Eurodollar & The Money Printer with Lyn Alden

 
 

Where to find the show

Download Episode MP3 File
The file will open in a new window. Click down arrow to download the file.

“This is inherently a Ponzi scheme essentially, if there’s more debt than there’s money, it means those debts in aggregate can never be paid down. It’s not designed to ever end… it can only grow.”
— Lyn Alden

SHOW DESCRIPTION

Lyn Alden is a macroeconomist and investment strategist. In this interview, we discuss the fundamentals of the current global economy: the Eurodollar system, central banks, money printing, debt, inflation and deflation.

- - - -

WBD528, “Everything You Know About the Economy is Wrong with Jeff Snider”, was very popular with listeners. It raised the concept of the global economy being controlled by the Eurodollar system, an esoteric and opaque financial market outside of the control of the United States. The issues emanating from this theory are manifold, not least that central banks aren’t in control.

A common request was to have us discuss the issues arising from Jeff Snider’s arguments with Lyn Alden. Lyn has written extensively about these issues: her November 2020 paper “Banks, QE, and Money-Printing” is a peer-leading explanation of QE. It clarified why, up to the end of 2020, QE hadn’t led to the inflation that many commentators had been warning of since 2007.

Jeff and Lyn are aligned on the theory that the Eurodollar system is a critical driver of the global economy, and that the risk of deflation is of concern. The differences in opinion center on the importance of sovereign debt. Jeff thinks we need more debt to unlock liquidity and combat recessionary forces. Lyn’s concern is that unprecedented levels of indebtedness, in the context of recessionary forces, are an existential threat.

Could the Ponzi scheme fall apart? The warning signs are there: the issues in the repo market in 2019; the breaking of the US treasury market in 2020; numerous currency crises around the world, which include developed economies.

If the situation is at risk of collapse, what are the mitigations? There seems to be no official alternative to the central banks' plan to continue printing money to resolve economic problems. But, as Japan may be finding, that approach may have its natural limits. The risks are apparent, whilst the solutions are limited. Maybe we need to have Jeff and Lyn debate in person.

TIMESTAMPS

00:03:48: Introductions
00:04:16: What is the eurodollar system and how did it start?
00:10:59: Eurodollar inflation
00:13:09: Lack of US control over eurodollar
00:14:24: How the eurodollar impacts the US dollar
00:16:49: Why the eurodollar is a bad system, and reasons for its expansion
00:22:21: Benefits of the eurodollar system
00:24:27: Money printing explained
00:28:10: The Fed, the Treasury and the banks
00:40:46: Constraints on money printing
00:45:26: QE and inflation
00:51:13: Variables affecting price increases vs inflation
00:55:21: Wages, high debt and deflation
01:03:56: Bitcoin as a medium of exchange
01:06:42: Understanding liquidity
01:10:34: Conservative bank lending
01:11:39: Final comments

 

SUPPORT THE SHOW

If you enjoy The What Bitcoin Did Podcast you can help support the show by doing the following:

If you are interested in sponsoring the show, you can read more about that here or please feel free to drop me an email to discuss options.

SPONSORS

 
 
 
 
 
 
 
 
 

SHOW NOTES

Connect with Lyn:

Mentioned in the interview:

Other Relevant WBD Podcasts:

PodcastPeter McCormack