Major Currencies Are Headed for a Reckoning | Lyn Alden

This major kind of cycle doesn't really end until there's major, like massive currency devaluation among the largest currencies in the world. Basically, major debt devaluation, major currency devaluation, uh, along with, uh, more durable, you know, kind of just shift in public perception, uh, away from this, this highly polarized, uh, environment, which I don't, you know, I don't think that happens in the 2020s.

Hey everyone, my name is Anthony Fatsies and welcome to another episode of the What the Finance podcast. On this episode, I have the pleasure of welcoming back Lynn Alton. So Lynn is one of the foremost macro strategists, uh, founder of Lynn Alden Investment Strategy, and also the author of a very good book, Broken Money: Why Our Financial System Is Failing Us and How We Can Make It Better. So Lynn, thanks so much for coming back on the podcast.

>> Thanks for having me back. Happy to be here. Yeah, looking forward to the conversation and, uh, yeah, seems like every sort of month, I'm sure everything that you said in the book, it's slowly, slowly coming true. Um, but yeah, if we, if we maybe go back to 2025, h, how do you look at 2025? Uh, what are the key things that stood out for you?

>> I, I think primarily we shifted to a headline-driven market. Uh, so 2023 and 2024 were mostly characterized by kind of single-direction markets. Uh, meaning that they were kind of very much liquidity-driven. Uh, by judging the current state of things, you could generally forecast pretty accurately how things were likely to go for the next couple quarters. Um, and, uh, in 2025, just because the, you know, the political and the geopolitical environment, uh, has been much more volatile, uh, it's much more headline-driven. Uh, so, uh, basically, uh, political decisions can impact markets, uh, more than just pure liquidity, even though liquidity is still a big factor that happens along the way. Uh, and so it's, I mean, it's certainly a lot more, a lot more to write about and talk about, uh, in 2025. Uh, and that's kind of been the main thing is that geopolitics is kind of back front and center. Um, there's these kind of big, uh, macro things to, to kind of deal with. Uh, but it's really all still part of the, the same theme I've been talking about for years, basically fiscal dominance. Uh, when you have fiscal dominance, uh, these sort of extremes tend to happen more frequently. Um, and we, we can learn a lot from history. We can learn a lot from, uh, you know, multiple other countries. Um, and, and how they've kind of gotten through, uh, situations like this. U, but that's kind of the main thing so far is that this past approximately a year has, uh, been a much more headline-driven market, meaning you can get kind of hit with random things rather than a more kind of slow unfolding, uh, situation that we had for about two years.

>> Yeah. Yeah. And has seemed to be very frothy in terms of, um, you know, some days these massive trillion-dollar companies can go down by, you know, 10, 20% as you said, based on these headlines. So, is that just sort of the end of a bull cycle? Do you think this is a, a shift to this headline-driven, uh, environment maybe for the near term and probably for Trump's presidency?

>> I don't think it's like a natural end to a bull cycle. Meaning, it's not like a bull cycle just kind of naturally exhausted itself and started happening. It's really just more of a, a political shift. I mean, basically, uh, tariffs are a massive wild card. Um, you know, potential for for military intervention at certain points is, is a wild card. They can sometimes affect energy markets. Uh, it's probably contributed to the run we've seen in precious metals. Not the only factor. Um, and so it's, it's more of that this kind of like that shift in political environment. Um, uh, that's really kind of changed the, the structure of what otherwise was mostly liquidity-driven, uh, type of dynamics. Um, and then we still have the underlying liquidity stuff. So we shifted from quantitative tightening to quantitative easing. Uh, and that got a lot of headlines. Uh, but that was pretty much forecastable ahead of time. So even the Fed roughly predicted when that would happen. Um, you know, in my research, we were talking about roughly, you know, roughly when that would happen, whether it's kind of the last quarter of 2025 or kind of the early part of 2026. Uh, there's a range where it could have happened. Um, uh, so a lot, you know, that, that kind of background financial plumbing stuff, uh, nothing particularly shocking there, that's still mostly predictable. And then it's more just this, this headline overlay, uh, which I wouldn't really say is just like that, that natural result of a bull market. It's just more of a, a political shift. Um, but then of course, we also have that technology shift. So the, the kind of the rapid, uh, you know, kind of, um, uh, consumer and business usage of AI has, for example, eaten into some software companies, um, and of course, is, has contributed to major bull runs elsewhere. Um, uh, you know, we have, you know, kind of fluctuating currency markets, uh, you know, just that's partially tied to, you know, some of the geopolitical stuff we're seeing, some of the, the kind of the drama around the Fed and, and, you know, other central banks. Um, and so there's this kind of pretty chaotic field out there. Uh, which is good opportunity for traders or for those that are kind of, um, you know, you can never be fully prepared for all the stuff that happens. I mean, if someone just kind of listed all the things that happened, let alone the start of 2026, but all, all throughout 2025 and, and so far in 2026, it's probably way more than they would have guessed. Um, but all that is from a pure investment standpoint, generally opportunity. Uh, volatility is, is basically gives you entry points, exit points. Uh, people get distracted by, you know, X, Y, and Z over here. So an investor can kind of look and say, okay, what are people missing? What is actually cheap? What is like the next year's headline? Let's get in now. Um, so still lots of opportunity.

>> Yeah, definitely. And, you know, I guess, you know, you mentioned the Fed, and there is this, uh, DOJ challenge, I guess, at least that we expect to potentially happen. And what does that mean? So, is this just Trump trying to sort of pull the Fed, Fed into line and then maybe set the, uh, set the path to what the next chairman will have to deal with, or how do you view this?

>> Well, so as soon as that happened, actually, like poly market, like betting market odds, actually, if anything, um, started pricing that that Powell has a greater chance of staying in beyond, uh, when his chairmanship ends. Um, because his chairmanship ends, you know, before his governorship ends, and, and, you know, the assumption is that when his chairmanship ends, he would step down as governor as well. Um, but the, the betting market is thinking, well, now he might be mad, maybe he won't. So I'm not sure that's, it's kind of working. Um, I, I think on, we've already seen, kind of a somewhat of a distancing from it. Uh, so the, the announcement itself was rather shocking. Um, because generally speaking, central bankers kind of talk in circles, uh, they don't really come out with like fiery, uh, stuff. Uh, whereas that was more scorched earth. I mean, Powell came out and said, this isn't about renovations, it's about independence. Um, which is just like a direct counter. Um, it's, it's definitely the biggest kind of executive branch and Fed kind of conflict since the '70s, and arguably ever since 1951, that the Treasury-Fed Accord. Um, so we, we certainly live in interesting times as far as that goes. Uh, since then, uh, Trump has somewhat distanced himself from the, the, you know, the, the, uh, you know, kind of indictment talk, uh, saying that he wasn't really aware of it. He hasn't really doubled down in a way that is, is more common with him. Uh, some news reports suggested that those around him, uh, were somewhat surprised by it. That it goes against what, um, uh, Treasury Secretary, uh, Scott Bessant has been kind of orchestrating for many months. He's, he's trying to kind of orchestrate an orderly, uh, transition toward a more Trump-driven Fed, uh, rather than one that's kind of, um, you know, spooks the market around Fed independence as much as this. Uh, so I, I, my base case is it will cool off, and that, that, you know, Powell will, you know, finish his term as chairman. Um, but it's certainly, you know, a lot to talk about. Um, uh, and so it's, it's, you know, it's another headline that spooked markets. I mean, you know, metals moved pretty rapidly, and the dollar had a little shift, uh, right on the headline. Uh, but since then, I think there, there has been de-escalation because I think there's enough people that are worried that that further escalation there would spook markets.

>> Yeah, definitely. I guess that will then lead into, as you said, that transition and hopefully a, I guess a positive transition and one that's, uh, there's less challenge. But how do you see, I don't know if you have any thoughts on potentially the next Fed chair, and do you see them going the way Trump wants to go with these massive cuts, potentially, you know, QE, massive injections of liquidity, or do you think they'll be a bit more careful about not losing control of the, the bond market?

>> Uh, well, I mean, so far, the, the interesting thing is that, uh, because of some of Trump's recent remarks, the betting markets are actually leaning toward the more hawkish pick of some of the, the recent options, which is interesting. Um, my base case is that, uh, basically this year, uh, he will, you know, he'll get, he'll get a new, I don't know who the Fed chairman is going to be, but he'll get a Fed chairman that is, um, generally probably more in line with his outlook on things. Uh, there will be a general, uh, gradual dovishness inserted into the Fed, uh, with the switch of the chairman being kind of the, the biggest individual moment. Um, you know, it's already started to some extent. We already see more, um, uh, Fed, uh, FOMC members disagreeing when it comes to FOMC meetings, instead of everyone kind of voting the same way. Uh, you have some people kind of pairing off of that and saying, you know, we disagree with the majority position by 25 or 50 basis points. Uh, I think that kind of thing will continue, um, in the next year or two. I don't really see, like, major wholesale changes in the Fed in the sense that they just completely threw out their playbook. I think that they're still going to try to project a sense of, um, independence, a sense of, uh, being data-driven. Um, I think that they, you know, markets might or might not fully believe that in a way that they somewhat have under, under Powell's term. Um, but I, I think it's, it's going to be more of a transition. I, I don't think it'll be like some massive, just, just black and white change. I think that it'll, it's, it's gradually over time, which happens in fiscal dominance, it becomes generally less independent in a realistic sense. Um, and then the question is, does it ever get to a significant enough degree that the bond market gets totally spooked? Um, so far, no. Uh, I think in the, you look far enough for the future, I, I think that's likely. But in the near term, uh, they still have plenty of levers to pull. And, you know, liquidity speaking, I, I've been in the camp that they're going to do a gradual print, uh, which is to say that they're, they're going to shift from balance sheet reduction to balance sheet increases, um, but that the increases won't be like COVID level type of, you know, just balance sheet going vertical, uh, and instead, it'll just be a more persistent, prolonged, uh, but kind of magnitude constrained injection of liquidity. Uh, that's so far what, what, um, Powell has projected through tax season. Uh, they've kind of projected that through April and May, uh, they'll be adding liquidity. Uh, we'll see what happens after that. That'll be a new Fed chair. Uh, so we'll see what, what their expectations are. The New York Fed already basically projected, you know, far as far as that I can see, mild liquidity injections. Uh, they've been projecting that for about two years to start roughly around now. And I think that's roughly my base case that we, we go back to a more gradually expanding Fed balance sheet, uh, you know, gradually expanding broad money supply, which is, you know, this ongoing persistent, um, debasement backdrop, uh, alongside everything else that's happening.

>> Yeah. Okay. Really interesting. But it does sound like that means, yeah, run a hot, you know, probably good for markets. Probably just going to continue to see, I guess, what we've seen the last few years from a, uh, from a market perspective, just everything goes up, probably except for potentially bonds. Is that what you >>

>> Yeah, more or less. I mean, it's, I, when I prefer to run hot is mostly the fiscal side and, and the monetary side. So basically, kind of the order of operations there is that regardless of what inflation's doing, whether it's, whether it's above target or if they get a below target, uh, if the treasury market becomes illiquid or otherwise breaks, or if the repo market becomes, comes illiquid or otherwise breaks, basically the, you know, the overnight lending market between financial institutions. Uh, when those things break, those are like core parts of the system. Uh, so the Fed will jump in, you know, right away, uh, and, you know, for some of those, already have standing facilities to, like, prematurely jump in, let alone take bigger action. So, uh, that's kind of the run a hot environment, basically. And one of the challenging things is, like, that the New York Fed is projecting that they're going to roughly keep their balance sheet flat as a percentage of GDP. The, the issue there is that the large fiscal deficits contribute to nominal GDP, which basically means that the bigger the ongoing fiscal deficit is, uh, the faster the Fed balance sheet will rise. Uh, they kind of seize some of that control over, you know, without saying so, over to the executive side. Um, and, you know, they, they, they try to mitigate it where they can. I mean, their, you know, their current balance sheet expansion is, is limited to, I, off the top of my head, I think three-year durations or less, uh, for the treasuries. Uh, so T-bills and, and shorter duration, uh, T-notes, uh, that could expand over time, but, you know, they're not really targeting duration here. They're not really doing it for the purposes of economic stimulation. And they're doing it for, for basically financial plumbing and bank reserves and keeping the monetary base going up so that banks stay liquid and keep making loans. Uh, so you get that ever-growing broad money supply, ever-growing base money supply. Uh, that doesn't necessarily guarantee that, as that, you know, almost all assets go up. Uh, if stocks get overvalued enough, they can certainly have like a five-year period of going sideways to down while money supply is still going up by five, six, 7% a year, uh, while the monetary base is increasing, there's really nothing stopping, say, the market going from say, it's averaged at, you know, 40 times cyclical earnings to 30 times cyclical earnings. That could, that is that kind of contraction can still happen for a number of years. So, you know, valuation still matters. Um, certain investments can certainly do better than others based on growth, based on starting valuations. Um, but generally speaking, yeah, when you have a rising, uh, monetary base and a rising broad money supply, that's a, you know, that, that's mostly not tied to cyclicalities. It's not really driven by bank lending, uh, cycles. It's more driven by persistent fiscal deficits that are partially monetized. Um, that's, that's an, you know, a debasing background, uh, that is up against some other forces, but the general bias is up and to the right.

>> Yeah, it makes a lot of sense. Like, you know, as you mentioned there, the debasement and trade, we have this deficit which doesn't look like it's going to go down unless, you know, maybe interest rate, if, if interest payments come down, it might go down a little bit, but that seems to be the only only way. Um, but do you see if they continue to grow where they are, and this is, you know, the GDP growth is inflation-adjusted. So if you take out the inflation, is actually higher? Could they actually get to the point where they are slowly outgrowing the growth if they keep the deficit where it is, or do you not see that as a, as a possibility because there's potentially more liabilities coming up in the future?

>> Well, that's kind of what they've been doing since 2020. I mean, debt as a percentage of GDP, public debt reached a peak in, in like 2020, 2021. Ever since then, you had a rebound in nominal GDP. Uh, you know, when you look at, for example, like Argentina, when they, you know, on their, when they were especially a couple years ago, when their massive kind of like, you know, budget deficits were going crazy and, and money supply was going crazy, the, the budget percentage as a percentage of that year's GDP was actually not that high. Uh, instead, it was really high compared to last year's GDP because the nominal GDP and the inflation growth was so huge. Um, and so my, my general view is that they, it's not that that number is going to keep increasing, too much debt as a percent of GDP, that they, you know, they, they somewhat can run nominal GDP and, and, you know, money supply as kind of fast as, as debt growth. Uh, that's not really the main constraint. It's what are the consequences of doing that, right? So you have, uh, right now, consumer sentiment is near record lows, despite the fact that stocks are at, you know, roughly all-time highs. Uh, it's, it's kind of the, the, the biggest divide, uh, between those kind of metrics in 40 plus years. Um, and so there's kind of this like quiet, slow-motion cost of living crisis. Some people have called it a K-shaped economy. Some people call it a two-speed economy. Uh, different kind of terms out there. Uh, but basically, those that are not on the receiving side of fiscal deficits. So mostly that's interest expense, defense, um, social security, Medicare. Uh, that's where a lot of that deficit spending is going. There's obviously smaller pockets as well, but those are the really big kind of pie chart components. Uh, those on the receiving side of those are generally doing pretty well. If someone's really not on, on the receiving side of those, but they're on the wrong side of monetary tightening. So, let's say they're a young family looking to buy a home. We have pretty high mortgage rates, pretty high, you know, uh, house prices. Uh, that's why a very high average age of, of, you know, buying a home these days, because generally speaking, lower and middle-income and younger families on average are kind of mostly locked out of that. They're not really on the receiving side of the deficits, but they are on the, the, the wrong side of the interest rates that are trying to contain the inflation. Uh, people are generally seeing that their, their money is not going as far for groceries or health insurance, things like that. And so you get rising populism. That's a topic I've been focusing on for many years, that, you know, you get, kind of, first, you get kind of like reasonable types of populism, and then when those just go unaddressed, you get more extreme types of populism. Um, and that, that kind of just keeps churning and churning and churning. Uh, so they, you know, five years from now, they can say, look, the debt to GDP is still roughly the same. Um, but everyone's like, "Well, my salary didn't keep up with, you know, money supply growth, and I, I don't feel more well-off than I did five years ago." Um, and so you get just rising social unrest, and it comes out on the right, it comes out on the left, it comes out, uh, in multiple different ways. And that, that's more the actual cost, uh, rather than just that pure debt to GDP metric.

>> Yeah. Okay, that makes sense. But it sounds like you think the inflation is probably going to be a little bit higher than what we saw in the 2010s. Um, which has sort of allowed it to happen, I guess, because when you have the lower inflation, you can let it run hot and these things explode. But now inflation,

>> I think on average, but I think it's, it's, it's very specific. So, generally speaking, it's hard to get a really super broad inflation without energy inflation, which right now we don't have. Um, uh, all the major inflationary cycles of history came with a pretty big dose of energy inflation. Um, and right now, there's, you know, there's deflationary forces on technology. So, you know, AI and things like that are kind of putting downward forces on certain services, uh, just because they, they make them just, you know, cheaper and automatable. Um, uh, you still have pretty significant inflation on things that are labor-intensive, capital-intensive, hard to, hard to, you know, reproduce. That's where you generally have inflation showing up. Where I'd be worried about a higher uptick in inflation is once you get some sort of energy inflation. So right now, under current prices, US shale oil is generally not drilling a ton, and they have, you know, pretty high decline rates. So we don't really see it rolling over yet, but we see some of the precursors, uh, kind of flattening out and looking like they might roll over. Um, and so you get kind of like weaker, you know, marginal production. Um, and if that goes on for a number of years, you get shortages, and then you get another spike in energy prices. Uh, some of what we saw, uh, in recent years, that's where you get probably higher inflation. Um, uh, in addition, if, if some of the AI, uh, you know, uh, uh, benefits don't come as quickly as some of the bulls think, uh, then they're not significant enough to offset inflationary kind of, uh, policies elsewhere. Uh, then any sort of like social disarray tends to be inflationary. So, like, if you, if you have one society that is like super, or like, let's say Japan, for example, um, if you have a society that most people just clean them up, up after themselves, is pretty low violent crime, there's pretty, pretty low, just mayhem, you don't need to put a lot of resources into, like, literally or metaphorically putting out fires. Uh, whereas when you have a, an economy or a culture that's otherwise just more disarray, there's more violent crime, there's more protest, there's more, uh, just polarization. Uh, you're, you're putting more societal resources toward putting out literal or metaphorical fires all over the place. That's inflationary. That's basically, it's kind of like war. War is, you spend resources to blow other resources up. Um, and, and so it tends to be inflationary. Uh, whereas in, in times of peace or in times of kind of social harmony, most of the resources can go toward, uh, innovation, making things better. Organization is generally disinflationary. Um, and so we have that kind of, um, mayhem premium, I think that's kind of just gradually put in, in, in the United States and Europe and in, in, you know, a handful of pretty large places around the world.

>> Yeah. So as you say, this sort of chaos is, uh, is, yeah, potentially could lead to very negative consequences in the future. Do you see a way around this? Because it does seem like the more entrenched the current system gets, the more, I guess, wealth divide there is between, you know, the K economy, the greater that becomes, the more instability there is, the more extreme ism there is. Do you see a way to prevent that? Are you sort of positive on this? Are you negative on this?

>> I, I mean, I would say pretty negative on it. I think it gets worse before it gets better. Uh, I think that the world in general has to kind of get past the demographics hump. We kind of built all our systems assuming that population always goes up and that the next generation is always bigger than the prior one. But as we have, kind of, you know, kind of the ending of that kind of cycle, uh, we have a very, you know, around the world, we have very top-heavy entitlement systems that's contributing to a lot of the polarization where people kind of feel the social contract breaking down around them, more intergenerational conflict. Uh, you know, and then, you know, that, that's where it gets very political. I mean, some, some economies then say, well, let's, let's have a lot of immigration to fix that, and then you get the, the pushback against that in both Europe and, and the United States. So that becomes a more of a political, uh, crisis. Um, and a lot of that has to be worked through, and I think it's going to take a very long time. Um, and then it, and then the pendulum kind of swings back and forth really far and gets kind of more extreme each time. Uh, and so I don't, I don't really see a clean fix anytime in the next, like, an investable time horizon in three, five, seven years. I, I think the best people can do is focus on themselves and their own communities and just try to be, just, you know, try to make their lives and the lives around themselves better than when they woke up that morning. Uh, and better than, you know, the start of the year, and better than than the start of the decade, and just kind of, uh, keep their own garden in order.

>> Yeah. Really interesting. And how do you see, I guess, the immigration impact? Because there's this, I guess, there's a theory saying that, you know, when you have, especially these large immigration levels that we've seen the past few years, that could then reduce, uh, you know, increase supply, reduce potential negotiating power that employees have, and reduce wages, which potentially could make this issue worse. I don't know if you agree with that scenario, or if you think it's, there's, there's another perspective on that, and I guess, yeah.

>> Yeah, all else being equal, it's a downward. I mean, that's, that's why corporations and certain governments like it, is because it puts downward pressure on, on wages. Uh, I mean, there's multiple different types of immigration. I mean, you know, there's, there's skilled immigration, there's unskilled immigration. Um, multiple different kind of factors there. But generally speaking, uh, it contributes to higher nominal growth because you have that more population growth, but it doesn't necessarily contribute to per capita growth. Uh, Canada was a pretty significant example of that, because their, their kind of real GDP has been at like stall speed. They had multiple years of, of above-target immigration, but the per capita metrics were pretty dismal. Um, and so that, you know, that happens. Um, now, the United States has big other factors. We have, you know, we're suffering from Triffin's dilemma. Uh, so this, this kind of multiple competing things all going on at once. Um, so it's a much bigger topic than just, uh, you know, do you have this kind of valve that can kind of lower wages or not. I mean, there's, there's any given time, there's pros and cons to immigration. It depends on what kind of immigration. Then there's the whole legal versus illegal immigration, skilled versus unskilled. The sheer numbers involved. Uh, I, I think that pretty much by anyone's estimation in the Western world, the immigration levels have been extraordinarily high until pretty recently. Uh, that, that's been a, I would say, a destabilizing force. There's more downsides to that than upsides. Uh, and that does contribute to the, the polarization we see today. Um, uh, I think that as they, as the, as governments kind of more clamped down on immigration, as it's become less popular over time, and as there's been kind of pushed back against it, uh, it can put some upward pressure on wages. Uh, but I think that also AI is going to keep, is going to kind of push down wages to some extent. Um, over the past several decades, automation in general has been, um, you know, a downward force on blue-collar work in many cases, like factory work. Uh, it's not all, I mean, it's, it's a good, it's a net benefit to society because basically what it does, kind of like how, you know, go, go all the way back to the tractor, when they invented the tractor, it farmer do the work of 10 farmers. Uh, and that's a good thing. Now, in the near term, it means, you know, nine farmers might have to, you know, them and their kids might have to go work somewhere else, generally speaking, higher wages, and, you know, contribute to, to building stuff and medicine and, um, you know, other things. Uh, so instead of having 60% of society have to work to feed all of society, you have like 2% of society can, can feed everyone. Uh, and then that started to happen in manufacturing. Uh, so instead of having a really big chunk of society employed making stuff, we basically, the, you know, you have skilled manufacturing oversight, you have a lot of robots doing it, people around to kind of troubleshoot and fix the robots, uh, and kind of handle the skilled parts. Um, and I think that some, to some extent, that's going to, you know, I'm not the first to say this, obviously, it's kind of understood that's going to happen to some percentage of white-collar work, that some of the more repetitious, uh, types of things, can be automated, uh, which, you know, doesn't fully displace jobs. It kind of just means that one accountant can do the work of two accountants, three accountants, five accountants, depends on how efficient that those systems get. Uh, and that, that more things that were, you know, that used to be very labor-intensive can be automated. Uh, which in the near term can be disruptive. Uh, but in general, uh, it's an ongoing march toward the, the gradual cheapening of many types of labor. Uh, and generally to the benefit of capital, and then it becomes political because then you have people trying to take that capital and, and spread it out again. People trying to stop that from happening. So you get that conflict either at the government level, the state level, the corporate level. Uh, and it, it contributes to chaos.

>> Yeah, it's really interesting. I guess one thing I have a perspective on, and I don't know if you know, maybe this is a negative way of looking at it, is that actually, if you have an older population, it might be better during this transition because you, lots of young people unemployed creates uncertainty and potential chaos and this backlash. I don't know if you've thought about that at all.

>> I have. I've seen Luke Groman make that point about China, that China has this big demographics cliff, and he said, well, if we have AI coming and we're worried about displacing jobs, do you want a, do you want a young and rapidly growing population, or you know, do you want a shrinking population? Because then you have, if anything, you have less of that issue. Uh, I mean, that partially depends on how quickly AI displaces jobs, uh, what kind of jobs it displaces, uh, but generally speaking, productivity growth, um, is, you know, one of the major levers to pull against these demographic cliffs. So when you have a, you know, that they stream in, when you have a demographics cliff, looks like Japan or, or Korea or China, uh, automation and just advanced productivity can mitigate that. So you still, you're still providing the goods and services that people need, even as there's fewer people available to, to work hard and provide them, because they, you know, they're, they're older and, and over time, fewer of them, and you have a more top-heavy entitlement system. Um, and that's, you know, that's, that's eventually going to, that's spreading into Europe. It's, uh, spreading into North America as well. Uh, so AI and technology in general is the best medicine we have against kind of the demographic bulge that the world's, you know, most of the world's going to go through. Uh, which one wins, I think, is, is challenging because then it becomes a societal issue. If, if most of the, the gains is that it just kind of concentrate significantly, you get more and more polarization. Um, and it, it, it gets redirected in different ways. Um, but it, it just kind of keeps building, and it, the outcomes are not always at the thing that's actually causing it. It just kind of spills over multiple places. So, um, different societies will handle that better or worse than others. I mean, generally speaking, Japan has a more harmonious way of handling it. So they, they've been able to really kind of push that further than most others. Um, uh, whereas many other places, they, they start to run into big cracks well before then.

>> Yeah. Really interesting. So I guess we go, you know, another trend at the moment, as you said, it's the headlines, but it's also, it's the geopolitics and how that's essentially shaping the world and what we're seeing. So a big, uh, theme at the moment is obviously Greenland and the potential for the US to either buy or, you know, take Greenland. Do you have any, I don't know if you thought about the realism or the, how realistic that is, and I guess there's an understanding of why they want to do it, but do you see something like that occurring?

>> Well, I mean, there's already, we already have the option. They've already provided the option to have more, um, military sites on Greenland if you want missile defense and stuff. So the, the reasoning for this shifts around a lot. Um, I mean, a NATO, an invasion of a NATO-controlled territory would certainly be, I mean, like, no shortage of headlines this year. Uh, that'd be, that'd be probably the biggest one. Uh, my base case is not, you know, shooting war on Greenland in 2026. You know, but then again, you know, if you asked me in 2025, you know, I would have given a 0% chance, roughly, of that happening in 2026. Now, I would say it's not zero. Um, so it wouldn't be my base case, but I wouldn't be utterly shocked. Um, uh, you know, and the whole, this whole thing, I mean, that I've been on your show before, we've talked about precious metals and things like that. I mean, this is, these kind of environments are why owning bare assets is helpful. Uh, because you have this kind of, you know, potential for mayhem around the world in multiple spots. It's not always the spot people thought it would be. You know, the Venezuela, Iran, um, you know, the Middle East in general, um, these are kind of the Taiwan, these are kind of the hot spots that people are worried about. Now, you know, Greenland wasn't really high on people's lists until, until, um, recent times. Um, but when you have multiple countries in the world going through fiscal dominance, uh, going through very real crises, they have a pretty strong incentive to direct attention elsewhere and to blame someone else for for issues that they've built up. Um, and you'll have multiple sides doing that at the same time. And that's, I think that's the, that's the core of it. Like, I, you know, I'm sure if I, if I come on again, we'll be talking about a whole another set of headlines here. Uh, some of these might have played out, some of them might not have played out, be a whole another kind of set of chaotic headlines, but the underlying factor is that the, the rot for this has been building for years and decades. Uh, the, the rot of Triffin's dilemma and, kind of the hollowing out that happens when you have the reserve currency. That's a really big one. Uh, then there's just the, the fact that the unipolar world's kind of shifting to a multipolar world, uh, over time, or if anything, it's shifting back to a multipolar world as it was for, for most of its history. Uh, and that's a, you know, that's a challenging transition. Uh, then you have that, you know, whole global demographics bulge, pretty much every, everywhere outside of like India and, and Africa, you've got these top-heavy, slowing population countries, uh, that, that built all their, you know, insurance, like their, their sovereign insurance, their entitlement systems around the idea that those just grow forever. Um, and so that's a, that's a massive issue. Um, and so as, as that, those all kind of, that slow-motion, like car crashes are playing out, there's this incentive to distract, blame elsewhere, and that's where things get very dangerous and harder to predict. And that's why fiscal dominant periods are often associated with more wars. I mean, wars contribute to fiscal dominance, and fiscal dominance contributes to war, uh, in a vicious cycle until a crescendo happens and the dust settles. Um, and so I, I think there'll be more of this before there's less of it.

>> Okay. Yeah. It's really interesting to see to see how that the world's shaping, as you're saying, and it's all driven by that fiscal dominance and, and then, and all these other complex. And I think that's that sometimes that's what I think I don't know if politicians struggle to see it, or maybe they just don't communicate very well how all these trends are coming to play, and they sort of try to find the first-order thinking of what's causing it, whereas it's the second-order and, you know, all the other trends that are that are driving it.

>> That, that contributes to a lot of these issues that, you know, they had, they, they, you know, they, they solved one problem, and with all these entitlement systems, but then they don't project it out far enough. Then they say, "Okay, wow, that the entitlement systems are really top-heavy. What can we do?" Well, let's, let's loosen immigration. Let's lower our demographics, age, and, and increase our population through immigration. And they're like, "Oh, wait. That causes a pretty obvious social crisis when you do that at scale." Uh, and then you try to put out that fire. And then you have countries saying, "Well, people complaining all the time with social media. Let's go out and try to like ban social media." Uh, it's like you're always putting out one fire and then creating the next set of fire. And what it does is, I mean, there's this gradual reduction in trust that people have toward institutions, whether it's media, whether it's big corporations, whether it's government, just this gradual decline. Um, and generally speaking, that's, that's, you know, the Fourth Turning analysis and kind of cyclical analysis of history. Sometimes it's kind of categorized as woo-woo, but basically, there is this sense where one era kind of builds these institutions. They solve problems of the day. Over the longer time, they, they gradually, they, they kind of succumb to to bureaucratic entropy. They, they, they, they're no longer serving, you know, they're, they're serving the thing that they did decades ago. They're getting more corrupt over time. Uh, you know, multiple generations pass, and, and people don't trust them anymore, and they kind of just gradually, or sometimes, you know, quickly break. And it's up to that next generation to, to build a new set of institutions, a new set of cultural norms, a new set of things to replace the stuff from, from a long time ago, either because technology changed or multiple other factors changed. Um, and I think right now, we, we're still going through that dying process. These, these extremely low, low, uh, confidence institutions, um, but that still have very entrenched power and very entrenched network effects, are basically just slowly, and occasionally quickly, but mostly slowly melting all around us. Um, and a lot of the decisions are kind of coming home to roost, uh, in the form of rising populism. And then it comes down to who can kind of stick the landing, who, who can kind of, who can kind of replace the system, replace the prior institutions with, with new ones that make sense with the least chaos possible. Um, and, and so, you know, for example, in, in the last period, in, you know, in the '40s, um, really, that was the United States. You know, basically, there, there were multiple places that had utter chaos, uh, and as the dust settled, some of them went through more extreme chaos than others. Uh, and those that managed to contain the chaos, generally come out stronger, uh, in the next cycle. So the question is, who, who can kind of do the most reasonable cycle, versus letting things kind of burn fully down before they, they fix things.

>> Yeah. And I guess do you see, like, a Milei in Argentina, do you see that as someone who's, I guess, creating new institutions, or is he just trying to utilize what he currently has and just extend this current process, or is there anywhere else that you see who's, or any other country that you see potentially doing this?

>> I, I generally think it takes a lot of times, it takes multiple tries to, to do something. Uh, which is to say that, that, that's more of a shock and awe attempt. Uh, it kind of wakes people up. And generally speaking, what happens is the pendulum shifts really far to one direction. So then people shift it really far in another direction. Uh, and this, it's generally a process. Uh, it, it rarely gets right the first time. Um, and, and, you know, their money supply is still growing very quickly, for example. Um, there's many issues, but, but those sort of structural rots aren't really fixed in one presidential term. Um, and, and one of the challenging things is that the, the, the public at scale has to kind of durably buy into an idea. Um, uh, and that, that's, you know, probably the hardest part overall. Uh, is that, that, you know, a pretty significant bulk of society, that they have to get past that highly polarized phase and, and toward a, a direction that is more sustainable, and that some, you know, kind of significant majority have a durable kind of, uh, view toward, uh, which is in many countries pretty rare.

>> Yeah, definitely. I guess someone like Argentina, it's just been bad for so long that you almost, as you said, there's that chaos or that, that, get things have to get worse before someone's willing to put up with the tough decisions to actually potentially try and make change. And who knows if that will work or if it won't.

>> Yeah. I mean, that's, and that, that's what happened. I mean, the same thing happened in, kind of, history. I mean, a lot, a lot of the, um, power structures we saw rose out of chaos. Uh, where in history books were like, why would people want that? It's like, well, because they had utter chaos and disillusionment. Disillusionment. So then they, they pick something that, that seems extreme, um, because they, they don't, they, they see that incrementalism is failing. Uh, so then they, they say, "Well, let's, let's try to break it and start again." Um, and I, I, I think that the, this major kind of cycle doesn't really end until there's major, like massive currency devaluation among the largest currencies in the world. Basically, major debt devaluation, major currency devaluation, uh, along with, uh, more durable, you know, kind of just shift in public perception, uh, away from this, this highly polarized, uh, environment, which I don't, you know, I don't think that happens in the 2020s.

>> Yeah. And I guess who are the losers? Who, who holds the debt? It's the government, I guess, generally older people, institutions, pensions. How, Yeah, that's the challenge. How do you

>> Well, the government, the government issues the debt. The, the their liabilities get devalued. It's those holding the debt. Um, uh, yeah, it's generally speaking, um, uh, large pools of capital, uh, on average, it's, it's older, uh, generations. Now, in, depends on the country, though. Like, in the United States, the older generations also the recipient of major deficit spending. Uh, so right now, we're actually kind of siphoning money on average from, from younger generations and, and channeling it toward older generations on average. Um, and that, that's somewhat offset by that devaluation. So, for example, if young people own, you know, Bitcoin, and older people on average own more bonds, that's kind of, that's kind of partially offsetting, uh, over the past, you know, 5, 10 years, uh, some of this. Um, but there still is the fact that there's, there's trillions of dollars of deficit spending cumulatively flowing into that older generation. Uh, which is why it, it generally takes a lot longer than, uh, one would think. Um, when it hap, you know, when they did this in, like, say, the 1940s and '50s, uh, it ended basically by siphoning more money to those younger generations. Uh, it was kind of like wartime MMT, uh, instead of siphoning it up. Uh, so I think that, and, you know, right now, they're still in the siphoning up phase. Um, and I think that, that in, in Europe and the United States, I think, and Japan, I think that continues for, for quite a while. Uh, I think that that's, that's more of a 2030s crisis, um, by the time that those systems might kind of, those engines might kind of run out, would be my guess.

>> Yeah. Know, really interesting. So Lynn, thanks so much for your time. We sort of covered so many different trends, so many of these headlines, and, uh, what's happening, and I guess how, how they, uh, could potentially impact the future. So really appreciate it. Uh, but my last question is, what is one message you want people to take away from our conversation?

>> I, I think the message is, I mean, this is an environment where diversification's helpful. I'll say two messages. I'll say financial message. The financial message is, you want to be diversified. Uh, you want to think in terms of the unthinkable. Uh, so things that are improbable, but that, you know, do happen in the course of a century. Um, this is the type of environment where they, they are have a higher likelihood of happening. So something that might, you might think there's a 2% chance of happening, it could be 20% chance. So even though that's the minority, it's like, if it's an extreme enough thing and it has a 20% chance of hitting, uh, you want to plan for that. So some degree, diversification, uh, is helpful, uh, kind of robustness over, you know, other factors. And then the other one is what I said earlier, that, you know, as these top-heavy systems run into issues, um, you know, it can be, it can be, you know, somewhat depressing to kind of watch these things play out. Um, but one can still do their best to kind of keep their own garden in order. Uh, you know, they can focus on their health, they can focus on their family and friendship connections. Uh, they can focus on, you know, earning more than they're spending as best that they can. Uh, you know, by produ, you know, trying to focus their time and energy toward production rather than consumption, and then channel that towards savings that are then put into, you know, assets that are that are scarce and, and productive, or or scarce and defensive. Um, uh, and, and just try to make the world around you better. Um, uh, because we, we still live in difficult times, but, but there's a lot of opportunities out there for those that are have some combination of fortune, but also, you know, the, the kind of the discipline and the energy and the, you know, the patience to kind of seize those opportunities.

>> Yeah. Perfect. That's a great message. So Lynn, thanks again. Uh, if anyone wanted to find out more about your work and what you do, where would the best place for that be?

>> Uh, so I'm at lindaldden.com. I provide investment research, uh, and also people can check out my book, Broken Money, on Amazon or elsewhere. Thank you.

>> Great. I'll put that in below. But thanks again for your time.

>> Hey everyone, thank you for listening. I really appreciate the support. Uh, if you've got value out of this, I, I'd really appreciate if you could like, subscribe, or, or comment, you know, good or bad feedback. I'm always open to that. But it really helps to the channel. Uh, as I said before, only about 14% of people actually subscribe to this channel. So if you were to do that, it would really help. It could mean we could continue to grow. Um, if not, thanks for watching and see you on next show. And you also might like, uh, this video right here.