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DEBT BUBBLE EXPLAINED INFLATION INCOMING: Lyn Alden

Published on Sat, Jun 13th 2020 News & Politics Rectangular HD

The world has a debt problem and in this video we go into detail with Lyn on many of the issues both domestically and internationally. The debt bubble explained expect inflation incoming with Lyn Alden.

Lyn Alden is a value investor with a background in finance and engineering who focuses on long term fundamental investing on a global macro level.

In the 1930s the United States had a deflationary crush because of a high private debt bubble that had built up in the 1920s - with major bank failures the economy lost around a 3rd of the broad money supply.

Then the US devalued the dollar from the gold peg from 1/20 to 1/35 of an ounce of Gold per dollar.

In the 1940s the United States had a federal debt bubble. 100% federal debt to GDP running at 20 -30% deficits to GDP to finance the war.
The Fed locked treasury yields at 2.5% and bought dollars to maintain that peg. From there, the US saw double digit inflation in 1942 and 1947 as a result of this rapid increase in the money supply.

Treasury yields then lost money on a real basis, and the debt was inflated away by devaluing the dollar relative to the fixed debt that existed.

Currently, the Federal Debt bubble is at 120% deficit as a percentage of GDP. This is all time high levels. The US has increased the money supply and increased the debt to money supply ratio. This is going to hit hard in terms of inflation.

The Fed can’t impact GDP but they control the money supply. By using practices like commercial lending the Fed can do extended unemployment, helicopter checks, infrastructure bills, and tax cuts to gives more money back to the public that isn’t funded by taxes or lending.

In 2008, the capital created went to recapitalize banks. Now QE is spilling over into the broader market as the damage is much worse than ever before.
If this continues over several more years, with tax decreases, extended spending levels, expect a faster money supply increase. With will lead to massive inflation.

The increase in domestic debt has gone from $15 trillion to $18 trillion year to date. With supply disruptions and de-globalization along with fiscal spending we could be up for a massive deflationary period in the coming decade.

Using Yield curve control the US will try and deflate away most of the debt. Yield curve control is a way to manage debt.

The money supply is a denominator for the velocity calculation when comparing GDP to money supply if the money supply is increased quickly but the GDP doesn’t increase as fast, then the velocity will be lower as the money supply doesn’t mean core growth.

The silver lining is the US dollar purchasing power has increased even with the additional printing of money.

But will the dollar remain strong relative to other currencies? Some variable to watch:
*Fed tapering treasury support
*Slowing the rate of balance sheet increases
What the Fed does with monetizing spending packages will make a big impact on the strength of the dollar.

Liquidity Swaps and International Repo are two programs by the Fed that protects the world treasury market. In order to maintain global reserve status swap lines has doubled in emerging markets and major countries to keep the dollar supply going.

The US is growing its money supply faster than any other country in the history of the world.

Lyns portfolio:
* Diversified portfolio including: Gold & Gold stocks that generates alpha
* US stocks, foreign developed stocks, globally diversified on quality

Strong balance sheets that produces cash flow.
Strong cash flows with strong balance sheets.

Lyn is currently tracking the rotation from growth to value stocks and believes this is one of the most critical aspects of successful investing in 2020.

Large hedge funds have been buying momentum stocks, but going forward these funds might start buying banks, and industrials if they think there is too much concentration buying the same products. They will become more contrarian and buy other assets.

The Gold to money supply ratio became very attractive at 2018 levels including streaming and royalty companies. Overvalued equities and the shift in monetary polices mean having gold is a great defensive hedge.

Physical gold, coins and bars are great for keeping your wealth.Some ETFs have physical metal storage (wealth preservation to keep money) Gold stocks and streamers are for speculation and capital growth.

Lyn is rightly bullish on copper with global demand increasing over time because of the EV (electric vehicles) and industrialization. Demand from India could also push copper up.

Lyn has a Bitcoin long speculative position. Seeing Bitcoin as a medium of exchange or a store of value. In 2.5 years, Bitcoin has maintained a strong market share in the crypto space with 64% dominance.
The Network effect of the protocol has been strengthened and now there is excess liquidity.

#Gold
#Investing
#DebtBubble