BROKEN MONEY, FIAT INFLATION VS SOUND MONEY DEFLATION, & GETTING OFF ZERO BITCOIN | Lyn Alden (Saving in Bitcoin Ep. 2)
Apr 11, 2025
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Lyn Alden, an independent investment and macroeconomic analyst and author of "Broken Money," joins to discuss crucial financial insights. She emphasizes the brokenness of our current monetary system and how Bitcoin serves as a potential solution for wealth inequality. The conversation also dives into the distinctions between fiat and sound money, the impact of inflation as an invisible tax, and Bitcoin's evolving role as both a speculative investment and a reliable saving mechanism. Alden encourages a gradual, informed approach to investing in Bitcoin.
Owning Bitcoin, even in small amounts, is essential for securing financial futures in today's rapidly evolving economy.
The flawed fiat monetary system creates structural inequalities, benefiting the wealthy while disadvantaging lower-income earners through mechanisms like the Cantillon effect.
Bitcoin offers a viable alternative for wealth preservation, contrasting with inflationary fiat currencies by providing a fixed supply for savers.
Deep dives
The Necessity of Bitcoin Ownership
One key insight is that having zero Bitcoin is not a viable option for anyone looking to secure their financial future. Research suggests that individuals knowledgeable about Bitcoin tend to allocate a larger portion of their net worth to it. Increasing personal holdings is ultimately a subjective decision based on individual circumstances. It highlights the importance of getting started with Bitcoin, even if that means starting small, to avoid being left behind in a rapidly evolving financial landscape.
Understanding the Broken Monetary System
The discussion illustrates that the current monetary system is fundamentally flawed due to a technological mismatch between transaction speeds and settlement speeds. Historically, central banks have created a centralized ledger to bridge this gap, leading to manipulations and loss of trust in the system. The reliance on fiat currency has resulted in a perpetual inflationary cycle, where the growth of the money supply dilutes the value of individual holdings. Consequently, money is often not able to keep pace with productivity growth, resulting in stagnant purchasing power for most people.
The Complex Nature of Inflation
Inflation is not merely a superficial increase in prices; it reflects the gradual erosion of purchasing power due to money supply growth. In the U.S., while official inflation rates target around 2%, the reality is that persistent money supply growth leads to an effective inflation rate that is often much higher. Various factors such as asset inflation complicate this picture further, making it difficult for individuals to maintain their financial standing. Consequently, understanding the mechanics of both consumer price inflation and asset price inflation is essential for effective financial planning.
Inequality and the Cantillon Effect
The podcast discusses the structural inequalities perpetuated by the fiat monetary system, highlighted by the Cantillon effect, where those closest to the money creation processes benefit disproportionately. Wealthier individuals and corporations can leverage cheap credit to buy assets, thus further widening the wealth gap. Meanwhile, lower-income earners who struggle to access credit find themselves at a disadvantage. This systemic issue suggests that the increases in wealth concentration are not merely due to individual greed but are embedded in how the monetary system operates.
Bitcoin as an Escape Hatch
Bitcoin emerges as a potential solution for individuals seeking to escape the pitfalls of the broken monetary system. While it may not be the ultimate answer to all problems, it serves as a powerful savings mechanism in an environment where traditional savings options often lead to losses in purchasing power. Bitcoin's fixed supply contrasts sharply with fiat currency's inflationary nature, making it appealing for long-term wealth preservation. Encouraging individuals to educate themselves about Bitcoin and start with small investments can help them navigate the complexities of modern finance responsibly.
Lyn Alden (independent investment and macroeconomic analyst and author of the incredible book “Broken Money” and General Partner at VC firm Ego Death Capital) joins Walker for Episode 2 of Saving in Bitcoin: Your Financial Freedom Blueprint, a six-episode limited series on THE Bitcoin Podcast.
Saving in Bitcoin is powered by Fold, the best place to buy, earn, and save in bitcoin.
"Saving in Bitcoin: Your Financial Freedom Blueprint" is a six episode limited series on THE Bitcoin Podcast, hosted by Walker. I’m talking to some of the best minds in Bitcoin to walk you through the basics of why our money is broken, how bitcoin fixes it, and how YOU can use Bitcoin as your personal financial freedom blueprint. In each episode, we'll walk through a specific topic within the overall theme of Saving in Bitcoin, giving you actionable tips for how to use Bitcoin as your personal blueprint for financial freedom in a chaotic world. This series is covers both Bitcoin 101 topics as well as deeper dives into what Bitcoin means for individuals, families, and humanity as a whole going forward.
