Bankless “Nothing Stops This Train” | Lyn Alden on Fiscal Dominance
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May 13, 2024 
Lyn Alden, an insightful author and investor, discusses the dawn of fiscal dominance and its implications for investors. She emphasizes the changing roles of central banks and highlights the potential winners and losers in this new era. Alden also dives into how capital controls and government surveillance are reshaping financial autonomy. Additionally, she speculates on cryptocurrency's performance amid rising fiscal challenges, urging listeners to diversify their investments as they navigate these shifting market dynamics.
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Fiscal Dominance Defined
- Fiscal dominance is when public debt and deficits drive inflation, overriding monetary policy's effectiveness.
- This differs from monetary dominance, where central bank actions effectively control inflation and bank lending drives money creation.
1970s Inflation: A Monetary Dominance Example
- The 1970s inflation, driven by bank lending and high money creation, exemplifies monetary dominance.
- Paul Volcker's high interest rates curbed borrowing and inflation because public debt was low.
1940s Inflation: A Fiscal Dominance Example
- The inflationary 1940s demonstrate fiscal dominance due to massive monetized war deficits.
- High inflation persisted because the central bank kept rates low to support government spending.