← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
Lyn Alden: No Massive Boom or Bust Ahead? Recession Fears, Bitcoin vs Gold Price and the Debt Dilemma
00:56:24
Lyn Alden, prominent macro analyst and author or Broken Money, joins Coin Stories with Natalie Brunell to share her 2025 economic outlook: potential recession, Fed rate cuts, mortgage rates, and how governments may tackle massive debt. We dive into: ...
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- [00:00]
A
Sometimes I get a little concerned on bitcoin getting ahead of its keys. Other times I get a little concerned on gold getting ahead of its keys. Right now, I mean, gold by more metrics is kind of sentiment overbought. Even though I still think the long term case for it is good. But I mean, over the next 612 months, you know, I, I put my vote for bitcoin.
- [00:23]
B
Hey everyone, welcome back to the show. Please hit subscribe and leave us a positive review. It really helps us get new listeners. I am here in person with the one and only Lynn Alden. Lynn, thank you so much. It's so good to see you. How are you?
- [00:36]
A
Thanks for having me. Happy to be here in person.
- [00:38]
B
Well, there's lots to talk about and when I watch the macro analysis that's out there, it's either doom or gloom. It's ultimately bullish. This is the golden age of America. Or we're about to hit a massive speed bump that's going to usher in the Great Depression 2.0. And then I read your report and you're always so balanced, so calm. Things aren't as bad as they seem. Things maybe aren't as good as they seem. So I would love to just zoom out and get your broad outlook on where we are right now with this economy.
- [01:06]
A
Yeah, it's a good question. I think that the problem is the incentive structure is a lot of people, either they aim for clicks and therefore sensationalism, either really good or really bad sells, or people get politically intertwined. So if who they don't like is not his running things, everything's bad. If they who they like is, it's all good. And they kind of just fluctuate without kind of that. That at least I try to be objective as possible, regardless of what's going on. I think kind of what we're in now is fiscal dominance still. So the same drum I've been beating for a while, but it's kind of fiscal dominance with a slightly slowing underneath aspect to it because we have other headwinds like tariffs, a little bit of cracks in the labor market, nothing particularly strong. And so it's kind of one of those things where data, you can always find data to support something. If you want to find the things that are kind of running, there's plenty of data points out there to find them. If you want to find the things that are looking really bad. I mean, commercial real estate's slowly been having issues and obviously the residential real estate market's been at least volume wise, pretty much slam Shut for a while. Like I said, little cracks in the labor market. A lot of indicators still not looking great. So any camp can kind of find what they're looking for. But I think basically the summary is the private sector itself is in a somewhat sluggish state right now. But when you're running 6 or 7% of GDP structural deficits without a recession, that is a type of stimulus. And I think that's the environment that we're in. And that's a lot of that is baked into the cake rather than something that it was kind of an active decision this year or last year. It's kind of more structural, it's based on entitlements, it's partially based on interest expense, partially defense and all this stuff that's intertwined there. And a lot of that is pretty embedded and keeping things somewhat elevated in kind of that K shaped economy or two speed economy, whatever terminology people use.
- [02:59]
B
So what I'm hearing from you is you're not overly concerned that all of a sudden we're going to go into a severe recession. The unemployment numbers, even though they're being revised, right? We lost like a million jobs that they originally reported from 2024 and some of these other data points that are coming out, you're not saying, oh my gosh, this means that we're suddenly going to have, you know, a recession or some major crash.
- [03:21]
A
I don't think we're going to have a major recession. Recessions can look different when you're in fiscal dominance. By some metrics, 2022 had recession like aspects to it. One of the phrasings I try to use or have you sometimes is like an emerging market style recession. And when a developed economy is running in a kind of a fiscal dominant way, some of their recessions can look more like an emerging market recessions, which means they might not be as disinflationary, unemployment might not get as high, but instead the misery index is where it kind of shows up. And for people that don't know the misery index, basically unemployment plus inflation in an emerging market, obviously they're more inflationary in general. And so in 2022, the misery index reached levels normally associated with recessions. But it was mostly because of the inflation side, not because of the unemployment side. And consumer sentiment tanked. Purchasing, managed indices stuff rolled over, you know, across the board, pretty negative things. Even had 2/4 of negative GDP growth that was of course off the, you know, kind of the 2021 sugar high. So it's debatably if that counts or not, but you didn't have an nber defined recession mainly because the labor market didn't break. And I think that going forward, you know, maybe not that extreme, but you can have a softening labor market. You could have little cracks, widen. But then generally speaking, what happens is the fiscal deficits kind of gradually widen and they kind of support that almost preemptively. And so it can show up in, you know, unemployment takes up a little bit, but instead of the disinflation you'd often get in that environment, maybe inflation stays flat or even goes up a little bit, you know, for a number of reasons. And so people kind of feel that something's off, but it's not the classic developed market, huge labor cycle, huge default cycle that we're, that is that we're kind of known, that we know that we know what to look for.
- [05:20]
B
I think right now I get the sense that a lot of people are feeling bearish and they're almost in this holding pattern because they think something bad is about to happen to which they'll respond with a bunch of liquidity. Right? Some in our space call it the big print. Like, what do you say to those people? Like, do you feel like that is around the corner or do you see this playing out a little bit more gradually? Where to your point, like there's cracks but nothing that signals that all of a sudden they're going to be coming in with the money printer like they did back in the pandemic. Response coin stories is proudly brought to you by Gemini. Investing in bitcoin has never been easier. With Gemini's bitcoin credit card, earn up to 4% back in Bitcoin on everyday purchases like gas, dining, groceries and more with no annual fee, no foreign transaction fees and no exchange fees on your rewards. And this summer, get 10% back in Bitcoin at golf courses. Plus sign up today and get a $200 Bitcoin bonus when you spend 3,000 in your first 90 days. Apply now@Gemini.com Natalie if you're like me and want to stay on top of bitcoin without getting lost in all the noise, you've got to check out the weekly CIO memo from Bitwise Asset Management. Bitwise has been around since 2017 and manages more than $10 billion across 1030 plus strategies. CIO Matt Hogan puts together a quick five minute memo that breaks down the biggest stories in digital assets each week. Just go to bitwiseinvestments.com cio memo and check it out. And always, of course, carefully Consider the extreme risks associated with crypto Coin Stories is also brought to you by Leden. Need cash but don't want to sell your Bitcoin? Leden is the global leader in bitcoin backed loans, issuing over $9 billion in loans since 2018 and they were the first to offer proof of reserves for with Leden you get custody loans, no monthly payments and more. Visit Led in IO Natalie yeah, my.
- [07:08]
A
Base case is gradual now. Things could happen, there's all sorts of war could happen and create, you know, any sort of crazy stuff can happen. But so putting aside things that are just nearly unpredictable, my expectations, a gradual shift toward Fed balance sheet increases, which I don't think they would call qe, at least at first. And I think the closest analogy we have is the 2019 repo spike, which like people deep in the weeds and macro will know what I'm talking about. But to, you know, kind of back up before we got to the early 2020, like hyper printing, the the Fed actually went back to increasing their balance sheet in September 2019 and there was this kind of a like in macro Twitter that was a really big deal. Outside of macro Twitter, people don't even know what happened because it was kind of this small little financial plumbing fire that was kind of quietly put out and basically that marked the end of Fed balance sheet reduction, the end of the quantitative tightening that they had been doing for quite a while at that point.
- [08:09]
B
Because Powell wanted to shrink the balance sheet. Right. He was essentially trying but realized he couldn't do it.
- [08:13]
A
Yeah, they were trying to shrink the balance sheet and back then they basically, you know, the fiscal deficits were widening even before the pandemic. That was kind of the really early stages of when I was pointing that out. There were some others like Luke Gromen that were pointing that out under Trump 1.0. Yes, but again, a lot of that was demographics. His unfunded tax cuts that he did certainly contributed, but a lot of that was demographics and otherwise baked in. So it's a combination of multiple factors. But regardless, the deficit was widening, the Fed was tightening their balance sheet and bank cash levels got pretty low, which is a consequence of that kind of combination environment. And quietly these little kind of liquidity leaks sprang up so showed up in the overnight lending market. And so first the Fed stepped in and they started doing repo operations. It's a way of kind of providing temporary liquidity. And people were talking is a bank failing? But some of us like no, that's not, it's not that bad. It's basically what's going to happen is there's too many T bills, there's not enough liquidity. So it looks like the Fed's probably going to have to shift to balance sheet increases. They're going to have to buy some T bills and by October. So something like three weeks later, they did in fact announce that they're going to now just outright buy T bills, even though it seemed like a repo problem that was actually kind of a symptom of the underlying thing. So then they go back to, they go to start buying T bills. They didn't want to call it QE because they were not buying duration and they were not doing it because they felt the economy needed stimulus. They were doing it basically to put out a liquidity fire, a liquidity plumbing leak. Different reasoning. And it wasn't explosive. You know, apart from the initial couple weeks after that, it was kind of pretty gradual balance sheet increases. And I think that they one is they partially learned from that. So they have standing facilities in place ready to respond quicker than they had back then. So we've already seen when they need it, repo is available to tap. And I think that they're going to shift back toward accumulating T bills again probably in 2026. But we'll see. And it'll be without much fanfare. There'll be probably a few weeks of across macro Twitter and Bitcoin Twitter, a lot of people talking about it, and then that'll be kind of a new normal, that'll be kind of a new low in the Fed's balance sheet. I don't think we're going to get trillion dollars balance sheet increases in six months or even quicker like we saw during the pandemic. Again, apart from something some unpredictable thing happening. But I think it's basically, it's a trend reversal that's going to happen and it'll be gradual. And the New York Fed in some ways is already kind of telegraphing that when they release their annual report about their balance sheet holdings, they've been kind of pointing to roughly 2026 or so as when they expect to kind of start going back to increasing their balance sheet roughly in line with GDP growth. So you can think of it as the balance sheet as a percentage of GDP is roughly staying the same. But nominally that'll all be going up.
- [11:16]
B
But the political fabric of the, of the Fed and the Board of Governors is really changing. Right. We're getting more essentially Trump appointees, people that are more dovish. So could more aggressive rate cuts be in the future simply as a result of the people that are actually in charge of the money printer.
- [11:33]
A
That will depend on how many people, how many, what percentage of that board, and that the FOMC specifically get on board with that. So certainly, you know, one or two can't necessarily pull the whole group. But as, as more rotate in and rotate out, it's certainly possible Powell's out.
- [11:50]
B
When in May, he.
- [11:51]
A
Well, his chairmanship ends. Well, most likely he'll be off. He'll. He'll also give up his governor's spot, but it's not, it's not certain. I don't think he's actually chosen not to comment on that. We can only speculate. But his chairmanship ends.
- [12:05]
B
It's just so interesting because it seems like the next person who comes in, they're between a rock and a hard place because they're gonna kind of look like a pushover if they do whatever the Trump administration wants, which is clearly lower rates. They've been talking about it nonstop and putting a lot of pressure on the Fed and they can't play hardball really because of the debt levels, right?
- [12:26]
A
Pretty much, yeah. I think the problem is that the Fed, they can look like they're playing hardball for a little bit, but as soon as one of those liquidity leaks springs, they jump in on day one. So when they were trying to fight inflation back in 2023, back when inflation was higher and the regional bank crisis happened, they were in there that weekend along with the treasury to help. And if they would have stepped aside, you know, there would have been some more bank failures, there would have been more of a destruction and, you know, a tiny percentage of the broad money supply, which is, you know, if you're trying to fight inflation, it's one of the variables that you can let happen. But they decided that the cascading risks that were too great for their taste, so they, they backed off and provided liquidity temporarily when needed. And you know, I think that's kind of where just understood that no matter how tough they talk, that if there's a, if kind of the core systems, if there's an issue in sovereign bond markets, they're going to step in. If there's an issue in overnight financing between banks, they're going to step in many cases already have standing facilities to help to kind of preemptively step in should these things happen. They can always escalate if need be. And that kind of limits what they ultimately can do. And the challenge. And you know, when I talked before about kind of this whole fiscal dominance or nothing stops the train. The issue is that the whole. The tools that the Fed has are mostly geared toward either accelerating or decelerating bank lending.
- [13:49]
B
Yeah.
- [13:49]
A
And if that's not the issue, if it's not that, you know, banks shut off lending, if it's not that they're lending too much, if they're just kind of doing average lending, which they are now, and inflation's still hot, it's because it's mostly from the fiscal side. And their tools either don't address that or in some cases, ironically, can make it worse because they're like, their rate decisions are not really going to affect congressional decisions for appropriations. So it doesn't really have the same effect that it has on banks. It just blows out the deficit even wider and that narrows their choices. And that's why when you do get to these environments, you know, something like yield curve control or just low rates, run it hot. You know, there's multiple ways to do it. But that something in that ballpark, there's a range there of how extreme you get, but something in that range tends to happen in history.
- [14:38]
B
So what's your message to people that are waiting for mortgage rates to come down to say, I mean, I don't think we're going to get the 3% that people got lucky to lock themselves into during the pandemic, but, like, can they come down to maybe 4%, 5%, or you think we're going to be stuck in a structurally higher range?
- [14:55]
A
So I think five. Five, certainly more doable than four. But I think that there's more things. There's some things I'm more sure on than others. One is I don't think we're going to see new low in mortgage rates. I think we've seen like the generational low. My base case, I certainly think we can go off our highs. I mean, judging by what we saw this week, and actually the last time the Fed cut rates, which was something like nine months ago, longer rates don't necessarily follow when they cut rates. So sometimes the long end of the curve, Treasuries, mortgages, things like that, sometimes they go sideways to up. Even if the Fed is cutting, it could because the market is losing confidence that they're going to control inflation. Therefore they, they price it into the longer end of the curve, whether it's mortgages or Treasuries. Other times it could just be a trading decision, kind of liquidity analysis and things like that. My base case is we'll be in this range to get lower on that range. It could be that the Fed or others do actions to push it down, or it could be, you know, going back to some of those other things that the labor market breaks more than it has been. If you do, if maybe have another tariff escalation or you know, kind of basically a major tax increase. If some of these things hit and do slow things down more than we've seen for a little while, you could get a pull down in longer in rates, but it wouldn't necessarily be the type environment people are looking for because it could be associated with job losses and things like that. So I think the challenge is, you know, regardless of where they end up, I don't think we're seeing a lower low. And that also means that there's no big refinancing cycle. So in prior major Fed cutting cycles and new lower lows and mortgage rates, it kind of ends up being a nearly free lunch for the consumption economy because everybody who has a mortgage can go ahead and refinance it pretty much, whether it's recent, whether it's older. There's this whole refinancing wave. And for them it's mostly a free lunch. They refinance everything and they just lower their bill and they're happy and they can spend more. And now if you don't get a lower low, if you only get, you know, off your highs and mortgages, but you don't get a lower low, then the percentage of people that they can actually refinance is only the past few years and that was very low volumes. So it's not a ton of people that have these higher rate mortgages. So you get a very weak refinancing cycle. So that's less even in non housing, just less money that's just kind of more freely available to families to go out and buy stuff so you can get more of a malaise. And that kind of two speed economy we were talking about earlier can persist longer than people think because there's no big refinancing cycle coming to the rescue. It's mostly just what we see now and we can see what Congress decides to do, what the President decides to do, but a lot of this is already locked in.
- [17:47]
B
Treasury Secretary Scott Besant recently wrote an op ed where he discussed the K shaped economy. He talked about how much wealth concentration there is and really that the Fed has contributed to it and it's always bailed out the asset holders. And so I was curious like, do you think that they, I mean, Scott Besson has also written sort of about the fact that we need a monetary reset. So do you think that there's sort of a plan in motion to try to devalue the debt through things like gold and Bitcoin and using stablecoins maybe to provide demand for Treasuries? Like, how are they going to get us out of this, this. This debt dilemma that we're in? I would think that with these smart folks in office, they're thinking about this and maybe devising strategies. But what do you say?
- [18:30]
A
I think. I mean, this administration in particular, but also any administration, there's usually multiple camps within the administration. And so there's certain groups that see a certain thing playing out, and there's another groups within the same umbrella of the same administration kind of seeing it a different way on a given issue, whether it's trade, whether it's what to do about the debt, things like that. Even the playbook we've seen, like, you know, they. If you look at Steven Mirren's paper From, I think, 2020, November 2024, the one on resetting global trade, it's kind of, you know, one of Trump's, you know, basic economist trade czars kind of laid out the, you know, pretty sophisticated approach, what they want to do. And that generally called for a temporarily stronger dollar during tariffs and during negotiations, at which point they'd come to the table and do something like a Mar a Lago accord to weaken the dollar. And so far, the game plan hasn't played out like they expected. You've had a weaker dollar during the tariffs and the negotiations.
- [19:31]
B
And why do you think that is, just by the way?
- [19:34]
A
Partially, I would say because the market kind of somewhat called the bluff, which is the US doesn't have all the. We don't have the strongest hand. We have a strong hand. We don't have, like. We don't have all the cards.
- [19:44]
B
Yeah, not all the leverage.
- [19:45]
A
We've got cards. China's got cards. All of Bricks has cards. Probably the. Probably the block that's weakened. A lot of the cards is Europe. So they. They really have. Don't have a ton of cards.
- [19:57]
B
And they did that themselves, oddly.
- [19:59]
A
Yeah, pretty much. Yeah. So other than Europe, I mean, a lot of these bigger entities do have cards, and I think the market correctly identified that pretty quickly. And, you know, the Fed, you know, they do contribute to wealth concentration, but at the same time, we talk about bailing out banks, the Fed has partial. They can do some things on their own unilaterally, you know, they can kind of do things that are inflating asset prices. The biggest bailouts are fiscally driven or a combination of fiscal and the Fed. So for example, after 2008, the whole tarp thing, that was a fiscal action. Even the 2023 regional bank bailouts, that was kind of Yellen and the Fed working together. Basically treasury and the Fed working together. And so I think the concentration. It's always kind of easy to blame one thing. If it's only, it's say it's just the Fed or just this president or just this. It's kind of this accumulated multi decade set of decisions. And I would say that probably equally as big as the Fed would be the combination of fiscal decisions along the way. Who gets tax cuts, who gets tax increases, where stimulus is spent, all these things add up. Even for example, the PPP loan program, I've kind of pointed out a couple times because when we think of COVID era stimulus, we always think of the stimulus checks. That's kind of the big one, or child care tax credits. But the PPP loans were actually some of the more kind of concentrated toward the top. When they did analysis on it afterward, a lot of those, you know, they give loans to businesses. Many, of course, small business owners are fairly wealthy themselves. Many of them were not in a position to really be planning on laying anyone off to begin with. And then those loans turn into grants and which basically means that it just went to the owners of the business. And that could be a quarter million, that could be a half a million, that could be a full million, it could be more. And they've done it. Now, I don't have the numbers in my head right now, but they've done analysis on this. I've cited it in Broken Money and elsewhere. The percentage that went to very wealthy people. And so it's kind of like whenever the, whenever things kind of break apart, it's always like, oops, we accidentally shifted more than we intended to the top 10%. And then it happens again, Oops, we did it again. And we've had like four or five of these kind of cycles now.
- [22:32]
B
Well, it seems like because we've known in history that this cycle just keeps repeating and the rich keep getting richer, which is why everyone's frustrated. And you've made this comment on my show before. We go from left to right, blue to red, and look, our debt just keeps mounting and the average, like the standard of living for the average, average person sort of deteriorates because their purchasing power is being destroyed. So is your message to empower the individual to acquire hard, scarce assets essentially. And bitcoin seems to be the most accessible one to me.
- [23:06]
A
Yeah, I think we can only kind of focus on what we can control. I would not anticipate the Calvary's coming anytime soon. So I wouldn't expect the fiscal side to get its act together in any sort of investable time horizon, which basically means that it's on kind of people to have to do it themselves. And depending on their level of knowledge, their volatility, tolerance, all sorts of things, there's different assets that can do it. I think that bitcoin is the fastest horse in the race. Paul Tudor Jones and others have kind of seen that for years. And I agree. You know, some people like gold, some people like equities, some people like bitcoins, some people like real estate, some people like all the above or some subset of the above. I'm kind of in the I like equities and gold and bitcoin. But I do think that bitcoin is, you know, if you look back five years from now, it'll probably have had the best performance of that group. I'd expect probably 10 years as well. And it's one of the things you can do when we look at like the public level. I mean, nothing short of like really fixing health care expenses, for example, or fixing just the overall, you know, revenue and taxation aspect of the government is really going to meaningfully address this, which mostly puts it down to the individual.
- [24:26]
B
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- [26:24]
A
I think that as stablecoins were already growing pretty rapidly and as there's pretty clear demand for them, it made sense for them to try to bring them into the fold. So five plus years ago stable coins are very small. They were kind of on the periphery. But now, I mean there's individual stablecoins that have well over 100 billion and collectively it's a multi hundred billion dollar industry. I think it could clear on its way to a trillion in aum eventually. These are really big pools of capital. It's basically the modern Eurodollar. So offshore dollars is kind of the biggest use case for them. But of course you can bring some of them onshore for certain purposes too. Anyone who sent an international wire can potentially see the benefit of stablecoins and how efficient they can be. And of course people that want dollars in jurisdictions where it's harder to get physical dollars. It's also obviously a pretty powerful use case. So I do think it makes sense for the government to want to codify how they work. Naturally, banks get spooked by them because they try to make it so that stablecoins can't directly pay yield and things like that so that they don't compete too much with bank deposits. There's been a long history of whether it's central bankers, whether it's the government kind of being fearful of kind of full reserve looking things.
- [27:48]
B
Yeah, that's right.
- [27:49]
A
So because they worry that if Something is full reserve and something fractional reserve. What happens to the fractional reserve? 1. Why wouldn't all the capital just suck out?
- [27:56]
B
Exactly.
- [27:57]
A
And then what does that do? The entire current lending dynamic that has all the existing stakeholders that like it the way it is.
- [28:03]
B
Well, and it's. Sorry to interrupt you, but it kind of goes to the brilliancy of stablecoins as a business model. Right. Because it's like you're issuing a token. It's back one to one with the US dollar and now you're taking that dollar, putting it into a treasury that's yielding 4%. So you're essentially just printing money. I mean these are extremely profitable ventures, right?
- [28:25]
A
Yes. As long as what's they're hard to get because there's liquidity network, network effects in play. So it's easier to start a bank than it is to start a stablecoin. So it kind of rewards the earliest movers that got through things that are now the top 1, 2, potentially 3 stablecoin issuers. But for those that can get to that point, it's quite lucrative. Another way of putting it is that the really big banks in the country, they have a pretty big deposit base of near zero yielding deposits, whereas a lot of smaller banks struggle to retain their deposits and they have to pay a higher rate. So stablecoins right now are able to pay even before certain laws kind of make it harder to pay yield. Just clearly there's been enough demand for them without them passing on any of that yield. And so, and there's because there's fairly few issuers that have any sort of network effect to speak of. They it's been extraordinarily profitable like up there, like the most profit you can get per employee. I think that's to some extent that's an anomaly of the era we're in now that just early mover arbitrage this happens and then eventually kind of other entities can kind of take their cut over time. But it is clearly a very profitable space. I tend to downplay the idea that stablecoins are going to like fix us debt, basically. I think that a common thing we see is people always want clean answers for how we're going to get out that don't involve pain. So then it's like, well, stablecoins, this new thing we can point to. And there is a report by Citi maybe six months ago. I don't know the exact date that it came out, but the treasury secretary referred to it as well. And if you dig into what they covered, they kind of had a bear base and bull case or how much stable coins there could be By I believe 2030. And you know, their base case was over a trillion in new stablecoin demand. Their bull case was over 3 trillion. But a lot of that was from existing pools of capital already, like dollars. So that basically represents say taking out of money markets or taking out of banks and putting in stable coins. And yet part of that thing that they were holding before was already holding Treasuries. So it kind of shifts where you hold Treasuries wholesale. Entirely new demand for dollars and Treasuries while present in that report and similar analysis is only a fraction of the headline number that you see. So I certainly think that stablecoins can add billions and over time tens or hundreds of billions of new treasury demand. But when we're talking 2 trillion in new deficits per year, so basically new treasury supply per year, that is just one variable among many. It's not some sort of saving grace for the whole, the whole fiscal environment.
- [31:17]
B
Got it. And do you expect every US bank, like all the too big to fail banks, to issue their own stable coins and then compete with maybe international issuers? Because it seems to me like the US wants all of this. They want to have that activity really be based here. And we see tether creating like a USAT coin or US Is it US usat? What's the stablecoin? I think that they just released, but it seems like they want to extend dollar dominance through these stablecoins and so they want to have all of it sort of headquartered here in the US.
- [31:51]
A
I think that any entity that is large enough will investigate issuing a stablecoin. Some will try. I think the challenge again is there's network effects at play. And then, then the question is, is their stablecoin kind of scaling above their own ecosystem? So for example, if an entity just replaces some of its own deposits with stablecoin or stablecoin like things, that's not the same thing is basically having stablecoin issuing it and collecting a lot of new, a lot of new assets under management because your stablecoin has taken off. And it's kind of goes back to the kind of the whole point of what money is and why stablecoins at least kind of currently work as money or money like assets is because there's not that many of them. When people potentially want to pay in stable coins, instead of saying which of the 37 stable coins are we going to pick from? It's kind of known which one or two you're going to use. And so it's kind of synonymous with the thing that it's underlying the dollar. So I do think that we'll see somewhat of a scramble for kind of stablecoin participation. But ultimately I think that the monetary network effects settle closer to one. Now with technology, swaps can make things super easily. So like basically you can always kind of just exchange things on the fly when you have to. If the buyer and the seller have, say, different, you know, one has a certain stable coin and someone else has a different stable coin, there are solutions for that. But then the question is, are you, is the thing you're building now, is it more complicated than the thing you're replacing? Because the whole point is to compress overhead, make things more efficient. That's what makes people want to use it, or that it gets them dollars, whereas before they couldn't even potentially get dollars or even better than dollars. Like a, basically a bank account, like an offshore bank account, basically. I think the phrasing that just clicks a lot is stablecoins are offshore bank accounts for the middle class and working class globally. So it used to be that if you were in a country that didn't have a great currency and you wanted something, you know, that's either out of the reach of your government to some extent, or you wanted something that's, that's more protected from inflation, one of your options is offshore bank account in dollars. But with the overhead and the, you know, having a bank account in another country, they're obviously only going to cater to you if you're quite wealthy.
- [34:12]
B
Yeah.
- [34:13]
A
And stablecoins basically use technology to suppress, you know, narrow that overhead cost to very low, which then makes it available to anyone with basically a smartphone in the world. And I think that that's, that's part of the demand. But then internally where it can help, especially cross border. So anything that involves, like I mentioned before, any sort of international wire transfers, that's a very kind of outdated system. It's ripe for faster, more transparent and cheaper international sending. Even a lot of things, even a lot of fintech stuff is just overlays on top of the correspondent banking system and stablecoins kind of just around that. So there is demand for it, but I tend to think, you know, that's, it's more, I have to put my venture hat on to see demand there, whereas when I put my macro hat on, I'm mostly looking at things like a trillion dollars and up. Right. So that, what kind of packed kind of Global macro flows. That's the range that has to things have to reach. So I kind of view this whole stablecoin dynamic as more venture like opportunities than something that kind of changes my high level macro thesis on anything.
- [35:20]
B
Oh, that's really interesting. Okay, so I mean when we think about how massive our debt is, can we somehow use gold or. I mean, I know we heard Trump say we'll pay it off with a crypto credit card, but I don't think that's happening anytime soon with, with Bitcoin. But is there a plan to somehow address our, our debt?
- [35:41]
A
I think individuals can have plans. But are there enough individuals together that have a collective plan? My guess would be no, but that individuals do. As far as using gold to do it, I mean there is a on the books mechanism to do this. It's not like you'd have to think it up. It's already there in the Fed operating handbook, which is basically that they can reprice gold and by doing so they basically get credited in the treasury general account with the amount of the increase. There's a couple more details than that, but that's basically. It's one of the very few mechanisms the government can do under current law where they can spend without issuing debt. But it instead involves, it's a type of default in a way, you're devaluing the dollar relative to gold. Now there is a little bit of a free lunch currently or kind of more like an untapped check there, which is that they only, if they only devalue the dollar relative to gold to current market prices because they have it on, on, on the books back in like 1970s prices.
- [36:46]
B
40 something an ounce.
- [36:47]
A
Yeah, something like that. So if they were to reprice it to current levels, that's just kind of reflecting an untapped thing that they still have. The optics would be questionable. That point, like the whole point, a lot of these, you know, dollar included, a lot of this is based on confidence. So it would, it would maybe it would get people talking, but that could make some degree of mechanical sense. Now they technically could reprice it higher than the current level. You could use that approach to price gold higher.
- [37:20]
B
They could just pick a price like 5,000 an ounce.
- [37:22]
A
Yeah, yeah, they can pick other numbers, but they have a cost which is. So they would then fill the TG up. They'd be able to spend without issuing debt. It would look kind of like QE at a pretty big scale, but it would even look more than that. It would look like potentially fiscal combined with QE depending on what they decided to do with that money, it'd be kind of the very pro liquidity move. So it'd probably be very good for asset prices around the margins. It probably would be inflationary. If gold goes up a ton, other metals could follow suit. Some of those have utility purposes which could then make the things they go into more expensive. Combined with all this liquidity that's now sloshed around the system, that is something that they can do. But it's basically a way of devaluing the debt and running it hot. And that's kind of instead of doing it by 6 to 7% a year, like the deficit numbers we have, that's kind of like pulling the band aid off and getting a lot done at once. With the challenging part being that there's still no plan in place to then fix the bleeding going forward. So for example, if you look back at World War II, they obviously they had huge deficits, huge inflation, but then part of the way they got out of it in two main ways together. One, they did inflate a lot of it away. So if you were holding bonds or cash, you just compared to everything else you could have owned, you got devalued, you paid for it. But then two, they grew out of it while doing austerity as well. So it was like basically the inflation was a type of default, you know, not a nominal default, but it's a purchasing power default. So they said, okay, we're basically defaulting on a big percentage of our existing liabilities, but then we are going to more or less balance our budget for the next generation. That's kind of what they did. And so if they just do the devaluation, but then they don't, you know, fix the actual ongoing deficit leakage. Yeah, that's more like an emerging market at that point. If they fix the. If they focus everything on trying to fix the leakage, but then they still have this big debt pile that's not been sufficiently defaulted on or devalued, then there's still risk for that still lies ahead. So it's like that one, two punch happens. We've already seen a partial bond devaluation the past five years, six years have been awful for bond and cash holders relative to practically every other asset class. Yeah, I just don't think it's done yet, basically. I think the wor. I think the, maybe the, I don't think the next five years maybe will be as significant in that regard as those five, six years were. But it's not as though we've kind of completed that, that full cycle and are back to some sort of sustainable baseline.
- [40:07]
B
But it's the risk free asset institutions can hold even if it's underwater. We've seen the outperformance in, in gold and people like Ray Dalio, all the biggest investors are coming out, they're saying, you know, 10, 15% of your portfolio in gold. Now why do you think bitcoin has sort of underperformed? I mean it's, it's a digital gold, it solves for some of the defects in the physical version. So why, why do people. Even though I know we're up 100% since last year by the way, but people are feeling kind of bearish about the whole situation.
- [40:42]
A
I think it's because it's reality versus expectations. Part of why I've not been that disappointed is because I've been more in the. I sometimes describe myself as like a bearish bull on bitcoin. I'd always have conservative bullish targets which is always like I think it's going to outperform things but I don't think it's going to the moon anytime soon. And we can talk about why that is. But part of the reason I like to hold both is because they don't always perform well at the same time. Sometimes bitcoin gets ahead of itself. Sometimes gold gets ahead of itself. Gold, now it's gold. Yeah, gold still. And gold is the larger asset by a factor of about 10. A lot of the biggest pools of capital still understand it better than bitcoin. Bitcoin viewed more as like a tech play, something that they do homework on to figure out. Whereas gold is, you know, been around for a while and you know, I sometimes I get a little concerned around bitcoin getting ahead of its keys. Other times I get a little concerned on gold getting ahead of its keys. Right now gold just by more metrics is kind of sentiment overbought even though I still think the long term case for it is good. But I mean over the next 612 months I put my vote for bitcoin. I think that kind of that rotation and I could be wrong in this. Maybe we look back 612 months from now and maybe gold still outperformance. But my guess would be bitcoin is probably going to take over for a while. I think partially we had to see some of the mnavs like overvalued M navs of treasury companies deflate to some extent once we saw altcoin treasury companies coming to market basically at that point you just kind of expect there's going to be a washout to kind of get the kind of tourists out of the system, both in bitcoin and around bitcoin. But then that allows for a platform to rebuild from. And now that we see the Fed getting a little bit more dovish, we've seen some of that kind of already get washed out. I think bitcoin's in a better place for the next 612 months. Going forward would be my base case.
- [42:47]
B
Well, I wanted to get your outlook on the bitcoin treasuries because to your point, a lot of the M navs have compressed. People are feeling a little bit bearish. Some of them have really gotten decimated recently. I know that that was largely due to some lockups that came up and then obviously people sold. But how are you feeling about the bitcoin treasuries and how should people evaluate them? Because for so many that I, so many people that I hear from, it's like, well, MSTR is really the proven one. And especially with the new credit instruments that they've put out, they have a difficult time figuring out how to value the other treasury companies.
- [43:19]
A
Yeah. And I think it's a new industry, so it makes sense. Many of them do have elements that are speculative. The only one that I've ever owned is MicroStrategy. I would own Meta Planet in certain valuations. I've been watching that one. Now that it's come down, I think that one's very well managed. I think those are kind of the two cream of the crop that are out there. I think what makes a good one is that you generally want to be the liquidity leader in your market. So in the US that's MicroStrategy. In Japan, that's Meta Planet. There are other opportunities for other big capital markets as well. And I think the markets made it clear that if one is unprofitable, they tend to put a pretty big discount on that just because they view it as a liability to the longer term bitcoin strategy. In addition, if you're the 3rd, 4th, 5th, 6th most liquid one at what you're doing, it's just challenging. Now that's where they can add differentiation. If one has cash flows, they can kind of market that and say we're, we're a hybrid entity. You know, we have this other business that's not Bitcoin and so you can kind of put the two together and they can balance out each other's risk. So they have to kind of explore what's going to work for the market. But I do think it's healthy that a lot of this was washed out. Just because whenever something starts to look like free money, that's when more entities are going to come in. That's when you're going to get like I said there were like altcoin treasury companies coming to market. It kind of needed a reset. I still think the model makes sense which is. And there's a couple of different models here. One is the pure play. I think that one it really helps to be a leader in your market. You know kind of the one, one of the top two or so. But then there's a long tail of just any company if they want, if, if you're selling whatever the case may be to have bitcoin on your balance sheet and make you know, some sense of that. So I think that's still a long term strategy and I think that we're in a healthier spot now that some of this has been kind of, you know, the froth has been reduced.
- [45:26]
B
So over the next year what would you say you're feeling the most bullish about and then what gives you a little bit more concern?
- [45:35]
A
I think bitcoin's in a good space for the next 12 months. I think we've seen decent amount of washout so just unlevered, self custodial. Bitcoin is I think in a great space right now. Some of the the better treasury companies that are either cash flow neutral or positive and their M navs have come down a lot. I think that that's been somewhat de risked especially if the ones that also pretty low leverage. I think those are in decent shape. Gold I like longer term but I the value investor in me is a little bit came up pretty high pretty fast. Yeah, I started warning about that back in April and it did this pretty long consolidation. It recently just broke out of it. So I got a little bit more kind of bullish again. But it's still just a little frothy. We'll see.
- [46:22]
B
Okay.
- [46:24]
A
I've been. Emerging markets are one of the areas that you know, I've actually kind of liked really select emerging markets. It was kind of off people's radar but it's something that I've been pretty bullish on and I still kind of continue to be probably for the next 12 months or so. I still think there's kind of room in the cycle for that. But I do think that probably unlevered Bitcoin is in a pretty good space right now.
- [46:49]
B
Okay. And what gives you a little bit of concern? What are you watching most closely? Where we had the economic data worsening that we talked about at the top, but nothing that's making you think that we're going to slide into something significant like a Treasury dysfunction or a huge liquidity crisis. But what give you a little bit.
- [47:06]
A
Of maybe worry in the market potentially AI Capex. That's been one of the few kind of really strong areas of the economy for, for reasons that I'm sure listeners know. But even that can get over skis temporarily. And because of the, the sheer scale of it, even that contracting 10% or so or just, just going flat for a year could be pretty big. So I think just the, the AI flywheel just taking a breather is something, or at least the potential for it is something I'm watching. I also think that residential real estate, I've been in the camp that it is kind of in a sideways pattern. So there's been the bear camp which is argued that because of these now structurally higher rates we talked about earlier, like I don't think mortgage rates are hitting a new low. The bear camp is basically saying that because of that these inflated prices are going to just crash. My view has generally been that nationwide average, obviously real estate is a very local market, but nationwide average, not going to be amazing performance in residential real estate, but that because of the fiscal dominant environment, that it's kind of, kind of levitate longer than people think and that you can, you can work that out through time rather than price. So there's two main types of corrections that can happen. Obviously you could, you can get over your skis and you can come back down in price or you can get over your skis and you can go sideways and you can chop along sideways in three years, five years, seven years, you could even go sideways to up, but at a slower rate than other asset classes. So it's another way, and that's a kind of a way of correcting over time. And you know when you look at charts like residential real estate prices compared to wages and they say, well this delta got really big, it has to collapse. It's like, well it could be the prices come down or it could be the price go sideways and nominal wages keep going up and right with inflation, I mean they're not necessarily like actual wage increases but just within with inflation and they kind of meet in the middle five years from now. And that's been more my camp because if you have a more disinflationary deflationary bust that's one thing. The hurdle for that happening under a fiscally dominant environment is just much higher. So for two or three years now, I've been in the sideways real estate camp. And that's, you know, we've been in the sideways up process or like inflation adjusted has been roughly sideways. I think that's probably going to continue. So it's not the, you know, when you factor in maintenance, when you factor in insurance, when you factor in, if you do buy it on mortgage, the expense of doing so. Real estate's not my favorite nationwide average market right now.
- [49:40]
B
Sure.
- [49:40]
A
But that's different than saying that I expected to just, you know, crash or anything.
- [49:44]
B
Right. And as you've been saying, you've been totally right. Nothing stops this train. I would love to end this on a positive note. And I have to be honest, Lynn, like I have been feeling just really nervous about just where we're at as a nation because we're so divided. And a lot of that I do think comes from the economic resentment that so many people feel. I mean, it's not the only thing that's leading to our division, our polarization. But certainly for young people, they have felt so left behind. And I think that that just breeds this like, you know, these teams that are looking for a political answer and sometimes looking for it in candidates that are going to, you know, promise you the most free things. Right. I just worry about where we're at, given how divided we've become. What's your, what's your message? Because when I think about you, you're so inspiring. You are self made. You taught yourself how to invest. I mean, I your whole backstory from our original interview, I think about it a lot and what you've created. And you're just incredible when it comes to analyzing every single asset class. And you've been investing for years now. I feel like the average person sometimes feels like they're just ready to give up. They don't know what to do, they don't know what to turn to. But you make it seem like it is possible. So what is your message to people that maybe are in the camp of feeling more bearish, more bearish about like the sentiment, the society, where society's at and where they're going to be economically in a couple of years.
- [51:16]
A
So I think it is hard. I mean, it's okay to acknowledge that it is a hard environment and not every, you know, not of environments as hard or easy as other ones is certainly, I think hard mode right now for a lot of people probably one of my pieces of advice would be the trap that people can fall into is kind of that perpetually online trap where because it's so easy to get dialed in and connected to everything that's happening online, people can then just kind of get sucked into it. And online is. It's obviously a bigger share of our lives than it was a long time ago, but it's also not real life.
- [51:49]
B
True.
- [51:50]
A
Online is like basically the version of us that then has like our in person, like empathy and other social cues stripped away.
- [52:00]
B
Yes.
- [52:01]
A
And that's not who necessarily people are, I think. And then of course, like, we're in a world where like bots can manipulate sentiment.
- [52:10]
B
And they do.
- [52:11]
A
Yeah, they can. And do lean into different narratives as they go. And I think the number one thing is to kind of check yourself and say, am I, am I falling into like a loop here? And there's, there's different loops people can fall into. And I think that's the number one thing is don't kind of black pill yourself. Or, you know, the, like when people kind of say, think there's no hope or they kind of go down that. I think the thing is kind of take a step back and just, just one step at a time. See what can you change going forward in your more local area, in your own local life. Because, you know, our parents and grandparents and great grandparents, I mean, the world often seemed hopeless to, to them. Imagine what the world seemed like during World War II.
- [53:00]
B
Yeah.
- [53:00]
A
And I'd rather, I, you know, judging what I know from history, I'd rather pick this time than that time.
- [53:07]
B
Yeah.
- [53:07]
A
So it's okay. We're at least. We're not in the worst. Yeah, there, There are periods of time. I mean, the Middle Ages would not. Not be on my high list for times to be. I mean, it's kind of, it's one of those things, like, it's. There's little pockets that might be better than now, and I think there are. But if you kind of just, especially when you say, okay, not necessarily in the United States, but it's globally. If you, if you just had to be born somewhere in the world at a given time frame, would you. Would you take the risk of not being born in the modern era, like, in this environment? I probably would not. So I think that's kind of the gratitude to remind yourself with is that. Is that there are a lot of real problems, especially kind of the softer problems, the social fabric, the things that are harder than. Literally, like, they're harder to kind of point to than a war, World War II. It's not hard to explain what the problem was here. The kind of the social disconnection, the online, the narrative kind of flows people get into. But I think the main thing is remind yourself that's not everything. There is still real life. Things are still pretty good, and there still are a lot of opportunities and we just have to pursue them. Another thing I kind of mentioned online recently is the idea of kind of radical context, which is you can always see a statistic. There's a whole. Any number of infinite statistics. People can say, this metric is at this level now. And it sounds horrible. But then always kind of ask yourself, what is the context? What did that look like five years ago, 10 years ago, 20 years ago, 30 years ago? What did that metric look like? Some of them will be getting worse than you think. Some of them are not as bad as you think. Some of them are literally better than they were 10 years ago. And I think we have to kind of train ourselves to not fall into these either despair loops or anger loops. You know, people might be prone to different. It's easier to fall like. Like, I don't really. I'm not really prone to anger, but I might be prone to, like, kind of put my hands up and say, I don't know what you. I don't know what we're doing here.
- [55:03]
B
I like that meme with the wizard guy.
- [55:05]
A
Yeah, yeah, yeah, Dumbledore. That's kind of. That's kind of my loop that I fall into. I'm like, I don't know what you guys are doing. I want to be part of it, though. And I think the main thing is just to constantly try to step away from falling into these either despair loops or anger loops or tribalism groups and seeing what we can do to make things around us just slightly better than they were yesterday.
- [55:28]
B
That is such a good message. It's not as bad as it seems. You recently posted. Go Touch Grass. Okay, don't stress out. There's so much doom around us, but there's always hope. And you have really given a lot of people so much knowledge and hope. Thank you so much for your work, everyone. Please go to linalden.com, subscribe to your amazing newsletter. Lynn, it's just such an honor to have you in person. Thanks for joining me.
- [55:49]
A
Thanks for having me.
- [55:49]
B
Thank you so much for checking out this episode of Coin Stories. Make sure you're subscribed to the show so you don't miss any new episodes. And if you can, turn on those notifications and leave us a positive review. They really help the show grow organically with new listeners. We have a free weekly newsletter. You can sign up@thenewsblock.substack.com this show is for educational and entertainment purposes only. Nothing should constitute as official investment advice, and you should always do your own research. I'm always open to feedback and guest suggestions, so please feel free to reach out@infoalkingbitcoin.com I'll see you next time.