Fiscal Dominance and Central Banks

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Fiscal dominance occurs when the central bank's tools for controlling inflation are weakened by the actions of the fiscal authority. The primary tools of central banks are interest rates and balance sheet size, mainly used to influence bank lending. In the 1970s, inflation was higher due to increased money supply from bank lending. As fiscal dominance sets in, central banks may find it challenging to effectively control inflation as fiscal authorities continue to borrow money, leading to a potential shift in the financial regime towards a more debt-dependent system.

On this episode, Nate is joined by investment strategist Lyn Alden to discuss how energy and technology have shaped our monetary system and current financial trends. While more people are becoming aware of energy’s foundational role in our global systems, it is still widely overlooked, especially among those working in finance. In contrast, Lyn’s biophysically rooted analysis of macroeconomic patterns expose the cyclical dysfunction of the world’s economy. How has increasing energy availability and productivity offset the inflationary nature of fiat currencies - and what happens if this trend were to slow or reverse? What assumptions and biases have led most analysts to mis-read long term trends, leaving us with vulnerable economies? Is it possible to rejigger our systems and innovate more biophysically aligned tools to enable a smoother transition into a future with a lower energy throughput?

About Lyn Alden:

Lyn Alden is an independent analyst and founder of Lyn Alden Investment Strategy with a background in engineering management. Her work provides institutional-level research in plain English, so that both institutional investors and retail investors can benefit from it. Lyn also serves as an independent director on the board of Swan.com and as a general partner at the venture capital firm Ego Death Capital. She is the author of the 2023 best-selling book Broken Money about the past, present, and future of money through the lens of technology. Lyn has a bachelor’s degree in electrical engineering and a master’s degree in engineering management, with a focus on engineering economics, systems engineering, and financial modeling. She worked for over a decade as an electrical engineer at the Federal Aviation Administration’s William J. Hughes Technical Center.

For Show Notes and More visit: thegreatsimplification.com/113-lyn-alden

To watch this video episode on Youtube → https://youtu.be/JTbZaSL1pHI