Everybody's always expecting dollar collapse around the corner,

which is just not how this works. This is a long train. Bitcoiners often talk about the problems with legacy systems, but we rarely talk about the path to Bitcoinization. And on the flip side, the path for Bitcoin to actually become ready for the grand stage. I had that conversation, but also, as you can imagine, a much deeper conversation on the state of the economy of Bitcoin and of the world in general with the amazing Lynn Alden. Guys, you cannot, cannot miss this conversation. So the story of the last year seemingly, certainly with the United States economy, has been when will the Fed cut? If you go back a year and a half, we were supposed to get three

or four cuts in 2023 alone. Here we are in July of 2024, still no cuts. I guess we can start with a simple question. In your opinion, should Powell and the Fed be cutting now? We obviously have that expectation for September. Should they be cutting or not cutting at this point? Well, so based purely on their mandate, which is to balance maximum employment with the way they define price stability, The data is starting to warrant basically some minor cuts probably later this year or next year, because before when inflation was very hot and the unemployment rate was very low, all of their mandates pointed toward trying to control inflation. Whereas now that some of the economic data is coming in a little softer,

some of the consumers are starting to weaken a little bit, and we see unemployment increase from, say, 3.4% up to 4.1%, which is still low but heading higher. If you're just looking at this like a control system and trying to swing between these two optimizations, it does start to make sense for them to probably consider trimming later this year. I think the current market expectations for mild cuts in the back half of this year do make sense based on the data we currently have. Now, if we zoom out and ask things like, should a central bank even control the price of money, I'd have a very different answer. But basically, within the confines of the current system, yes, I do think that at least the data right now probably warrants looking at trimming. I think that's a conversation we'll have in a few moments. From what I'm seeing, we're looking at maybe 0.25 in September, maybe 0.25 in November. As you said, unemployment taking up above that 4% number. And so that's

their dual mandate. But a lot of people still view the Fed as political or that potentially they're viewing the stock market as the main measure for how they should be behaving. We obviously have stock market at highs. So do you think that they are strictly focused on unemployment and inflation? And if they start to cut, do you think that inflation will actually get down to their target of 2%? Well, so I think a background shadow mandate that they have is financial stability. So basically, anytime the treasury market gets illiquid or otherwise disorderly, they're

going to step in. Doesn't matter what unemployment is, doesn't matter what inflation is, that's going to elevate to the top of the stack right away. For example, when the banking system is having issues in 2023, and they were verbally all in on inflation fighting mode. Well, one of the ways of fighting inflation is letting some money go away. If unsecured creditors lose some money, that destroys the money supply a little bit and is around the margins disinflationary. And so they could have let that happen, but they feared the broader

instability of people not having confidence in the banking system. And so they stepped in over the weekend and quickly kind of put the bandaid on that, even though around the margins, that was contributed to mild inflationary pressures by being a pro-liquidity event. One of the themes I've been pointing out over the past basically year and half, is that when you get to public debt to GDP over 100%, interest rates become less effective at fighting inflation in the first place. Because the entire premise of raising and lowering interest rates to combat inflation, there's really two main reasons why that works. One is it makes your currency attractive to foreign holders, or at least it

makes domestic holders not want to flee to other currencies. So that's number one. That's obviously the problem Japan's going through right now. Nobody wants to hold their currency. So number one is make your currency attractive relative to peers. The other one is to accelerate or slow down bank lending. Because historically, most money supply growth is from commercial bank lending. And when you lower rates, you encourage more borrowing. When you raise rates, you kind of squeeze everything. At least that's the idea. The problem is that when you go through a lot of those cycles for many decades, and you have public debt that's over 100% of GDP, plus demographics and other kind of reasons why there's a large fiscal deficit,

now we're in a position where fiscal deficits annually exceed the amount of new bank loan creation. And so we're not really monetary driven anymore, we're fiscal driven. And when you have over 100% debt to GDP and you raise interest rates to try to slow down that bank lending, you blow out the fiscal deficit by a larger absolute amount than you slow down the bank lending. And so when they raised rates in this cycle, they did slow down bank lending, you blow out the fiscal deficit by a larger absolute amount than you slow down the bank lending. And so when they raised rates in this cycle, they did slow down bank lending, but only by an amount that was smaller than the deficit increase. And so interest rates become a somewhat insufficient tool to try to fix inflation. Basically, it's more on the fiscal side. It's like, can you fix your taxing and spending issues?

Can you make sure your country has energy security? Can you get other kind of supply side pressures to go away while you don't have rampant money supply growth? Those are the factors that really go into control and inflation and the industry rates are kind of a sideshow. They're more impactful for narrow industries, Commercial real estates, small business lending, those are the two legs that are really impacted by this. Whereas a lot of, like in other places, there's kind of this trade-off that's not really going the way they expected.

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You absolutely have to try this if you are in the United States. Use the link down below. It's bit.ly slash itrust-scott. That's bit.ly slash itrust-scott. You have to try this now. It's interesting because pundits, markets are focused heavily on the Fed. We talk about what they're going to do with interest rates, but you just made the very obvious point that we should probably be watching the fiscal side and the treasury and not really

the Fed and monetary policy. We know M2 money supply is increasing, even though the Fed is theoretically tightened and has not lowered rates. So isn't this sort of like wagging the dog? You're not watching what's actually happening. We're just seeing what they're sort of telling us. Because what you just said is the Fed kind of doesn't matter. Yeah, kind of. I mean, basically, I think they matter, but the relative weighting is lower, right? So everybody's like so focused on the Fed as though that's the only game in town, whereas they're more like the second or third thing kind of going on, right?

And so the parts where that matters is like that first variable that I mentioned of how desirable is your currency to hold, that still is largely impacted by rates. And the thing is, if they cut rates moderately, it's not really going to affect any of the fixed rate debt. So no one's going to refinance their mortgages. Investment-grade corporate debt's not going to be affected. Around the margins, it's nice for banks and commercial real estate and small businesses. But a few cuts are not a big deal. Where they actually impact to some extent is ironically emerging markets. Because if they're holding all this dollar-dominated debt, they're getting squeezed because the dollar is so strong, because the real rates are kind of high.

When they start softening the dollar and the rate differentials a little bit, that eases some of those international pressures. So there's still ramifications from cutting or not cutting by how much. But in terms of just the single-minded media focus on the Fed, yeah, I think they're basically the they're the second thing. They're not the first thing right now. The biggest thing is fiscal. Right, we talk about Powell wanting his Volcker moment, but you pointed out earlier,

if you're at over 100% debt GDP, I don't know where we are now in mid 120s. If I had to guess, pushing 130 at some times, Volcker had 30%. And I think that people view it as the same environment as it was then, but you've pointed out it's just not going to work. But doesn't that imply that if they start cutting, it's going to have very minimal effect while people are pricing in these cuts as this grand savior for markets and

the economy and that we're going to continue to boom? I mean, historically, when we see cuts, we usually get an inverting of the yield curve cuts, then the market crashes. Yeah. So partially depends on why they cut, because a lot of times when you see that the asset prices do not do well during cuts, it's largely because the third factor that's causing both problems, which is there's basically a recession happening. So they're cutting in response to recession and asset prices are doing badly in response to recession. So it's not necessarily that rate cuts cause bad stock prices. It's just that the things that trigger both to happen are usually unpleasant.

In Volcker's era, basically, if you look at the 70s and ask where most money creation was coming from, it was from that bank lending side. Basically, the baby boomers were entering their home buying years, peak credit formation. Obviously, they had issues from going off the gold standard and then oil shortages, things like that. And so raising rates slowed down private sector bank lending way more than it blew out the deficit back in his day when you have 30% debt to GDP. So Powell's challenge was that he basically applied the Volcker playbook to a situation that was not the situation Volcker had, which is that most of the money creation is from the fiscal side. So yeah, basically, I do think that a handful of rate cuts is not going to be super stimulatory. Around the margins, it is decent for emerging markets, which stimulates the globe a little bit.

It risks causing a second inflation wave. Because if you get even moderate dollar devaluation and emerging markets able to breathe a little bit because their dollar debt is not squeezing them as hard, well, that potentially triggers more oil demand. I think the eventual outcome here is probably a second inflation wave. The timing is still unclear. That's what we saw in the 70s, correct? Yeah. You kind of had it come all the way down once again near the target and then a massive spike again. Yeah. I think that's probably my base case. We're going to monitor that quarter by

quarter to see what the timing looks like because obviously anything in macro has like 15 million variables going into it. So you have to kind of readjust your model regularly to kind of take into account what's happening. But basically, it's a rock and a hard place. If you leave rates high, you continue to blow out the fiscal deficit. There's too much polarization and too much financialization to realistically address the deficit. That's why I keep saying nothing stops this train. The path towards any sort of meaningful long-term deficit reduction is extremely narrow. And so keep rates high, that's all going to happen. Probably by late 2025, you'd have the Fed go back to balance sheet increases just to

assist the Treasury market in that scenario. And so that's one path is the hire for longer path, which doesn't really address the problem. And then if they do cut, well, then they start triggering the fact that your currency is less attractive to the foreign market, you potentially get higher energy prices, and you have the consequences that come from that. So it's not a position I'd want to be in if I was the Fed. Maybe Powell gets his soft landing before the election and then bows aside gracefully and the problems are kicked down the road. It seems like that would be a nice scenario for him because people are still now back

on the soft landing trade hard.'s – so everybody got really bared up for a recession. And what they were missing was that the rate hikes were not as recessionary as people thought because of the fact that we're in fiscal dominance. And so much of the private debt was locked in at low rates while the deficit just blows out when you raise rates with 130% debt to GDP. But now the pendulum is swung the other direction. Everyone's like, oh, it's all fiscal, no recession in sight. Whereas actually, the recession odds are higher now than they were a year ago. I do think that under fiscal dominance, recessions tend to look different. One way, you can call it like an emerging market recession. You generally get a little bit more of a stagflationary type of recession rather than this big kind of disinflationary implosion type recession. So to the extent that we do have a recession or hard landing, I think it would look different

than, say, a 2020 or a 2008 type recession. But those risks are on the table. So I kind of see the rock and hard places like economic malaise versus second inflation spike. Right, which is the 70s to a degree. I mean, it's a stagflationary event, which means we get a very quick or deep recession and depression and then go hyperinflationary, which sounds like an awful path. Yeah, I mean, hyperinflation is a term that describes... I shouldn't say hyper because then we get another inflationary boom. Yeah.

And I think that's probably coming down the pike eventually. Okay. So obviously this is all massively manipulated to some degree or they're trying to pull these levers to kick the can, I guess, further down the road and keep things under control. It seems like very few people are talking about the fiscal side, at least politically. I mean, you can make an argument that adding a trillion to the debt every couple of months is unsustainable. It's the biggest problem. Powell's even said it in interviews, sort of poking the bear on the fiscal side. But why do you think that it's never really

addressed at the highest level? I mean, everybody rationally knows we can't have $40, $50, $60 trillion debt in a matter of years, two years, three years, but there's no plan at all to address it. So partially because it's inconvenient, but I think the bigger factor is that people have been lulled into a false sense of security. And historically, being the one alarming about the deficit has not paid off. They end up being in the too early crowd by decades. So basically, back in the late 80s, because of all those rate hikes to control inflation, they did start to get the deficit blowing out. They also had very high military spending. A bunch of things together were causing deficits, including interest expense, to be a very big percentage of the budget.

And so by the late 80s, they put up the national debt clock. And then by the early 90s, the most successful independent presidential campaign was run largely on debts and deficits. And so that whole kind of late 80s, early 90s era was like peak zeitgeist for the public debt and deficits are a problem. But then what happened was China opened up to the world. The Soviet Union fell, and that whole block opened up to the world. This was a very disinflationary, globalizing outcome. And they were able to continue basically 40 years of falling interest rates and disinflation, which when you have rising debt to GDP, but you have falling interest rates, your interest expense remains very manageable for

a long period of time. And so all those voices that were calling out debts and deficits ended up being something like three decades too early. And so by the time we got into the 2010s and everything, the narrative kind of became deficits don't really matter. Look at all those people that were crying wolf. It's just spent. And the problem is that we bounced off zero rates. We did a lot of fiscal. We've gotten public debt to GDP very high. And now we don't have that falling interest rate offset even more. Even if interest rates just go sideways now, let's say they don't just keep going up. Let's say they go in a range now between 2% and 6%. If you're rising debt to GDP while you have sideways interest rates, that's a fiscal spiral. And so I think that's basically people,

there's one side of the pendulum that I think swung to, they were kind of viewed as being earlier wrong. Now the pendulum's in the other way, which is that none of this matter. And ironically, this is when I think a lot of those things are starting to matter. Yeah, we're objectively in the debt spiral, as you said, a fiscal spiral. I don't see how that can possibly be fixed at this point. But like you said, it's politically unpalatable to mention it. You can't run on austerity. Yeah, exactly. And basically, deficits are very unpopular to fix. What makes it even harder, because some people will point out to times where debts and deficits were fixed. So for example, Canada and Germany, countries like that have managed in the

past to lower their debt to GDP ratios pretty substantially. The problem is that they did it on an economy that was not particularly financialized. The toxic combination is high public debt and deficits and a financialized economy. And what I mean by that is, for example, in the US, as we've hollowed out our industrial base, as we become very financialized, we have an unusually high correlation between asset prices and tax receipts. The way we do CEO compensation is different than the rest of the world. The level of wealth concentration we have, the sheer amount that our stock market matters domestically and to the world is different than the rest of the world. And so even if they try to get their hands on the

deficit and try to say either raise taxes or cut spending to control it, the resulting slowdown would ironically, and asset prices going sideways to down for a period of time, would contribute to a rising deficit from weak tax receipts. And so that combination is super hard. You'd have to overhaul almost everything to try to kind of thread the needle there, which is why I say nothing stops this train. It's like 99 times out of 100, there's just no realistic path there. And so I think that long-term leads to currency devaluation and the harder path of getting through that. And we have, last I looked, $7 trillion, $8 trillion of that debt needs to be refinanced in the next six to seven months, probably from a sub 2% rate,

even lower to 4%, 5%. There's, there's no solution for that. You have to refinance that debt at the current rates. Yeah. A lot of that is short-term stuff that keeps rolling over. So that's rolling over from high rates to rates that are still high. But then, yeah, around the margins every quarter, some of that is intermediate or longer-term debt that's getting refinanced at these higher rates. So if bonds issued five or 10 years ago, when they come due and get refinanced, that's adding to interest expense. So even if they just hold interest rates flat, interest expense keeps going up a lot because more and more of the existing debt gradually gets refinanced at these higher rates.

Even though that kind of headline number, a lot of that is that short-term refinancing, but a component of that number is that longer-term stuff that is getting refinanced at these higher rates. And the funny thing is, even if they trim rates a little bit, if they cut off 50 basis points or 75 basis points, you're still going to get higher interest expense because the refinancing of that older debt would still be getting refinanced at higher rates, even in that mild rate cut scenario. Fiscal spiral. Let's get into the more, I guess, interesting question then,

which you sort of posed at the beginning. You have to be someone who is on top of this 24-7, 365, educated to even begin to understand it, right? I think you rattle off this data. It's incredible. 99.9% of people can't follow any of this, right? And so I think they bite on the headlines about interest rate cuts and interest rates going up. But it really leads to the question you asked, which is, should the government be doing this at all? Well, yeah. I mean, I think basically, I don't agree with price controls, which include centralized pricing of money. The way that I've described this era, this central banking era, is kind of this technological

kind of valley, which is that, say, before you had the invention and deployment of the telegraph, you had, in many ways, a fairly decentralized kind of harder money system. When we entered this era for the past century and a half of telecommunications, so transactions and information and transactions can go around the world at the speed of light, but there's no fast settlement.

And so we spent this 150 years bridging that gap with centralization and debt. Basically, you can't settle quickly, you know, use physical gold and, you know, settlement and verification. Everything else is moving around at the speed of, you know, telecommerce. And so we put all that on these central ledgers, which are then very manipulatable, very easy to lever, extraordinarily high. And, you know And now we're entering a kind of potential new technological age where we do have fast settlement that we can kind of go back and address some of these things that have built up.

So I kind of viewed it in such a way that if we were to run this back, the way the world went financially, if we were to run it back 100 times, you'd end up in a similar position most of the time due to the order of technology uh that that comes um but it means that once you do have windows to address this uh we should we should take them because i think i think central pricing of money uh has all sorts of um hard to measure problems uh some of them are easy to measure some of them are hard to measure uh but that of them are easy to measure. Some of them are hard to measure. But that's the system that we're in right now. I think a lot of people who believe in Bitcoin believe that the fiat experiment should have never happened,

that it's a fundamentally broken system. But the way you describe it seems like it was almost a necessary evil to bridge that gap. I view it as kind of like technological determinism, which is that it's not like the gold standard could have succeeded in the telecommunication world. Once you have gold slow, it's not very divisible. You have to abstract it to kind of keep up.

That's been going on ever since the Silk Road and the Hawala system and all these different kind of abstractions to move money around safer and more efficiently than actually just moving gold every time. But in the pre-telecom era, the amount of leverage and centralization on that system was fairly low because there's only so much benefit you get when you have that abstraction. But in the telecom era, the abstraction became so big and all the incentives all aligned toward

these more abstract central bank ledgers. Basically, everybody puts their gold into a bank because they want to participate in the global banking system. But by everybody putting their gold in the bank, the government has these big honeypots where they can just go after and control it. And then they can drop that from the settlement entirely. So it's one of those things where basically when you have that mismatch between transaction speeds and settlement speeds, I think you're going to get something that looks a lot like what we've seen over the past 150 years. And the technological order is such that fast transactions are always going to come before fast settlements, kind of like how a bicycle is going to come before an airplane. Basically, the technology you need to send Morse code around the world, which lets you do pretty basic low bandwidth transactions,

that's always going to come before something like Bitcoin, which needs way higher cryptography, bandwidth, infrastructure, that's inherently going to come later. And so when we have that gap there, that gets solved by centralization and abstraction. And of course, individual politicians can make good or bad choices on whether it does well under their watch or not. But everyone's incentive is always higher debt, devaluation, kick it to the next person. And so when you see something fail everywhere in the world, so it's not like the gold standard succeeded in some spots and failed elsewhere. It literally failed everywhere all at once, except for Switzerland was a hangout for longer, but even then they eventually got off of

it. When you see something go away entirely, it's heavily indicated that there was something flawed with that model. And basically gold just is not great for a telecommunication age. And so that's kind of where we find ourselves. Well, I think we'll get into the obvious Bitcoin conversation soon. But when you have those misaligned incentives that are built into that system that maybe was meant to just be a stopgap,

then you obviously have centralized authorities protecting that system at all costs because they're the ones that benefit from it. So, you know, I had Jeff Booth recently, your partner, of course, and friend, and we talk about this pretty regularly, the beautiful world he describes in The Price of Tomorrow. But that world exists in a vacuum and transitioning to it is effectively impossible in the current system. So how do we move more towards decentralization,

more towards faster settlement, more towards a Bitcoin-type world, whether it's Bitcoin or not, when all of the incentive is for the central banks to remain in control, to print more money, and to keep things as centralized as possible? I think there are two main answers to that. One is making this new system better. So everyone finding ways to make it more decentralized, make the user experience better, educating people around it. All of that work is going into building up this new system, all the network effects, all the technological foundations, all the options. That's one path. And then the other path is basically that, as we just described, the incumbent system is on a spiral, a fiscal spiral.

So part of it is just watching that system destabilize itself. If the dollar system is working reasonably well, then any sort of alternative system is going to have likely slower adoption. There's a reason why central banks were not really accumulating gold for many decades. They were just holding treasuries because treasuries held their value against oil and held their value against other things. They had positive real rates for a while. And so all these countries are willing to hold treasuries. But as soon as treasuries are clearly untenable, both because they can be frozen and because they can't structurally maintain positive real rates on a sustained basis because of

the debt load and the fiscal spiral, central banks start reevaluating gold again. And so part of it is that the incumbent system is itself destabilizing itself. And one analogy I like to use is like in emerging markets, when they have a currency failure, they normally dollarize either formally or informally. So basically, there's 160 currencies in the world. They maintain some degree of capital controls around themselves. It makes it harder to bring in or out value in large amounts. And when they start to become destabilized, the dollar is always there as a pressure,

as a better currency than what they have to offer. And stablecoins potentially allow that to pierce in even more. It goes around those choke points around the border and allows dollars to extend even more into those jurisdictions. But at the same time, what's happening is that as the dollar itself in the longer arc of time gets destabilized in a similar way that emerging market currencies get stabilized, Bitcoin is this thing that's there, always kind of pressuring, always there, always an option.

And so I think part of it is that the current system just kind of works its way through its lifecycle. And the other thing is that people have to make sure that the new system is ready for when some of that stuff really does start to hit the fan. So you presented two scenarios. The pessimistic view of those two scenarios, obviously, is number one is pitchforks and torches, right? A groundswell from up and they overthrow the other system with this superior system, because I doubt it just as a peaceful transformation where these centralized authorities disappear gracefully into the sunset. And the other one is a global economic collapse, right? So maybe is there a way that number one or number two, for that matter, is a slow and steady transition that isn't incredibly painful for

the average person? Well, any sort of transition is a heightened period of danger. It's creative destruction. It's an opportunity, but it's also dangerous when you're going through that middle period. I spent a month in Egypt this year. I go there every year. I live part of the year in Egypt. And they're currently dealing with 28% inflation. And they have natural gas shortages, and therefore, rotating power outages for part of each day, different neighborhoods at different times for when their power is going to be out. And that sounds like a terrible scenario, what it is. But I mean, at the end of the day, people are still bringing their kids to childcare.

There's still, it's not like anarchy. There's no Mad Max going on. When you see emerging markets go through currency collapse and dollarization, Argentina, for example, at least so far, it's not been a violent transition. It's not been a revolution. It's been this political revolution that we're seeing in slow motion. Obviously, there's a lot to be written about that story in the future. We don't know how that's going to go. But I do think that basically, even though those who run a country's currency never really want to willingly give it up, sometimes it becomes so

untenable. And then that kind of spirals into chaos where no one really knows how to defend it. It's not really working. There's multiple attempts tried to regain it. And there might not even be any sort of violent thing. It's just that the better external currency kind of keeps inserting itself in there. And eventually, politics shift around that new reality. And so that can happen on a global stage with some of the bigger currencies as well. It's just obviously the stakes are way higher when the countries have nukes and when these big powers are in opposition. So there are positive and or at least they're still friction filled. They're still hard. But it's like developed markets with emerging market characteristics. And the question is, can we thread that needle in a way that doesn't lead to some of the darker outcomes of fascism and these rising things that can happen when you have that really destabilizing moment? Right. You brought up Argentina.

And I think a lot of Bitcoiners believed that there was a chance at the beginning that Millet would move to a Bitcoin standard or make Bitcoin legal tender. And he was very quick to move, at least conceptually, to the dollar. It's the best example, I think, of what you just said. I just wonder what happens when it's the world reserve currency that goes through that spiral and collapse that you talked about, right? Because all of these other examples, they have the dollar to run to, or they're a smaller economy. So it's not as much contagion, you know, if it doesn't spread beyond their borders. So the dollar would be last, in my opinion, right? So if the dollar goes, everything else is probably gone before it, right? Well, the challenge is that the United States has structural trade deficits.

And so in some scenarios, other countries can actually benefit from a weaker dollar. If a country, for example, owns a lot of assets, reserve assets, gold and global equities and things like that, and then they have dollar-denominated debts, if the dollar encounters a spiral of the fact that it has larger twin deficits than almost any other major currency. So on one hand, the dollar is like both the cleanest dirty sheet in the hamper and the dirtiest dirty sheet in the hamper because looking purely at its twin deficits and all this, on those fundamentals, it's one of the worst. But the other side of that is that because it's the global reserve currency,

because of that global dollar-dominated debt, there's all this structural network effect inbuilt demand for that currency. And so that's the polarity of the dollar. It's both extremes, best and worst, at least among developed ones. And so if something pulls out one of those legs of the stool, if there's less global demand for it, then the other side is actually in some ways worse than other countries. And so I don't really necessarily view the dollar as last, but certainly one of the last in the sense that the 160 currencies in the world, most of them are untenable. They're small, they're local, they're either pegged to a major currency or they keep devaluing

very rapidly. And things like Bitcoin and dollar stablecoins can inject into all of those and replace them. And when the dollar's time is finally here to be kind of truly unstable, everybody's always expecting dollar collapse around the corner, which is not how this works. The network effect is massive. The supply growth is nowhere near collapse territory. This is a long train. But as that time eventually comes where it becomes truly unstable, it depends what the alternatives look like at that point. By that point, you probably have pretty significant bilateral trade in other currencies around the Eastern Bloc, for example. And hopefully, then you probably have a much bigger and more widely

dispersed and liquid Bitcoin network as well. So when that does come, I think the alternatives will likely be much larger and more normalized than they are right now. I'm not an expert on the history of money, but the dollar wasn't always the global reserve currency and we got there. So I guess there's some precedent, the pound at some point, obviously the world worked on the British pound and we got to the dollar and the world didn't collapse. So I guess that that's the answer to that this can be done and you could eventually make your way to Bitcoin. There's been no lack of attempts from foreign entities, other countries to try to get off the dollar. We've obviously seen the petrodollar

end in Saudi Arabia. I don't know how big of a deal that is to you. BRICS, which has seemed much to do about nothing to this point. But do you think that any of these things could actually weaken the dollar's stance as the global reserve currency, the main currency for trade around the world? So around them, basically, all of those have a trouble because of the network effect, right? So none of them have, it's not just the currency, it's also the capital market. So the reason why the dollar works is because it's super liquid. Most currency trading happens with the dollar. It's on like 90% of every side of a trade. So if you want to exchange currency X into currency Y, you normally go X

to dollar and dollars to Y. And in addition, the liquid market for it, so stocks and bonds in the US are very broad and unified and deep capital markets. And so you can move hundreds of billions or trillions of dollars over longer term pretty readily. Whereas if you're a country that's trying to internationalize your currency, but you don't have those types of capital markets, like Europe, for example, they've got this shared currency, but then they've got different smaller capital markets. So they're not deep and liquid enough. China, their capital market, partially because of capital controls, partially because of different rule of law, like less rule of law, their liquid capital markets are just less

attractive for many investors. Where their priorities are as a country are less focused on the stock market. And so all these countries are trying to set up bilateral trade, but the problem is they have trouble netting in balances. I think over time, we're going to see more and more bilateral trade, more and more shift toward China, where China can bridge the gap between Russia and some of the other BRICS countries, and they can build enough bilateral trade and settlement and things like that to be a pretty workable alternative to the dollar. And over time, that diminishes demand for the dollar as we go

through our fiscal spiral. But we also see, for example, there are downsides of being the global reserve currency. It artificially boosts your import power. It artificially suppresses your export competitiveness because you're stuck in the position of exporting dollars for the rest of the world, and it manifests through a trade deficit. And so we would go through that painful process, but we'd have a chance for a more vibrant domestic economy. I think the biggest challenge is if you let that happen to you, and so you're forced to go through that from a position of weakness, that's very unpleasant. If you try to get ahead of it and go through that from a position of strength, then you

have more options. But we'll see how that turns out. One thing that's interesting is that Trump's VP pick is one of the few politicians that have talked about dollar-dutch disease or resource disease, basically this problem of examining some of the downsides of being the global reserve currency. So discussions that were kind of on the fringes some years ago are now openly talked about in the Senate, held by some major politicians. So we'll see what happens in the years ahead. What does that vice president pick to you mean for the economy and for Bitcoin, I guess, specifically? We know that Vance himself has reported, it was a few years ago, but that he held up to $250,000 in Bitcoin. He's made some

very pro-Bitcoin, pro-crypto generally statements. And this is all added to obviously Trump's pivot from a few months ago to being outwardly pro-crypto by any measure. So do you think that Vance adds to that agenda? And do you think that this party, if in power, this pair in power could actually get some of this under control? So I do think that the Trump pivot and the Vance pick, obviously, that's a more Bitcoin and crypto friendly administration than we've generally seen historically, both in the Biden administration and the prior Trump administration. You know, people, I think, rightly raise concerns like, OK, after the election, what are the actual positions going to be? You know, to what extent are promises kept and things like that? So we'll see how that unfolds.

So I have fairly high confidence that they'll be more friendly toward this industry than the current one, should they get in power. However, I have low confidence that they'd have any way of really getting their hands around this fiscal spiral. I think part of the reason the train doesn't stop is that it doesn't really matter who wins. There are other things that matter based on elections, but I think that the fiscal deficit is not really one of them. And so my fiscal spiral, nothing stops is train outlook, is election independent. There are around the margins, it can be affected one way or another. So for example, there are certain tax cuts that are set to expire in the next administration. And you probably would have different outcomes based on who wins the election on whether or not those tax cuts are likely to be extended or made permanent or not.

And there's other things that would change. So there are lots of individual things that can change one way or another, but I think the deficit's gonna be an issue either way. I think the fiscal spiral's in place either way, and that's very hard to address per se. Couldn't they actually contribute further to the fiscal spiral

if they either keep taxes low or lower them further? So historically over the past, you know, 50, 60 years, Republican administrations have run larger deficits than Democrats. It's kind of inverse of the common perception. And that's because Democrats tend to raise spending and taxes, whereas Republicans tend to raise spending and then cut taxes. And so you get – there's obviously pros and cons to those outlooks, but either way, you generally get larger deficits, ironically.

Now, partially that depends on recession timing and things like that. I mean the sample size isn't very big. But yeah, I think basically overall, their approach is potentially deficit enlarging, because you're more likely to get the tax cuts locked in. You're unlikely to get, with polarized Congress, you're unlikely to get any sort of meaningful cuts to any sort of entitlement programs, which are kind of at the core of the size of the deficit. You could get changes around the military spending situation that we're seeing. That's one lever that they might be able to shrink. But I think it's all locked in. 80%, 90% of it is locked in and everything else is around the margins. And the problem is those things that you just mentioned may have been more effective over the past 8 to 12 years, but now the deficit is so large and the interest

payments are so high that even $100 billion here, $100 billion there cut becomes almost meaningless. Yeah. Yeah, I think we're past the event horizon, which is basically where there's nothing that resolves this without some sort of restructuring or devaluation. And it could be long term, it could be a sudden, quick thing. But basically, tweaks to taxing and spending is not, it just doesn't really address anything. It's all around the margin. Okay, so let's say that Trump and Vance or the next administration or somebody become true orange pill Bitcoiners, and they want to slowly move the world towards a Bitcoin standard, knowing that they're in power and that we have the dollar as the global reserve currency. What does that path look like? Does it start as adding a bit to the central bank balance sheet, like having gold on the balance sheet,

backing the dollar by Bitcoin. I think that's obviously extremely unlikely as much as we'd like to talk about. What does that path look like to make this less painful if the eventual outcome is a Bitcoin standard? Yeah, I think it's unlikely. Basically, if I put my hat on and think, what would you do if you wanted that to be smoother? Yeah, basically adding some to the reserves would be one of the options. In addition, encouraging businesses that are building on it to be in your country would be an obvious step. Making it legal tender, or at least as a first step, eliminating taxes for a small amount to enable spending with it. Things that go against the current structure. But if you're elected from a position not really liking the current structure and thinking it's worth restructuring, those are some of the options.

Basically, encouraging it more, holding some itself. The US always does have the option of pivoting away from being the only reserve currency. Basically, they don't really have currency exchange reserves, like foreign exchange reserves, like the rest of the world does, because we're the axiom of the system. Even including our gold holdings, we only have like 2% of GDP in foreign exchange reserves.

And so one option that they've always had is that they could just boost their foreign exchange reserves to like 10 percent of GDP by buying foreign assets, gold, or in this case, Bitcoin, some combination thereof, devalue the dollar, but increase your reserves. And then at that point, you're a reserve currency, you're not the reserve currency. It'd be a huge shock to the system. Nobody wants to touch that. It'd be very good for some, very unpleasant for others. Usually things don't really get done like that from a position of strength. They usually get to a point where- Desperation. Desperation. Everything works its way down. It's kind of like how many empires grow and grow and

grow and grow and then they decide, you know what, we're too big. It'd be better if we streamlined a little bit. Instead, what happens is they grow and grow and grow, and then they get mired defending borders that are too big to control, hollowing out from the inside, and then they fail from a position of weakness, when they could have re-evaluated from a position of strength to right size. But you almost never see that happen. I guess there's a flip side to that question. We have the question of how do you get to the Bitcoin standard, but don't we also have a question of how do we get Bitcoin ready to be able to hold up under that standard?

I think we can certainly make the argument that if the world tried to move to a Bitcoin standard right now, it probably wouldn't work. Transactions aren't cheap enough. Transactions aren't fast enough. Transactions aren't fast enough. Very variable things. What do you think we need to see happen on the adoption side for Bitcoin to be ready to become a global reserve currency or a meaningful part of the system? So I think this is inherently a multi-decade process.

Network effects of this magnitude don't change quickly. For example, something like smartphone adoption, that can happen in a decade or a decade and a half. Whereas something like switching the back end of the entire money system is something that's more of like a 40-year thing. Even the switch over from the UK pound to the US dollar, that really was a multi-decade process that kind of started around World War I. And it went all the way to the Suez crisis four decades later. And so I generally view it as along those lines. Basically, right now, and some of that feeds on itself, right?

So right now, even gold's not big enough to really take on the mantle, nor is it fast enough. Bitcoin is tiny relative to the US dollar system. But the thing is, as the dollar becomes more destabilized, those other things have an incentive to grow, right? So right now, as long as the dollar is reasonably stable, there's less incentive for all these global players to kind of jump into these other assets. But over time, as the US goes through its fiscal spiral, there's more and more obvious signs on the wall to get into these other assets. They become larger, they become more liquid, they become more widely held, and more technology builds on top of them. They get more and more ready. In the meantime, that's partially why at EgoDeath Capital, we do venture for building

infrastructure and solutions on Bitcoin. I mean, that's one of the things that we focus on because I think there's valuable work to be done there. But a lot of it is just a time component that we have a rising small incumbent with powerful network effects, but still small, versus this really huge incumbent wide network effect, gradually destabilizing thing. And I think even years from now, there's going to be no death of the dollar. But I think what we're going to see is a dollar transition to more looking like an emerging market currency,

which is that you have problems that no one seems to know how to put out the fires for, because as we've discussed in this interview, they're so structural. They're so just inbuilt and nothing short of an overhaul would fix them. So effectively, necessity is the mother of invention. Bitcoin doesn't need to be there now and it will naturally evolve as necessary to get to that point. But you're confident that the tools will be built, that it will be fast enough, cheap enough, and a large enough network to accommodate whatever comes.

That's how I view it. And it's unpopular to some people, but I think a lot of it will be custodial in the sense that the number of people that want to hold their own money, there's a certain percentage. A lot of it will be custodial. I generally focus on optionality, right?

The making it so that anyone has the option to participate in the stack and whatever they want. If they have $100 in a wallet and they're doing spending money, there's a good chance that's going to be custodial. But if they're holding substantial savings, that's where things like, you know, cold storage, collaborative custody, multi-sig, those things make sense.

But basically, the layers on top of it, they can be adopted from the current system. so that those ideal options of self-custody and privacy don't get completely dwarfed and that the system doesn't get kind of captured because of that centralizing tendency. So I think it's really important to build those tools so that those who have the desire can participate in Bitcoin in kind of the most cypherpunk way possible. Obviously, you're investing, as you said, via ego death into a lot of things that are being built specifically on Bitcoin. A lot of those things have been built previously or at least tested on other blockchains, probably Ethereum being the greatest. Do you think that those have effectively been test nets for what can be built on Bitcoin? And do you think that that's where all of this will eventually land? I mean, you talk about stable coins,

for example, right? Obviously, they play a major role, as you said, in the dollarization, hyper-dollarization even around the world, giving people who would have otherwise had to go get cash on the black market, if they could even find it at a premium, to send 10 bucks to their friend on Tron, right? With no fees effectively, instantaneously. Why don't we have the stable coin on Bitcoin as the base layer, right? For example. So do you think that all of those things will eventually be built on Bitcoin and the rest of these blockchains will effectively become moot? Or do you think that all of them will serve a purpose still or exist? So a couple answers there.

One for the stablecoins. One thing to kind of question is, do you need Bitcoin for something? So for example, because stablecoins themselves are inherently centralized, the rails that they run on, it's an open question of how much decentralization do they need? There are various Bitcoin tools that are building to bring stablecoins back to Bitcoin in some way. So I think especially for people operating wallets in the global south, having a Bitcoin and a dollar balance is really powerful. So I think basically dollar exposure can make those tools better and they make it so that people actually use them. But I don't think stablecoins as a whole necessarily need to gravitate toward something like Bitcoin. That's almost like a separate tech stack that makes sense for their own purposes.

And when we go back to the other types of scaling solution, I think there's really two tech paths that we're seeing. One is the kind of what we've seen on Ethereum, which is you have like rollups and things like that. There's been a lot of interest in building that kind of thing on Bitcoin more recently. But the other tech path is interesting because it didn't really inherit it from other ecosystems. So the Lightning tech path, as well as one thing I've been really excited about the last few years is Chalmian ecash um so so ecash uh was invented like 40 years ago uh you know by kind of the grandfather this whole digital money yeah this whole digital money movement and the problem

was so it's a really good privacy uh and and medium of exchange solution but it was built on the dollar so it was built on on sand and the really cool thing is that Bitcoin actually makes Chalmian eCash better. It's kind of building that really cool technology on granite. And so in the past few years, there's these open source protocols that are kind of coming out to actually make that workable. And so I actually think that the combination of Bitcoin, Lightning, Chalmian eCash, plus these various fraud proofs and rollups and things like that, those are actually a pretty big assortment of tech stack. Some of which kind of was built on other ecosystems and is now kind of coming back to Bitcoin, some of which was kind of grown up within the Bitcoin ecosystem. I think there's multiple paths forward there. And I think that things that make sense to be built on Bitcoin that actually inherit its decentralized immutable

aspects will be. And there are other things that don't really need that level of immutability. And they can run on whatever sort of ledger makes sense and is cheap and is allowed by governments to exist because it's centralized down to the core anyway. Yeah, inevitably building on Bitcoin will have its own bubble if it hasn't already. It's had many ones since I think it blew up where you have all the people coming from the other chains looking for a cash grab because it's where we are in the hype cycle and it's the place and all of that stuff will disappear and we'll be left with what's actually valuable. But before we finish,

you're seeing all these investments, you're seeing things being built on Bitcoin. In the immediate sense, let's say in the next two to three, four years, which of these things do you think are the most exciting to you or could find some level of meaningful adoption? Because a lot of people are still disillusioned with crypto in general, that it hasn't found this sort of mainstream killer app or product market fit. I would say Bitcoin is the killer app and stablecoins are the second killer app, but beyond that. Yeah, I agree. Bitcoin and stablecoins really have been the two big things. And then there's just various pieces that put them together. So I mean, things like people leveraging their Bitcoin with stablecoins or leveraging their other cryptos with stablecoins.

We're trading them in kind of pseudo decentralized places. That's been fairly pop in other ecosystems. Digital collectibles, I think that still has some likes to it, even though it just keeps getting washed out. Overall, the thing that interests me the most is actually the combination of Nostr and eCash. And it's super small. That whole ecosystem is super small right now. And I don't expect Nofster to be super big in terms of social media anytime in, say, the next three years. But what's really powerful about that is the payment directory aspect. Because that's an area where it's already made my wallets better in the sense that if, let's say we share an Uber and you cover it and I'm like, how can I pay you back? You have to give me payment information to pay you.

You have to give me a Bitcoin or Lightning address or give me your Fiat ways to pay you. And then I have to pay you. So it's a bilateral process to make a payment that the payee has to be involved in. Whereas Nostr, what it's building is like a payment directory. And it's kind of self-organizing. So if anyone's on Nostr and they have their Lightning wallet hooked up or their Chalmini cash or whatever, in my wallet, I can just look them up and pay them. It's basically, it gives you a Venmo-like experience, but not just confined to the US dollar system. It's international open source version.

And so I actually think that that has some legs to it because it improves the UX of the medium of exchange of Bitcoin. And then when you add Trauma in eCash, you fix two of the three problems of custody. So with custody, there's three main problems. One is lack of privacy. Number two is that your account can be targeted or blocked or taken or something. And then three is you worry about rug pull of the entire custodian. And Trauma and eCash fixes the first two because you have privacy and that privacy makes it so that your account can't be isolated.

And so the main thing you have to worry about is the entire trauma and e-cash custodian being rugged. So you can pick ones you trust, you can diversify across multiple of them. And so I think that there's actually a lot of building blocks there for people, especially when you think outside of the US, you think of the whole global south, you think of all these people in 160 different currencies. There actually really now are some pretty interesting building blocks for decentralized communication, private transmission of Bitcoin and holding of Bitcoin. And I actually think that's fairly powerful for the next few years, at least for those that need that stack. Robert Leonardus When Jeff and I finished our podcast a couple weeks ago, he said, you got 20 more minutes. And he's like, we walked through Fetament.

I downloaded the app and we kind of connected and I was pretty blown away, to be honest, by the experience. Obviously, I've used Nostra, but I do think that that is the future. But to your point, it's a very, very long path. Yeah, I think the takeaway I would leave with the reader or the watcher is that money plus comps is a really powerful thing. If you have money alone, you're very limited in it. And if you have comps alone, especially without international unstoppable money attached to it, that can only go so far. But I do think that what makes money better going forward is having more comms built into it.

And I think that we're going to see more and more of that in the years ahead. And that's the path I described is kind of one of the ones I'm excited about. But the broader concept is money plus comms together in the same app. I think that's a great way to finish, Lynn. Thank you so much for your time. Where can everybody follow you and keep up with you after

this? So I'm at lynnaldin.com. People can see my research there. And I'm also active on Twitter, Ian Noster. I highly recommend the newsletter. Jeff got off Twitter. He went full Noster. It's bold. Yeah. You're not ready went full Nostr. It's bold. Yeah. You're not ready for full Nostr yet. Well, so I go to where my friends are. So for example, for Bitcoin discussions, Nostr is pretty good. But if I want to chat with my macro friends

or my TradFi friends, they're on Twitter. So I'm on both. How very balanced and pragmatic. I love it. Thank you so much. Hopefully we'll catch up soon and see how well our predictions are in six months, six years, and God willing, 60 years. Sounds good. Let's go.