SLP294 Lyn Alden – Inflation, Debt, and Energy Markets

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Lyn Alden of Lyn Alden Investment Strategy rejoins me on the show to talk about macro updates and Bitcoin. We chat: 

  • CPI rises to 5.4% and inflation
  • Govt debt and the likely govt responses
  • Why and how they keep the party going
  • Oil & Gas Bull case
  • Energy and the need for baseload power
  • Stablecoins & why Bitcoin is different
  • People are sleeping on the Lightning Network

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Stephan Livera links:

Podcast Transcript

Stephan Livera:

Lyn welcome back to the show.

Lyn Alden:

Thanks for having me happy to be back.

Stephan Livera:

I saw you were participating in the B word and there was a segment that you did, and I thought that was a great segment. I don’t know, you’ve been doing a lot of great work recently. You had an oil and gas piece as well. But I also wanted to start on obviously for a Bitcoin up inflation. So there was recently a big CPI print of 5.4% on an annualized basis for the us. So I’d love to start there. What are your initial thoughts on that?

Lyn Alden:

Yeah, so it came in a little bit higher than I was expecting, but overall I’ve been in the more inflationary camp. So there, if you follow people in the macro world, there are some, there have been some people that are expecting more types of disinflation. Whereas a number of us are expecting a higher degree of inflation. And so overall this is, this is roughly going align along with what I expected in terms of the types of outcomes that we get from policies we’ve seen over the past year to 18 months. And so basically we got a very high CPI print. You asked, we got, I believe it was 5.4%. Even other measures of inflation generally came in hotter than, than economists were expecting. And, there’s certain categories that are contributing to that, right? So basically my overall framework for the type of inflation we’re getting is that this is a very fiscal driven type of inflation.

Lyn Alden:

So because of the large amount of stimulus we’ve had we’ve increased the broad money supply by quite a bit, which is different than just increasing base money or fed balance sheet. We’re actually increasing the broad money supply. So P money that’s available for people’s checking accounts, savings accounts, currency in circulation. And so when you get that increase in broad supply, we’ve improved people’s demand, right? So we given them money they didn’t otherwise have, and so they can go out and expend it, but we have increased the amount of goods and services by a corresponding amount. And so we’re specifically running into bottlenecks, wherever there’s a supply constraint. So an example where we’re not running into bottlenecks is like men’s suits, for example they’re actually still deflating. And so there’s no issue there, but there’s an issue in certain things like semiconductors.

Lyn Alden:

So that’s going up the supply chain into automobiles and especially used automobiles because there’s constraint in new automobile production. And so that raises the cost of existing cars and light vehicles. And we’re also of course seeing energy prices up we’ve seen commodity prices, some of them spiked and came back down due to various specific bottlenecks, but we generally have a higher price, a little commodities than we had in the past several years. And so one of the things I’m looking at going forward is that a lot of this inflation happened without rent increases going up by a dramatic amount. And yet we’ve had of course house price inflation and the, cost of building materials go up. And so when you, when you look later this autumn I think the next kind of leg of this inflation will be rent driven in large part.

Lyn Alden:

And we also have to see what happens with wages because we’re also seeing a labor shortage in certain industries. And so overall, the year over year comparison is still looking at say a somewhat of a disinflationary period from last year that kind of that May to June period was, was, prices took a dip. But as we move out of that you know, the year over year comparison gets a little bit harder. So we could see that we could see that year over year figure, go down a little bit. However, we still have these other underlying things like rents, I think that are gonna keep that elevated and probably above the expectations for awhile?

Stephan Livera:

Yeah. So great points you’re making there around how money is not neutral and therefore inflation is not necessarily equal across every different kind of product or industry or what we’re looking at. And so, as you rightly say, the price of some things is still going down, but the price of other things quite important, things like semiconductors is still rising. And so I think the interesting question as well is now historically people from the Austrian camp has been sort of saying, oh, very high inflation, but it could also be that it might not be like hyperinflation. It just might be like slightly higher inflation than what we’ve historically seen in the more 3% range. Is that essentially your view that we’re going to see high, but not crazy high inflation going forward in the sort of medium term?,

Lyn Alden:

Yes, that’s how I’m viewing it, but there are, there are upcoming decision points to watch. And so, overall my view is that the amount of inflation will partially correspond to how much fiscal stimulus we get. And so we already had a certain amount and that is still working its way through the system, especially as we come out of lockdowns in some cases while some areas are still in lockdowns. So that’s actually still holding down certain things like energy prices. They’re not as high as they could be if there was actually, say a full unlocking. But basically we have certain constraints still in place. But this is still rippling through the system. So we have to see what happens with wages. We have to see what happens with rents. But for, let’s say, for example, just fiscal stimulus stops right now because of how much debt is in the system.

Lyn Alden:

I think we would see those levels come back down to some extent however, if we do more rounds of fiscal stimulus then we’ll probably get ongoing inflation. Of course, that comes with certain trade-offs. And so if they don’t do fiscal stimulus, because there’s so much, they build up so much debt in the system, then you have more default risk and recession risk. But if you do that stimulus then you you run the risk of having another burst of inflation and it continued to run hot. And so there’s kind of a couple decision points that I’m monitoring to see how long I would expect this period to go and how high it could reach.

Stephan Livera:

Yeah. Good explanation there. And so I’m also curious then how you think that will play out into other markets. And I think an important one is the bond market, because historically it has been seen like bonds where the defensive play, and yet now, because of inflation rising, it means the real return for a bond investor is coming down. So how do you see that? And also there is that recent I believe it was the 10 year where there was a recent rise in interest rate there. So how do you believe the inflation story coming is going to play out into the bond market?

Lyn Alden:

So overall, yeah, this is not a very attractive environment to be holding bonds or cash. And so that’s one of those things where even in a moderate inflation environment, however you want to find that let’s say three to 5% inflation, rather than say, 15% inflation list. So you have three, 3%, 4%, 5%. If interest rates are like zero or 1% you’re, you’re getting devalued on your purchasing power by holding that. And of course there are other ways to measure inflation, right? So there’s arguments about how accurate those, those CPI measurements are. So the real measure could be somewhat above those figures, and yet your rates are still zero to 1% and you’re getting devalued. And so that’s one of the bigger challenges. We also one of the complexities is that historically the market uses bond signals to judge what’s happening in the economy.

Lyn Alden:

And so, for example, when you have a steep yield curve and bond yields are rising on the long end of the curve, that generally means that the economy expects more inflation, more growth, right? Because they want to go into riskier assets. And so that’s up to a certain point, that’s a good thing towards the end of a business cycle, historically, we started to see that long ended bonds start to go down because the market is starting to sense that there’s less growth coming and that they prefer to hold some of these higher, longer duration treasury assets. They’re expecting the central bank to cut interest rates on the short end of the curve. And so they’re going ahead and buying some of those long duration assets. Now the tricky thing now is that because the central banks are large buyers of those treasuries that’s basically adding a complex signal to those bond markets.

Lyn Alden:

And so we’ve seen, for example, that we started to see bond yields rising earlier this year in anticipation of higher inflation and things like that, especially when we saw copper and lumber spiking. But then we’ve seen some of a cool off in a handful of those commodities. And we’ve also seen bond yields come back down part of the way. So bond yields have actually cooled off, even though inflation is higher this month than it was last month, bond yields are actually lower than they were last month. And so we’ve seen kind of conflicting signals. And some market participants are expecting that they’re saying oh, the bond market knows this is transitory. It’s looking down for inflation to calm down. But that’s that’s with the caveat that the Fed is still the largest buyer of treasuries and that’s true for many central banks around the world. And so the ECBs is the biggest buyer of those sovereigns. And that’s true for most, most developed countries in the world where they’re kind of eating their own cooking. There’s an old quote like the measurement becomes a target, it ceases to be an accurate measurement. And so we’re kind of in that sort of field with bonds at the moment.

Stephan Livera:

Right. And so when you add that on with this notion that government debt is very, very high, as you have been speaking about, and many others have been commenting on this idea, what does it look like? Are we going to be in a place where rates have to rise back up because the private market is going to reassert itself? Or do you think it’s more like, because the governments are so active in the government debt markets that they’re going to keep the rates down effectively because of all the central bank and other operations going on to basically keep the rates low?

Lyn Alden:

My base case is that yields would remain pretty low regardless of inflation, at least for a period of time. And so I think that’s a danger that market participants are not realizing that they have this kind of implicit assumption that if inflation gets too hot industries will go up as well. And that’ll cool off inflation like we saw Volcker do in the late seventies. And I think a better model for this environment is the 1940s. And that’s because in the seventies in the United States and many other countries because at that point we had already inflated a lot of debt away. And we we also grew pretty considerably. That was a big period for productivity, 50’s, 60’s, 70’s. We had this environment of pretty low public debt as a percentage of GDP and pretty low private debt as a percentage of GDP, at least in most countries, including the United States, which is my kind of cleanest dataset.

Lyn Alden:

And so when you had inflation for a variety of reasons they were able to raise rates to keep those to keep inflation in check. And it put the economy into recession, but they didn’t cause like mass insolvencies because debt was pretty low, but in the 1940s because of the war and because of other factors let’s use United States as an example, we had like 130% debt to GDP, just the federal debt. And so they couldn’t pay high interest rates. And so despite the fact that you had inflation, that was roughly as bad as the 1970s, but for different reasons, the fed still held rates literally yet at like zero. And they actually went a step further and they even kept long duration bonds.

Lyn Alden:

And so they were and the way they did that they maintained that peg was, they were willing to print money and buy any bonds that try to go over that interest rate. So they were basically the buyer of last resort that said, we will buy any number of bonds at this price point. So don’t try to sell them over that price point. And they were they were able to do that, but then of course they were able to have that mechanism, inflate debt away prevent government finances from getting out of control. But then the release valve ends up being the value of the currency. And so if you’re holding cash or you’re holding bonds, you’re getting 0%, 1%, 2%, whatever the case may be while inflation could be 3, 4, 5, 10, you know, in that environment, in the forties, the highest inflation print was 19% year over year while industry zero and long duration bonds for like two and a half percent.

Stephan Livera:

Yeah so essentially there are a lot of people getting robbed in real terms. So they are sitting there in bonds thinking I’m just making zero or 1%, but in real terms, purchasing power terms there they’re really losing out. And so I think that may drive a lot of bond investors and out of bonds where they have the ability to, so obviously there’s some people who, for regulatory reasons, or for some other kind of market technical plumbing, reason that they have to hold bonds. The other people who choose to hold bonds, they may not choose to do that. And maybe some of those people will come into Bitcoin. Some of those people will go into potentially equities as well, because they’re chasing for some kind of yield. They want some kind of return. What’s your view on that?

Lyn Alden:

Yeah, I think we’re already seeing that to some extent. And so I just, I just, in my newsletter, I just posted a couple of days ago in United States, we have households have record high equity allocations as a percentage of their total assets. And so they’ve never held more equities than they have now. Now part of that’s just because they were holding equities, that then became very expensive, right? So equities are at historically high valuations by many metrics. But in addition, we also saw ever since that March crash, we saw a lot of retail enthusiasm that hasn’t existed for the past five to 10 years. Right. Pretty much going back, you have to go back to the.com bubble to find the last time that there was so much retail enthusiasm for holding equities. And so we are seeing pretty high allocations of equities.

Lyn Alden:

We’re seeing people willing to buy real estate. And of course, we also saw, periods of people going into gold and silver people going into Bitcoin, people going into, dogecoin, like all sorts of things that they’re going into rather than hold their money in cash or bonds. But yeah, like you point out, there are some pools of capital that for regulatory or technical reasons are still buying those, those treasuries. But generally you’re,you’re seeing pensions buy them. You’re seeing certain international types of central banks buy them. But you’re not seeing a lot of kind of households want to own a lot of treasuries at the current time. Now there’s also still some locked up in risk parity funds. There’s still some blocked up in target date types of kind of index approach type of investments. There’s even a case that a tactical trader might want to have some cash and bonds in case you get kind of a deflationary kind of move that they could, they could rotate some capital back into those other types of assets. But yeah, basically, depending on the types of mindset of the investor, we are seeing them prefer real assets. And that could mean very different things for very different people.

Stephan Livera:

Yeah. Good explanation there and quite a balanced point of view, I think. And so the broader situation that we’re living in now is that governments are in such high levels of debt. And the, perhaps the prevailing view, if we went back 10 or 20 years, it might’ve been more like, oh, government will eventually outgrow that debt where they’re going to encourage more people to have children and help the demographic problem that way. And therefore over time, we’re just going to grow this out and it won’t be an issue, but now it seems that we are actually getting to levels that it would require just ridiculous sustained growth levels. We’re talking 12% or something in that range, which is just crazy to sustain that kind of level, which when most of the time a big developed economy is getting something in the two to 3% range growth. So I think where I’m going with this is this idea that it seems that as central banks and governments generally don’t want the party to end on their watch, potentially the quote unquote, least pain way that they from their point of view can get out of this is to keep the economy in financial repression for longer. So is that aligned with your view or how are you seeing this?

Stephan Livera:

That’s how I view it. Yeah. and there have been a number of people that have seen this coming well before the pandemic and the pandemic, I would argue brought forward maybe five years of this type of thing into like one year not the pandemic and then also the lockdowns, the whole thing. And so part of my framework came from reading the research of Ray Dalio over the past 10 years, and then also, taking those seeds of research and then doing my own research with it. And so he foresaw a lot of this happening. And then in addition, back in 2019, there was actually a paper released by BlackRock. And so the world’s largest asset manager, and then actually they were in that paper, they were advised by Stanley Fisher, who is the former fed vice chair.

Lyn Alden:

And they basically they pretty much laid out the playbook that, literally like starting less than a year later countries around the world were doing especially United States, which was, they said, okay, in the next downturn interest rates are already so low. So cutting industry, it’s not going to be very effective. And so we’re going to have to go direct and we’re going to have to have more fiscal spending up to potentially even including helicopter money, but they said, okay, this, the risk there is that it could be somewhat inflationary. And if rates go up that could offset some of the benefits or all the benefits of that fiscal spending, and therefore you’ll need some sort of quote unquote soft coordination between the central bank and the fiscal authorities where the central bank is willing to hold rates low. Even if you get that period of inflation.

Lyn Alden:

And it’s uncanny if you go back and read that because it’s literally, they didn’t predict, predict a pandemic, obviously, but this, this period that we had is literally almost down to the line exactly what they saw playing out. And that’s a topic that I started covering back in say 2019 or so. And the when it actually started on fold in 2020. I was like, okay, here’s the, here’s the playbook. My own research shows that, I expect the same thing. And so far now that we’re deep into 2021, that is the playbook that we’re seeing playing out where, they’re not going to, at least in countries that control their own currency. The chance that they’re going to default on their own currency is very low. And so instead, what you’ll see is that, they’ll basically spend what they need to don’t monetize what they need to and try to keep it going that way.

Lyn Alden:

And so generally when you see sovereign defaults, it’s usually because they’ve run into some constraint that they can’t print. And so you see that, for example, in emerging markets where let’s say Argentina has dollar denominated debt and for whatever reason say that they run into an economic problem. They don’t manage things well. And then they’ve too many dollars. They can’t print dollars, right. They can only print their local currency. And so eventually they say, you know what we can’t pay it back. Let’s restructure this, let’s this partially default on this, and let’s reorganize this and try again, right. So that’s a sovereign default. Another one would be for example the United States and seventies we backed our dollar by gold. And so we can’t print gold. We had a finite amount of, of gold in reserves, which is actually, which at the time was going down pretty quickly.

Lyn Alden:

And so they defaulted on the fact that the dollar was backed by gold. But they didn’t of course, default on, on say the nominal value of treasuries. You basically just got, partially inflated away you’re defaulted on what it means to own a treasury or what it means to own a dollar. But the actual dollars, the treasuries themselves were not defaulted on it. So basically they’ll default on things they can’t control. But then they, they will rarely default on things that they, that they can control it, that they can print.

Stephan Livera:

It’s really fascinating. And so maybe another way to come at this and just explain it just for listeners who might not be as familiar. So as an example, it’s like, they’re trying to play this Goldilocks game of keeping not going too hard or too soft, because at the same time, if they print too hard, then they go into the more implicit default situation that you were saying, this idea that, oh, yeah, we’ll still repay you this number of dollars, but the value is much, much less. And then on the other side, it’s also that in various markets around the world, it’s almost like they don’t want equity bear markets. They don’t want too much of number go down in various other, whether it’s say in the Australian housing market context, they don’t want the housing market to crash because they’ve let all these people bet their lives on the housing market.

Stephan Livera:

And now they don’t want to let that go down either. So then they’re sort of playing this game of trying to keep interest rates low, to keep stimulating things, but at the same time, have, as you’re saying the fiscal stimulus aspects but they’re trying to play this Goldilocks game of not making the inflation rise too high, because that would scare everyone off. But then also not let markets crash because then that looks really bad on your watch too, because if the stock market crashes or if the housing market crashes, then that also looks bad as well. Agree, disagree, what do you think?

Lyn Alden:

And that’s, that’s the approach. I mean, even in that paper, for example, they were talking about the risk of it getting too hot. And so they propose different ways to kind of moderate it. And so that’s, we’re seeing they didn’t do that full playbook for that part, but we are basically a currently at the moment seen that kind of moderate outcome we’ll see how high it gets or how long it goes. But at the current time though, there’s still a lot of market participants, they’re saying, oh, it’s transitory, it’s due to specific issues. They also, of course they have, they have cover from the pandemic. They could be, look, we had to do this because XYZ. And so, there there’s all sorts of things that they can use to kind of make it look like it’s pretty normal.

Lyn Alden:

And so from their point of view, they want a decent amount of asset price inflation. And then they do want a decent amount of just prices going up for consumer goods as long as it’s not too hot or too quickly especially in certain areas, like say food price inflation they can quickly lead to social unrest. And we’re seeing that in emerging markets, in many cases, we’re seeing it in Cuba, we’re seeing it in Lebanon. We’re seeing it in a bunch of countries. And so that’s, that’s overall what they’re aiming for. And one of the risks is that because over the past four decades, we financialised the economy so much in many different countries that if asset prices fall, that can actually reduce GDP because so many either people or organizations have their wealth tied up in assets and both psychologically, and just mathematically, if those asset prices go down that can affect their level of consumer spending, which can then impact other company’s revenues, which can then mean they hire fewer people, they have less money to spend and you actually get a recession from asset prices going down.

Lyn Alden:

And so in the United States, we, we tend to hold a lot of our assets and our equity market. Right. And so that, that’s one of our kind of pain points, whereas in Australia, it’s about the housing market and more so and so different markets same with Canada. So different markets have their different areas of assets that they have favored for one reason or another for Canon Australia, partly it’s because of the Chinese buyer that the foreign buyer that is, is committing capital to kind of prop up those as well. So whereas in United States we have a lot of foreign buyers of our equities. And so there’s that pain point that they’re, I think they’re aware of. And so it’s going to be challenging for them to navigate that over the course of the next decade, because as the prices are so high already we’ll also debt is still very high. Yeah. I like

Lyn Alden:

That explanation around how they need asset bull markets from their point of view, to keep the quote unquote party going, because there are a lot of people who are reliant on that for their ability to keep on spending, because for example, they may have drawn against the equity on their home to take on another loan and using that credit to spend, or they may be I know in there, I think in the US there was this recent a bit of drama around this whole concept of buy, borrow die, right? This idea that rich people who are just not having, they don’t take income into their personal name, they’re just borrowing against their rising assets. So it’s like the smart people essentially realizing, oh, I’m just going to put my wealth into this thing that’s going up. And I’m going to borrow against that. I’m going to collateralize against that. And obviously there are risks associated with collateralizing and I mean, in the Bitcoin world, you can see a big price drop, but in things that are quite well-established large markets like equities, housing, that seems to be the tax efficient strategy that the wealthy people are employing.

Lyn Alden:

Yeah exactly. We also see it, the middle-class with, with 30 year mortgages tied to a property in the S and so basically the whole play there is that you benefit from the house going up in nominal terms while your mortgage is, is generally basically getting partially inflated away or just treading water with inflation. Whereas house prices, if it’s a decent piece of property has generally gone up higher than the official CPI metric. And so that is the kind of thing we’re seeing playing out. And so let’s say someone they have a big portfolio of equities. They’re upper middle class, let’s say and they’re about to go on a vacation or they’re planning on a big vacation. If asset prices crash, right.

Lyn Alden:

They’ll feel less confident in going on a vacation, they might downsize their vacation where it let’s say they were going to buy a second car for someone. And they say we can’t buy that car this year. Let’s see what happens with markets first. And so whether it’s whether it’s their home equity, whether it’s their portfolio you know, there’s all sorts of things that basically can, if those prices go down can influence their spending. And then that trickles into the real economy. It has all those kind of butterfly effects as it trickles through the whole system. Yeah.

Stephan Livera:

Excellent. And I saw recently you did a great piece on oil and gas. So you were basically explaining, I guess, some of the misconceptions out there, because it, there’s almost this public perception of what energy markets are and how they work. And then there’s that real, if you’re an engineer and you’re really looking at the numbers, there’s that view. So could you tell us a little bit about what you were getting at and what people can learn from that idea?

Lyn Alden:

Sure. And that was, that was an exceptionally long articles. So it’s, it’s one of the more challenging ones to summarize, but overall it kind of made the case for why oil and gas are unlikely to be phased out anytime soon. And also why their prices could be somewhat elevated mainly because we’re not putting a lot of money into developing new supply while demand is still pretty persistent. And there’s a bunch of, and then it kind of goes into a deep list of reasons as to why. And so that a couple of reasons are, for example there’s the idea that we’re going to shift primarily to solar or wind. But of course the big challenge there is that as I showed in the article, historically whenever humanity found new energy sources there are two things.

Lyn Alden:

One is, they were generally more dense energy sources. And so coal was more dense than wood. Oil is more energy dense than coal nuclear is more dense than that. And so we added these new energy sources, but we never actually reduced the old source. We just, we just, we reduced them as a percentage. We actually just kept adding new types of energy on top. And so it’s very hard to actually remove yourself from a prior energy source. And whereas now the idea that wind and solar, which are less dense energy sources are going to come in, and we’re just going to displace a large part of our previous energy stack, especially quickly, like, let’s say 10, 20 years the probability of that is so very low.

Lyn Alden:

And so basically we have kind of fundamental challenges with energy density that I don’t think a lot of people are aware of. And that doesn’t mean that solar wind can be part of the energy mix but and they have their own downsides too. So for example, we call them sustainable or clean energy. But in many cases they’re not recyclable. They do take a lot of energy input. And so they’re harvesting a sustainable source. So solar is renewable. Wind is renewable, but the actual mechanical and electrical components to harness that energy, that’s really not renewable. And so the article just kind of went through all these different misconceptions about energy and kind of made the case why oil and gas are probably going to be around for quite a while, potentially with periods of elevated prices due to us not really investing in them. And also I kind of reiterated the fact that I think nuclear energy is a very strong energy source that I’m kind of expecting that at some point, the world’s going to kind of more catch on to that. We’re starting to see rumblings we’re starting to be a little bit more accepted in some jurisdictions or other jurisdictions are still kind of looking to gradually phase that out. And I think that’s going to be a pretty big challenge in the USA. Yeah.

Stephan Livera:

Nuclear is an interesting one because it seems like the perception of big accidents Chernobyl, and the like have colored people’s minds to be overly bearish or negative on nuclear. And despite the fact that if done correctly, it can be very safe and very, very efficient long-term. But it’s just maybe not as viable right now for a lot of the new nuclear projects to come online, which is why we’re sort of the, it seems like if you just looked, if you just read the news, you would get this impression of oh see everything’s wind and solar, and we’re never going to buy it when I’m never going to do any coal and natural gas again. But it seems that the reality is quite different from that, because there’s still a need for baseload power. There’s still a need for cheap and reliable, scalable energy

Lyn Alden:

With nuclear. I use the analogy of like airplanes. So, people are kind of intrinsically more afraid to fly than to drive and because flight, it feels like it’s out of our control. We don’t understand it as much. And of course, every few years, there’s like a huge crash that’s on the new global news and it’s terrible. But when you actually run the numbers if you’re going a long distance, it’s much more dangerous to drive. And so we see that with say, let’s compare coal to nuclear. So coal it’s kind of the enemy rather than the one you don’t know. And so, for example, it’s simple, it’s been around for a long time and it is pretty damaging. It does a lot of particulates into the air and those are linked to all sorts of other types of death.

Lyn Alden:

And so they there’s actually papers out there. The estimate, how many people die from air pollution, that’s related to coal, that’s related to kind of other types of fossil fuels and that’s somewhat measurable. And it’s pretty, it’s a pretty high number every single year. It’s like a hundred thousand in the US and then that can be far higher globally. Whereas if you look at nuclear energy the number of people that have directly died from nuclear disasters is like a dozen or so a couple dozen. And then when you actually the estimate for how many people were negatively impacted by say Chernobyl and Fukushima there’s a big range of estimates, what that number is, but even the high end estimates throughout the entire, like say 50 year history of nuclear power, they’re like less than like one year of like coal related deaths.

Lyn Alden:

And so it’s one of those things where it looks ends up being a lot like air travel, where you have these occasional horrific incidences and yet the whole industry is actually very safe compared to many of our other types of energy. And what I would like to see is those, the three disasters that we’ve had three mile island, Chernobyl and Fukushima, and of course they had different levels that will being the worst. Those were even though they occurred in different decades, those are all built on 1960s and 1970s technology because we haven’t really been progressing nuclear in the same way. Kind of like how we haven’t really progressed aerospace as much as we have say electronics. And so nuclear has just not been an area that we’ve advanced as quickly as we could have.

Lyn Alden:

And so you could have, for example, smaller nuclear reactors using 21st century technology to make them even safer than they historically have been, and to reduce the probability of some massive incident. And I’ve actually, I don’t know if you saw the news with Oklo and compass mining where compass mining there’s a startup named Oklo and they’re trying to basically popularize or deploy these much smaller nuclear facilities that, that they take the discarded waste of conventional nuclear facilities. And then they can actually run off that and basically get more juice out of that. And so they actually partnered with compass mining that was on a press release where they’re actually going to power a Bitcoin mining with that. And the whole point there is that the downside of those small nuclear reactors is that when you’re running a smaller facility you have kind of lower margins.

Lyn Alden:

And so they are actually there’s, I read up about it. They were kind of proposing trying to run these unmanned, but of course, when you hear about an unmanned nuclear facility, you’re like, I don’t know about that. I don’t know if you want to, I don’t know if regulators want to let that happen. So you basically, it’s better. You have to kind of co-locate that with something that’s using that power that is providing security and providing personnel. And so of course, if they co-locate with Bitcoin miners they basically have onsite security and they’re able to provide that power. And so you can have flexible arrangements where a town needs power they do business with Oklo comes in and builds. One of these facilities but lets say, that town only needs half the power well like Bitcoin miners the co located with that power plant can soak up some of the remaining power and help make that project profitable. And so I’m hoping we’ll see more types of that kind of innovation because we’re going to need a bunch of different energy sources going forward to be both clean and something that we can keep getting more of. And that is you basically, cost-effective in clean as possible.

Stephan Livera:

Yeah, that’s a great example. Compass mining is actually a sponsor of my podcasts. That’s certainly a good one. And so I think the similar dynamic, just like what you were saying, this idea of like a plug factor, if you will, that you can use where there is energy that can be created in an area. And I think it’s another good example that’s related is hydro and geothermal that potentially can have a similar kind of story where it might be only able to be made in certain places. And so they can go set up a facility draw, use that power, and then any excess power that’s not being used by the local town, because you can’t transport it cheaply or easily, then you can, people, Bitcoin miners would be happy to go and set up there and start contributing to the network security while also helping make these projects viable where otherwise they may not have been.

Lyn Alden:

Exactly. And so we’ve seen, for example, Bitcoin’s been very good at sucking up excess capacity from hydroelectric dams in China. And then also in Quebec, for example, those are just two that come to my head and then with geothermal, I mean we’ll see what kind of innovations come there. I mean, it’s one of the cleanest types of energy with downside being that it’s historically only suitable in certain types of areas. There are proposals for deeper types of, of geothermal that can tap into a deeper layer to get heat and therefore BP, useful in a much broader range of geographies, but kind of like nuclear power. There just hasn’t been a lot of money going into that space to really kind of spearhead that type of, we are seeing developments that might make your thermal potentially a more widespread use of power.

Stephan Livera:

And also I’d love to touch on some of the examples you raised in that piece. You spoke about the examples of Germany and of India. So Germany has this example where they’ve been really trying to do all the renewable stuff. They’ve been really trying to do the wind and solar. And it seems, they’re even trying to mandate that car manufacturers transition to using electric cars. And you see like Mercedes come out with like an electric AMG version and things like that. But at the same time, you quite rightly point out that, well, hang on, they still need baseload power. It’s not like you can just go to this wind and solar only. And so that aspect of it was really interesting to me. Could you explain a little bit around that?

Lyn Alden:

Germany has one of the grids, the electrical grids that is the most focused on wind and solar but even there, as you point out they need baseload power. And so these, a lot of coal for that and they’ve also had a decent chunk of nuclear and after the Fukushima incident in addition to Japan taking some of their reactors offline actually had Germany decide to start phasing out some of their nuclear power plants. And so the interesting thing there is that they, they could have phased out coal more rapidly instead. And so they actually chose nuclear over coal. So they don’t, it’s like, there’s always a trade-off when you make a decision like this. So they said okay. We want to get rid of dirty nuclear or risky nuclear.

Lyn Alden:

And so we’ll leave the coal in place longer. Like people don’t hear that second part. And so they could have kept the nuclear and phased out coal more. And so you’ve actually seen, despite all of the growth we’ve seen in German wind and solar their coal usage is pretty much flat, whereas they could have, they could have reduced it. And there’s even been papers showing that actually that actually had kind of measurable death counts most likely in Germany, because as it pointed out there the number of deaths related to coal and other particulates is somewhat measurable. And so that some non-zero number of people potentially died due to the decision to phase out nuclear instead of coal, unless of course the improbable event that one of those nuclear reactors would have otherwise blown up or something.

Lyn Alden:

And so, yeah, you have that kind of that outcome there. And then two it’s one is when you look at overall energy consumption, electrical grids are only like 20% of our total energy consumption. And so we often think of it, most of our electricity coming through the grid, but that’s never really not the case, of course, automobile energy, and then also energy that we use and like all sorts of diesel equipment to combine our commodities. And so we, we basically as in terms of how much energy is used by the world only about 20% of it is grid. And so Germany is actually still using quite a bit of fossil fuels for all their other industries, all their cars, all their manufacturing and it just so happens that their grid is somewhat more solar and wind focused.

Lyn Alden:

And so basically it is a decent region for wind power, for example. So it does make sense to make use of wind when you have it. But I think over time, basically, they’re going to find it they’re already, they had a period where they had a big energy surplus, right? So they’re producing more than they’re using, but ever since they’ve kind of accelerated that wind and solar approach that surplus has been diminishing. And so I they’re over as you kind of project that they’re in a case wherethey’re going to need baseload power and it just the question of do they want it to come from coal? Do they want it to come from nuclear? Do they want it to come from natural gas? We’ll see what direction they go in.

Lyn Alden:

Probably some combination of the above. Of course, ideally you want to phase out the ones that are, say more dirty or less safe than other ones, and a contrasting example I use, or a similar example is, India. And so India, for example, if you look at how much solar capacity they’ve installed it’s this big exponential increase, they’ve every year they’ve been dramatically increasing how much solar capacity they install and it makes for great visuals. But then if you look at actually how much coal capacity they installed, it actually dwarfs how much solar capacity they, installed. And so on a percentage basis, solar was growing faster because it was growing from a very small base whereas their coal grid is a lower percentage, but because of the coal is like the vast majority of their grid power.

Lyn Alden:

The fact that it grew at a, at a decent percentage, man that actually was a much larger absolute addition to their grid over the past 5, 10 years than solar. And so that’s an example of the challenge you have when even if you find a new energy source that you want to go ahead and add to your grid, it’s very hard to replace prior energy sources, especially because a market like India is growing more quickly. And so there, they generally have a preference for fast turnaround energy sources of which coal is kind of well-suited whereas Germany, because they already have, most of their energy needs met. They’re able to invest in longer projects. And so you kind of have those different dynamics in different markets. Yeah.

Stephan Livera:

Great explanation. And as it’s probably fair to say that over human humanity’s history, our story is being able to use more energy so that we can do more. So, as you say, once we’ve found an energy source, we’re very unlikely to turn it off, unless it has some really horrific health impacts and we’ve got a better alternative. I mean, maybe an example would be in some parts of the world where people don’t have access to energy, they’re using wood and burning the wood inside a home. And so that can be very bad from a health standpoint. So people, if they can transition over to a better energy source, they will, but if not, well, they would rather have that because then at least they can, they can cook food instead of not being able to do that and that sort of thing.

Stephan Livera:

And it’s a really interesting point as well, around the decision of which one we’re going to use, because there is, just like with air pollution and maybe even concepts that people don’t like to think about, like this idea of statistical value of a life, which is used in insurance calculations as well, where effectively do have to think about these trade-offs because all life is precious, but they still have to think about how many resources they’re going to expend to save more lives in this, that, or the other area. And so to the point around, electricity it’s also that or energy as well as you rightly point out that we have to look at what is going to enable all of these other things, right. I guess the Alex Epstein point to make here would be that yes, coal has all these, it can have all these negative pollution impacts, but on the whole it’s enabling all these people to produce and to eat and to live and to do all these things that they otherwise would not be able to. And as you rightly point out in say, countries like India, there’s a demand is a huge demand for energy. There’s a need for that. And a really funny point. And you made this point in the article as well, is that sometimes the developed world is outsourcing production of things into the developing world and effectively saying, oh, I’m just, I’m going to look more green myself, but you do all that dirty work using coal and natural gas, right?

Lyn Alden:

That’s kind of a kind of a balance sheet trick we’ve done over the past 25 years for, let’s say the United States. For example, if you look at our overall energy consumption, it’s pretty flat. It hasn’t really gone up that much. And so we’ve been able to gradually phase out some of our coal and things like that, which I think is a good thing. Cause coal by by many metrics is among the dirtiest sources. And so our energy mix looks pretty flat there, but you say oh look, we’re keeping our carbon emissions in check we’re we’re, we’re doing all this, but then the part that they’re leaving out of that calculation is it over the 25 years, we’ve radically expanded our trade deficit particularly with China, but also other emerging markets and other countries.

Lyn Alden:

And so China, we gradually shipped our manufacturing chain over to China and that’s very coal, heavy it’s very energy intensive in general, regardless of what type of energy source you’re using. And so part of China’s developing on its own. So it’s increasing its say middle-class quality of life. But in addition that part of the way they’ve done that is that they become a big manufacturing hub along with other countries and in parts of Asia. And so we basically outsourced some of our energy usage to those countries. So it’s off of our balance sheet. And so we say, look our grids pretty clean? We’ve managed to keep our carbon emissions and check and look at China over there, burning all that coal.

Lyn Alden:

But a lot of that coal, a big chunk of that is actually coming back to us in the form of all the things that they’re physically making for us, which is all the energy expenditure and all the raw materials that go into that. And so it’s really one individual country is sometimes capable of flattening out their energy demand and also reducing some of their dirty sources of energy like coal. But it’s very hard for the world as a whole to do that, because that means essentially that you’d be flattening it out without also outsourcing it to somewhere else. If the whole world kind of to say flatten-out its energy usage. And so those are two very different comparisons. And so I think it’s important when we’re talking about the future of global energy it’s much harder to flatten that out than it is that we’ve seen in some of the developed countries where they managed to flatten out their energy demand.

Stephan Livera:

Yeah, really fascinating to think about it reminds me as well of when people talk about say tax policy, historically in say even in the US as an example, there are examples where the total tax take as a percentage of the economy sort of stayed the same, even though the tax rate has varied because in practice, what would happen is people might use different accounting techniques or tax strategies and effectively the amount of tax take that the government would receive was staying roughly constant. And it’s a similar kind of idea here, even in energy, right? So this idea that we’re trying to in some countries, the more developed countries, we’re trying to say, oh, look how clean we are. You look at you, you’re dirty, you’re doing all this dirty stuff, but the reality is it’s more just like globally, it hasn’t actually changed that much.

Stephan Livera:

So it’s a kind of interesting action and reaction example there. But yeah, also another area I really wanted to chat with you about is stablecoins, right? So obviously some of us now, some listeners might get annoyed. We’re talking about stablecoins. I want to hear a Bitcoin stuff, but I think there are interesting impacts onto the traditional banking system coming out of stablecoins. My recent episode with Caitlin Long and some conversations around the space as well. I’m wondering, do you have any thoughts on this idea of stable coins impacting the traditional banking sector, money market funds?

Lyn Alden:

So we are seeing a rapid shift towards stablecoins and we’ve had pretty rapid growth in that space. And so it is becoming large enough that it’s a macro phenomenon. Now it’s not just a few billion here and there it’s like a hundred billion dollars of stable coins. And you had Caitlin on your program. And so she’s paying a lot more attention to that space than I am. She’s a lot more qualified to talk about that. So I would actually reference, I would say people should go check out that episode. And so there’s all sorts of kind of those intricacies to look at. But overall I think what we’re basically seeing is for anyone that’s kind of used stablecoins or is kind of active in the digital asset ecosystem, those are just generally a much faster payment rails that we see in the legacy system.

Lyn Alden:

And so basically there’s that kind of one way adoption, right? So it’s kind of like once you start using them, you don’t go back where possible to the previous legacy system. And so unless regulators kind of slow that down. You’re likely to get that continued migration to stable coins. And we’re even seeing, for example, you know, Facebook and diem, right? So, so it was, it was the Libra project. Then they add some regulatory scrutiny, they kind of they retooled that a little bit. And so we know ultimately what that is is, is another stable coin approach. And, and, and so it’s one of those like highly regulated stablecoins that it can apply certain technologies associated with blockchain to say making payments quicker or programmable in a way that can say be more beneficial than the current system.

Lyn Alden:

But of course it doesn’t solve the same problems that Bitcoin solves. Right. So it’s not like a permissionless trustless decentralized system. But it can still have certain advantages over the existing rails that have been around. We’ve been kind of iterating on rails for a very long time, like fedwire and that’s like a hundred year old system. And they, as technology has come across, I mean, they say, okay, now we’ve made the radio. And now we added layers of technology to that. So we’re not actually like bringing wheelbarrows full of cash or gold between banks anymore. And so, but it’s still fundamentally the same types of rails where stable coins are kind of a whole nother kind of set of rails. They kind of exist alongside that and kind of disrupts that potential a little bit more.

Lyn Alden:

We’re also going to see questions around how’s that going to interact with central bank digital currencies for the countries that choose to launch that in the kind of the near term or I should say, like intermediate term. And so for example, if you look at DMS white paper, they reference central bank digital currencies, and in their view, they kind of potentially view themselves as like an overlay on top of central bank, digital currencies, where they can kind of like how, if you look at say Circle like a stable coin, they will ostensibly hold a certain amount of reserves. And then they’ll issue tokens that are backed up by those reserves. Whereas something like Diem if you have central bankers occurrences, they can have an account with the fed or whoever that system’s going to work, where they hold central bank, digital currency units, then they issue their own token.

Lyn Alden:

And those tokens are say more programmable, more flexible than the central bank digital currency units are. And so there you’re potentially kind of a private sector extension of central bank digital currencies. And so this field is still very new. And it’s only in the past year that it reached macro significance. I mean, I remember I wrote an article earlier this year when I was touching on Ethereum and kind of critiquing that to some extent. But one thing I pointed out in that article was I do think that stablecoins, the volume of stablecoins is going to increase pretty rapidly. And since then it actually, it actually like tripled in say seven months or six months, whatever the case may be. And so it is a very fast growing space that even a year ago was, was much smaller, not really on regulator’s radar in the way it is now.

Stephan Livera:

Yeah. Excellent comments. And so do you see it, like, we’re going to just see continued growth in that sector and we’re going to see a lot more competition come into that space because right now, obviously the big names, people like tether do you see it, like we’re going to see more and more people starting their own stablecoins or doing stable coins for other currency currencies as well, not just the US maybe Euro stablecoins or others.

Lyn Alden:

We are seeing we’re interested in that. I mean I’ve been covering Sber bank is interested of Russia of doing stable coins there. It’s generally a pattern we’re seeing around the world is that many major currencies. They want to do stablecoin implementations of them, even the Diem project seeks to have stable coins of multiple currencies around the world. They want to expand the number over time. And so I do think that barring certain regulatory actions that is likely to increase and their use cases can rotate. So historically stablecoins were primarily used within exchanges, especially the offshore exchanges. And so we’re starting to see more regulatory crackdown on like Binance and some of those offshore exchanges. And so that, that could potentially I’m just kind of estimating gear that could slow down the usage of, tether, for example.

Lyn Alden:

Whereas you could see other types of stable coins. They let’s say Diem or other ones that are more intended for use as a, as a payment mechanism. They could start to take off more. Of course, we’ve also seen algorithmic stablecoins, some of them more successful than others. We could, for example, have lightning channel stable coins, right? There are a couple of people talking about those. And so there’s still a lot of innovation happening in the space both in terms of the number of currencies that could be used and the mechanisms you use to do that. So either custodial ones or synthetic algorithmic ones, and there’s a bunch of different options depending on what the use case is. So I think that the long-term shift to watch primarily is the idea of stable coins, primarily being trading as a unit of account towards if they actually start to become more used as a medium of exchange in the broader economy, right?

Stephan Livera:

So people may here and there use them as method of payment, or to potentially get around, say the difficulties of trying to use the normal system to do international wire payments and things like that. But fundamentally it still doesn’t compete with what Bitcoin does, right. Bitcoin is special. And for good reason, I think this is another thing where it’s worth reiterating that e-gold and Liberty reserve were shut down for a reason. And tht’s Bitcoin was built the way it was to be permissionless for a reason. And so stablecoins, while they may have a little bit more of a superficial convenience to them, they just fundamentally do not have the same characteristics that say Bitcoin has and Bitcoins overall network effects that are growing. And on the B word today, I saw you well, it was a pre-record I think, but I saw you made a great presentation there as well, talking about some of the network effects, and you were talking there about how comparing Bitcoin’s security versus other coins out there, or the security of Bitcoin versus say the fiat system.

Stephan Livera:

I’d love if you could touch on some of those aspects of Bitcoin’s network effect that’s growing. And I think you also had a great explanation around the whole MySpace Bitcoin aspect as well, because that’s a common one that people hear. So how do you answer that? Let’s say if somebody asks you them is Bitcoin MySpace.

Lyn Alden:

Yeah. So yeah, a couple of different questions there, I guess, going back to the root I totally agree that Bitcoin is just fundamentally different than stablecoins and things like that. And that’s a force because Bitcoin is a decentralized permissionless bare asset. So it can be used non-custodially, non trust fully. And so that’s the whole point there. Whereas if you’re using say a stable coin, you’re relying on them to custody it for you, assuming it’s that custody type of stablecoin. And in addition, they can blacklist certain addresses and so they can actually they can make them less permissionless than they seem. And so, whereas Bitcoin’s pretty much the unique asset that doesn’t really have those issues. And so overall it’s a fundamentally different asset class, and that’s why we can monitor what’s happening with stablecoins for other purposes.

Lyn Alden:

But I just find mentally don’t consider them a competition to Bitcoin they’re more of a competition to the way that the current system runs. So if I was Western union, I’d be concerned about stable coins and Lightning for that matter, but there’s a couple different attack factors there if you’re a legacy systems for lying on high fees now yeah. Then going into Bitcoin’s network effect, this is a topic that I’ve wrote an article about it’s something that I’ve been emphasizing, partly because it was one of my initial questions with Bitcoin. And so my initial question with Bitcoin when I was kind of looking at it years ago was okay, so it’s a great technology, but these other systems can come and copy it.

Lyn Alden:

And so it’s open source. These other entities can copy it as to what makes Bitcoin special. And so of course, one is the fact that it’s, well-designed it had a really good path dependence it’s leaderless. So there’s all sorts of those qualities. But then in addition it it has the widest network effect. And of course in blockchains, your network effect is your usage is heavily tied to how secure you are, like how much hash rate you have, how sufficiently decentralized you are. And so in that sense, Bitcoin is large enough decentralized enough, well-designed enough that it’s very, very, very hard for other blockchains to come and try to dethrone Bitcoin, at least in the things that Bitcoin is aiming to do. So I wouldn’t be shocked if say that the total stable coin market cap were to exceed Bitcoin for a period of time, who knows.

Lyn Alden:

But it’s fundamentally not competing with same thing that Bitcoin’s competing in as an example. And so the overall just the fact that anyone can run their own full node, the fact that you can send permissionless payments and then the fact that, you know, compared to some of the hard forks are compared to some of the other protocols you’re more decentralized and you’re more sure when you send a large payment of its security and its ability to arrive in that location. And then in addition, I didn’t get into it in that B presentation, but also the lighting network adds a whole nother network effect onto the base layer. And this is something I’ve talked with Elizabeth Stark about my view that essentially lightning makes even more use of network effects than Bitcoin because Bitcoin is a broadcast network.

Lyn Alden:

Whereas lightning is a channel by channel network. So it’s very, very reliant on having adequate liquidity. And so the more that we build that lighting millwork on top of Bitcoin that further strengthens the network effect, both of lightning and a Bitcoin, it kind of creates more and more usability in the network. And then once you have usability, you can bring in more apps and more users, which then further increases liquidity and usability and keeps that flywheel going. And so I’m really optimistic with the development path that I’m seeing Bitcoin using. I really like that layered approach because that’s the best approach where every layer has trade-offs, but when you, when you use each layer for the purpose that they’re designed for, you can greatly minimize the trade-offs for your use case. And so I think that overall development path is going really well.

Lyn Alden:

And I’m really excited to see it catch on, I mean, I tweeted back in January that I think people are sleeping on lightning network. And I basically said that I think it’s starting to reach critical mass both in terms of liquidity in applications. And since then, all the capacity in nominal terms and Bitcoin terms is almost doubled on the lighting network. So went from like 1000 to like 2000 Bitcoin on the public part of the lightning network. And so I think that that’s if you look back five years from now, I think the capacity is going to be much higher than it is currently. And I think the number of apps using it can be just far larger than you can probably imagine right now.

Stephan Livera:

Right. Yeah. I mean, I’m a big fan of Lightning. I’ve done a lot of interviews on lightning. I guess I’m curious though your view, because it seems that right now, a lot more people are using Bitcoin as a savings technology, and they’re not as interested in the kind of medium of exchange aspects of it for now, because it might be capital gains tax implications, or it might be various other things. And so I’m not saying this to criticize lightning I’m myself, a promoter of Lightning, but I’m curious your view there on do you view that as a conflict or do you see that as like a it’s just another whole network effect that we’re growing this whole thing?

Lyn Alden:

I think it’s a law, it’s a long-term planning, right. So you want to build out before you need it. And especially because as we saw one of the criticisms of lightning is that it was going slow, that it wasn’t just like, it’s not like you turned it on day one and it was usable right away. And that’s because it took time to build up the liquidity in addition to the development work needed to do. And so it’s inherently say a slower project than say, like a DeFi project, like making a decentralized exchange. It’s this much, it’s a slower process, but it’s kind of like a train where it starts slow, but then the momentum is really, really strong. And so I’m glad that they got that going over the past three years because eventually as on chain fees potentially grow you need that lighting network more and more if you’re trying to do small transactions, even if all you’re trying to do is take your coins off of exchanges and things like that.

Lyn Alden:

And so there there’s all sorts of use cases there, but then from another point of view people in emerging markets can make better use of lightning potentially, right? So if you’re doing smaller transactions with the need for smaller fees, that can matter. And so for me, I’ve not been someone who’s rushed into making extensive use of lightning because I’ve been primarily interacting with Bitcoin as a store of value asset. Whereas many other markets like we saw, for example, in El Salvador their first touch with Bitcoin was largely lightning related. And so, and another topic is that I think in the intermediate term, you can use lightning as a monetary network without even relying on the asset. And so we’ve seen that with strike, for example, where you can, you can do to Bitcoin to dollar payments in a way that is faster and cheaper than say Western union for, for remittances and things like that.

Lyn Alden:

And eventually you could have, you could have dollar to Bitcoin to Euro payments or Euro to Bitcoin to Aussie dollar payments. And so that’s that’s a kind of a competing way to do efficient payments compared to stable coins, even. Or even interacting with stable coins. You can do stable coin to Lightning, to stable coin type of payments. And so it’s another tool in the tool chest to basically give developers abilities to just fix things that kind of find deficiencies in the current system and to iterate them as much as possible to make them cheaper, faster, better especially for people who those fees are a very meaningful part of what they’re dealing with. And so I think that I don’t view it. I don’t view any sort of conflict with lightning, especially because not everyone has to use it, at least not at the current time.

Lyn Alden:

It’s just, it’s something that it’s there for people that need to use it, or want to start trying it out, but then it’s not needed for other people. And in addition I think it was like a couple months ago I was on a clubhouse and there we talked about that a little bit, and there are people that they say are heavily in the Bitcoin space and a lot of their revenues denominated in Bitcoin. And so they actually do spend some of their Bitcoin because they have to live their life. And so for someone like me, my incomes in fiat, and then I can choose what percentage of it do I want to put in Bitcoin? And it just kinda, it’s kind of a one directional thing there. But if I was getting most of my revenue in Bitcoin, I’d be say saving some of my Bitcoin, but then I might want to spend that where possible.

Lyn Alden:

And so right now, in most countries, the tax burdens around spending your Bitcoin are not great, right, because you’re triggering a taxable sale. And most people, I have good access to credit cards and PayPal and other fairly cheap forms of payment. Whereas that’s not an option in many countries. And so I think it’s one of those things, people that need it should, should explore it. And even people that don’t need it, I think they should be happy. The fact that developers have been working on it, building it out for the people that do need it. And there there’s a chance that we’ll need that in the future.

Stephan Livera:

I agree wholeheartedly there. And it also enables it opens up new possibilities. For example, people might want to start business models that are not otherwise feasible or profitable, or people might be setting up online who knows lightning poker, gambling websites, or some other betting website. And it’s all done with lightning payments. And I think some of those do exist already, but of course these could grow over time. And the experience that they could offer with lightning might be far greater than they would otherwise be offering if they were having to do everything Bitcoin on chain. Right. So, yeah, probably a good spot to wrap up here Lyn, have you got any closing thoughts for listeners and where can they find you? Of course I will link to the oil and gas paste in the show notes, but like can people find you online?

Lyn Alden:

Yeah, no, I think that covers it. I guess the last point I’d make is that a lot of it is about usability. And so in early technologies, you start out, something’s less usable. You have to be somewhat tech-savvy to use it. And eventually, a lot of those details are kind of worked out so that the end-user is not at it, it’s not worrying about some of those underlying technical details. And so with lightning, it progressed over time, it’s becoming more usable. So it was Bitcoin, the base layer all these, all these kinds of things that abstract some of the technical details from us. And so it’s one of those things that, again you want to start it before you need it. And so by the time that you need, it’s usable. It’s simple. It looks like the type of systems we’re already used to interacting with. And so that’s how I view it. And so yeah, I’m available at LynAlden.com for people that want to check out my work. I cover multiple asset classes, including Bitcoin and I’m on Twitter at linen contact. And so I really appreciate you having me on again.

Stephan Livera:

Yeah, Lynn, it’s great to chat with you. You’ve always got a lot of interesting points of view and you’re very, well-researched across multiple fields you’re not just Bitcoin-only in your analysis. So it’s always a pleasure to chat with you. Thank you for joining.

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