E135: The Problem With Reserve Currencies and Switching to Crypto w/ Lyn Alden [From the Archives]
Apr 17, 2025
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Lyn Alden, an insightful investment strategist and author of 'Broken Money', dives deep into the evolving landscape of global currencies. She highlights how the U.S. dollar's status as the reserve currency reshapes trade dynamics and influences inflation. Alden discusses the historical evolution of money shaped by technological advancements and shares advice for navigating economic uncertainty. She emphasizes the need for a shift towards understanding cryptocurrencies and the impact of debt on modern economics, urging listeners to rethink traditional financial paradigms.
Lyn Alden's book 'Broken Money' provides a comprehensive overview of global monetary systems, highlighting challenges faced by countries with multiple currencies.
Alden emphasizes the significant role of technological advancements in shaping monetary history, asserting that they have more permanent impacts than political decisions.
She analyzes the U.S. dollar's status as the global reserve currency, discussing its structural trade deficits and implications for domestic production and wealth concentration.
Deep dives
The Motivation Behind 'Broken Money'
The book 'Broken Money' was written by Lynn Alden to provide a comprehensive understanding of the complex world of finance, money, and digital assets. Alden felt a strong compulsion to write it after years of producing long-form content, aiming to present an accessible starting point for those new to the subject. She emphasizes the need to address macroeconomic factors and the structure of global currencies, highlighting the challenges faced by countries with multiple currencies and capital controls. This approach seeks to fill a gap in existing literature by offering a broader and more integrated view of financial systems, especially from a global perspective.
Synthesizing Economic Theories
Alden contributes to ongoing discussions in economics by synthesizing the debate between commodity money and credit money, which has historically divided different schools of thought. She argues that both forms represent ledger money, with the common goal of facilitating trade by reducing barter frictions. By analyzing both commodity and credit systems, Alden aims to establish a more cohesive understanding of money and its functions in facilitating transactions. This nuanced perspective seeks to bridge gaps in literature and provide a more comprehensive foundation for the discourse on monetary systems.
The Role of Technology in Monetary History
Alden emphasizes the importance of technological advancements in shaping monetary history, asserting that political decisions alone do not account for the evolution of money. She highlights the telegraph's invention as a significant turning point that allowed for instantaneous updates of ledgers and global transactions, thus redistributing power dynamics in finance. Alden notes that technology creates permanent and global impacts, unlike political decisions, which can be temporary and localized. This angle reflects her engineering background and seeks to provide clarity on how technology continues to influence modern financial interactions.
Impact of Global Reserve Currency Status
The status of the U.S. dollar as the global reserve currency leads to structural trade deficits, adversely affecting the U.S. manufacturing sector and contributing to wealth concentration. Alden explains that while the dollar's dominance provides certain advantages, such as import power, it also results in a trade imbalance that diminishes the competitiveness of domestic production. This scenario underscores the systemic issues arising from reliance on a single reserve currency, impacting economic policies and international relations. The implications of this dominance may challenge the long-term sustainability of the current monetary system.
Inflation and Debt Dynamics
Alden predicts that the U.S. will experience inflationary pressures due to high debt-to-GDP ratios, a history that indicates countries often resort to inflation to manage sovereign debts. She points out that while low interest rates previously alleviated some concerns over rising debt levels, the current fiscal landscape poses new challenges as rates normalize. The interaction between inflation, interest rates, and ongoing deficits forms a backdrop for potential economic turbulence, particularly if technology growth fails to keep pace with monetary supply increases. This complex interplay suggests that policymakers must navigate these dynamics carefully to mitigate adverse outcomes.
This week on Upstream, we’re sharing Erik Torenberg’s 2024 interview with Lyn Alden. Lyn discusses her book 'Broken Money', the impact of the global reserve currency, inflation, interest rates, and provides advice for navigating an uncertain economic future.
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