Part 2: How Money Broke with Lyn Alden - WBD704

Lyn Alden is a macroeconomist and investment strategist. This
interview is the second of three shows where we discuss Lyn’s
amazing new book: Broken Money. In this show, we explore the
concept of hard money, the ascendancy of paper money and the
transition from gold-backed currency to fiat currency. We talk
about the birth of banks, fractional reserve lending, central
banks, the flaws of the Bretton Woods system, and the impact of
the petrodollar.


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Historically, hard money like gold has been considered the ideal
form of money due to its scarcity & durability. However,
another aspect to consider is utility. Paper money, despite not
being as hard as gold, became dominant because of its convenience
and speed. Speed is perhaps one of the most important functions
people demand in money: throughout history, humans have sought to
make money more portable and efficient.


At the same time as money was evolving, so were the institutions
associated with managing money. Banks can be traced back hundreds
of years with the provision of credit and the increased
portability of money. The modern form of banks emerged in Europe
over the past few centuries; the importance of banking to the
functions of the state led to the development of central banks
that financed governments, particularly during times of war.


The demand for speed opened the door for the introduction of fiat
currency, which offered faster and more convenient transactions.
Government legal tender laws and taxes on non-monetary assets
further solidified the dominance of fiat currency. But, this also
opened up the distortion of money as a result of greed and abuse.
The speed arbitrage provided by fiat currency has allowed for
more manipulation and corruption.


The evolution of fiat currency led to the emergence of the
petrodollar: the United States sought to replace gold with the
dollar and maintain its economic and military dominance by
enabling the dollar to become the global reserve currency.
However, this has negatively impacted countries outside of the
US, and it’s also now affecting the US. The future of money needs
a reboot. The development of a decentralized alternative will be
the focus of the final show of this series.


 


Show notes:
https://www.whatbitcoindid.com/podcast/how-money-broke


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