How to Understand the Era of "Gradual Money Printing" — Wash's Federal Reserve, Gold, and Bitcoin

Podcast Source: Bankless

Podcast Edited by: BitpushNews

Guest Profile:

Lyn Alden, a renowned global macro strategist and investor, has long studied long-term debt cycles, the evolution of monetary systems, and the roles of hard assets like gold and Bitcoin. She is the author of “Broken Money.” Her analytical framework excels in cross-asset allocation and historical cycle analysis, often understanding financial market changes from the perspective of long-term debt structures and policy constraints.

Why is the current global environment so chaotic and uncertain?

Lyn:

I usually explain this using long-term debt cycles rather than relying solely on culturally influenced frameworks like the “Fourth Transformation.”

The world is in the latter half of a long-term debt cycle, characterized by decades of rising debt-to-GDP ratios and structurally declining interest rates approaching zero. When private sector debt can no longer expand, the system begins shifting leverage to the government sector, using inflation and currency devaluation to achieve a “soft deleveraging.” This phase often involves declining institutional trust, political polarization, a return to industrial policies, and increased trade frictions, making it seem like all variables are out of order simultaneously.

Historically, after private debt bubbles peak, policy tends to shift toward coordinated fiscal and monetary measures—expanding money supply and lowering real interest rates to sustain debt sustainability. This process doesn’t happen overnight but unfolds over many years. The current situation shares some structural similarities with the late 1930s, but faster information dissemination, an aging population, and social media amplifying volatility make the experience feel more intense.

Is the Federal Reserve’s independence being weakened?

Lyn:

Such open conflicts are indeed rare, comparable to the period before 1951. During the Great Depression and WWII, the Fed was largely led by the Treasury to support high debt issuance, implementing yield curve control and maintaining negative real interest rates for a long time. After the 1951 agreement, the Fed regained relative independence, but it was never absolute—when debt levels are extremely high, maintaining stability in the government bond market becomes an implicit goal.

The current situation isn’t entirely politically controlled; rather, high debt and fiscal pressures are gradually narrowing policy options. Often, the Fed and fiscal authorities act in concert not because of direct orders but because systemic constraints force them into similar paths. Only when disagreements emerge will independence be truly tested, and we are now in a phase where such disagreements are becoming more openly apparent.

Will the new Fed leadership lead to a “big money-printing” episode?

Lyn:

My baseline view is that we are entering a phase of “gradual money printing,” not an extreme surge. First, the Fed chair is just one member of the FOMC; policy still requires consensus. Second, short-term rates cannot fully control long-term rates, which are critical for housing and fiscal financing. If policy becomes too aggressive, it could push long-term rates higher and undermine effectiveness, so decisions are constrained by practical considerations.

Currently, banking system liquidity is near the bottom, and balance sheet expansion has limited room. While some expansion may occur, it is likely to be slow. Rates may remain dovish, but balance sheet growth is more likely to be moderate rather than immediate large-scale expansion. Overall, the next few years will probably see a gradual increase in liquidity rather than a sudden policy shift.

Why is gold performing so strongly?

Lyn:

It’s a combination of factors. Structurally, central banks worldwide are emphasizing reserve diversification amid geopolitical tensions and asset freezes, increasing gold’s importance as a neutral reserve asset. Additionally, financial and trade frictions between the US and China are prompting some countries to reduce reliance on dollar assets, boosting gold allocations. In the short term, market momentum, arbitrage trading, and leverage-driven volatility can amplify price swings, making phase-overheating in rallies not surprising.

I don’t see gold as in a long-term bubble, but some volatility or corrections after rapid gains are normal. The overall trend remains linked to shifts in global reserve structures and monetary system adjustments.

What is the future direction of the monetary system?

Lyn:

I lean toward a multipolar system. The global economy is now much larger than in the immediate post-WWII era, making it difficult for any single currency to serve as the sole reserve and settlement medium. Future developments may include multiple regional currency centers, supported by neutral reserve assets—gold remains the most established choice, while digital assets like Bitcoin could play a supplementary role over the longer term.

This transition won’t happen suddenly but will be a gradual process spanning many years, with fluctuations and adjustments. The US dollar will likely retain its dominant position, but its “privileged” status may gradually diminish.

Why has Bitcoin lagged behind gold in this cycle?

Lyn:

Its performance has indeed fallen short of my earlier optimistic expectations, but I don’t believe this changes its long-term value. One reason is that institutional risk reassessment—including concerns about quantum computing and other long-term uncertainties—has led to models incorporating tail risks, reducing allocation proportions. Additionally, structural shifts in capital flows may have diverted some direct buying.

Bitcoin’s long-term logic remains rooted in decentralization and network effects, but adoption is slower than many anticipated because most people don’t yet feel an urgent need for an alternative monetary system in daily life. Compared to gold, Bitcoin is still in an earlier stage, so its pace of movement differs.

Are four-year cycles still valid?

Lyn:

In early stages, halving events significantly impact supply, making cycles more pronounced. But as the proportion of new issuance declines, market prices are increasingly influenced by holder behavior, institutional flows, and macro liquidity. The importance of halving diminishes. However, market psychology has inertia—many investors still use the four-year cycle as a reference, and this expectation can continue to influence short-term market behavior.

How should assets be allocated?

Lyn:

I favor a three-pillar approach.

The first pillar is high-quality stocks, including US and international markets, with a moderate increase in global diversification to spread risk.

The second pillar is hard assets, such as gold, Bitcoin, and energy infrastructure—these assets offer protection in an environment of long-term currency devaluation and supply constraints.

The third pillar is cash and liquidity, used to manage volatility and provide flexibility during major market corrections.

The core of this approach isn’t betting on a single narrative but maintaining diversification and flexibility amid uncertainty, while avoiding excessive leverage. Given the current environment of slow restructuring rather than abrupt collapse, a long-term, diversified investment strategy is advisable.

Closing remarks

Lyn Alden’s overall view is that the world is in the late stage of a long-term debt cycle, with policies gradually shifting toward more moderate and sustained liquidity expansion. The monetary system is evolving toward greater multipolarity. Throughout this process, the roles of gold, Bitcoin, and various assets will continue to change, and investors need to focus on maintaining a structured, patient approach amid uncertainty rather than relying on a single grand narrative.