An interview with Lynn Alden focused on how the Iran conflict, energy shortages, and rising CPI could keep the Fed cautious and reinforce a slow-burn fiscal-dominance / monetary-debasement regime. She argues the immediate shock is energy-driven inflation and geopolitical fragmentation, while the bigger theme is a more multipolar, multi-money world with continued structural support for hard assets, Bitcoin, and select energy-linked equities.
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Daryl Thomas of VRIC Media interviews Lynn Alden of Lyn Alden Investment Strategies about hotter-than-expected CPI, the Fed’s likely reaction, and how the Iran conflict interacts with money creation, fiscal dominance, and the global monetary order. Alden says the CPI print was hot largely because of energy and downstream transport costs, and that the Fed has limited ability to address supply-driven inflation. She distinguishes between base money and broad money, arguing that the current inflation impulse is primarily a supply shock rather than a new acceleration in broad money growth. Alden then frames the war as reinforcing her long-standing view of fiscal dominance and a gradual-print scenario: large fiscal deficits continue, the Fed can monetize liquidity needs as necessary, and the most likely path is persistent debasement rather than an abrupt “big print.” She says the conflict …
Near term, the market is vulnerable to more energy-driven inflation surprises and headline risk from Iran/strait disruptions, which argues for caution on duration and a preference for assets that benefit from scarcity or stagflation.
Over the next few months, the base case is a sluggish, deficit-heavy environment where the Fed stays constrained and any deeper escalation would likely strengthen the case for more liquidity support; watch for normalization in shipping and energy before leaning risk-on.
The structural read is a slow transition away from a dollar-dominant, U.S.-centric system toward a more multipolar monetary regime, which should keep favoring hard assets, energy infrastructure, and decentralized stores of value over time.
Hot CPI driven by energy makes it harder for the Fed to cut rates.
Alden says the print was hot and that energy and transportation costs are feeding through the system.
The Fed has limited tools to fight supply-driven inflation such as energy shortages or fiscal deficits.
She argues the Fed can affect lending and the currency, but not fix a supply shortage or fiscal deficits.
The current environment reinforces fiscal dominance and keeps the base case on a gradual-print path.
She explicitly says the Iran conflict is neutral to or reinforces fiscal dominance and that gradual printing remains the base case.
Should investors be worried about a more hawkish Fed response if this CPI inflation stays elevated?
Lynn Alden says the hot CPI print makes it harder for the Fed to cut rates but she doesn't think they'll start hiking because the Fed's tools don't address energy-driven supply-shock inflation. Bank lending isn't excessive, fiscal deficits contribute to inflation which the Fed can't control, and raising rates would blow out interest expense without fixing the source. She expects a holding pattern from the Fed until the chaos subsides.
How does the difference between broad money and base money relate to the type of inflation we're seeing from energy and food price spikes versus Fed-driven inflation?
Lynn Alden explains that base money is set by the central bank while broad money is set by commercial banks. Increasing base money alone (like 2008-09 QE) wasn't inflationary because it didn't reach spenders, whereas COVID stimulus created a broad money spike by sending checks directly. Supply shortages in energy cause price inflation in those areas but don't accelerate broad money supply growth, forcing consumers to trim discretionary spending elsewhere — creating a disinflationary effect over time. The structural backdrop is a gradual increase in monetary base and broad money growing ~7% per year, and how prices respond depends on productivity.
How does the conflict with Iran reinforce or challenge your fiscal dominance thesis?
Lynn Alden says it reinforces the thesis — it's either neutral or accelerates it. She distinguishes her view from the 'big print' camp expecting a sudden explosion of money printing; she's been in the 'gradual print' camp where the Fed slowly increases its balance sheet in line with nominal GDP. The US is running $2 trillion deficits that will persist as far as the eye can see, and the central bank will monetize a portion to maintain liquidity, creating persistent background debasement inflation.
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