#232: Treasuries, inflation, history lessons, and Bitcoin & energy with Lyn Alden
2/24/2021 · 75 min · transcript via mlx
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Key topics
— Rising long-term Treasury rates are causing a repricing of speculative assets and shifting value toward traditional sectors like energy and financials.
— The Federal Reserve and Treasury face a structural debt-to-GDP problem similar to the 1940s, making rate hikes untenable and suggesting yield curve control and currency devaluation as the probable release valve.
— Broad money supply has expanded 25% year-over-year—the largest increase since World War II—driven by unprecedented fiscal and monetary stimulus.
— Bitcoin mining on stranded and flared natural gas creates an energy arbitrage that reduces waste, generates producer revenue, and improves ESG outcomes in oil and gas operations.
— Commodity markets (copper, lumber, agricultural goods) are entering a new cycle after a 12-year bear market, driven by supply disruptions and monetary expansion.
— Bitcoin's finite supply and adoption curve position it as a superior hedge against currency devaluation compared to traditional hard assets like gold or commodities.
Market & price signals
— The 10-year Treasury yield has risen sharply from historically low levels, reversing nearly a decade of rate compression. The U.S. dollar index touched 89 in 2020 and is currently near 90, approaching 2018 lows. Copper prices have reached levels unseen since 2013 and are up significantly, with stocks like Freeport-McMoran rising from ~$5 in March 2020 to the upper $30s. Lumber has doubled and hit all-time highs. The Fed's balance sheet expansion and Treasury debt issuance remain at historic levels, while the Treasury General Account (TGA) sits at historically elevated levels and is set to normalize, releasing significant liquidity into the system. Bitcoin's four-year cycle continues to track historically, with adoption accelerating among corporations adding non-zero positions to balance sheets.
Actionable insights
— Hold finite assets (Bitcoin, commodities, quality equities) rather than cash or bonds, as currency devaluation via inflation is likely the primary release valve given unsustainable debt-to-GDP ratios and demographic liabilities that make rate hikes politically and economically untenable.
— Even modest Bitcoin allocations (3–5% of corporate cash) on balance sheets provide meaningful inflation protection without excessive downside risk if adoption falters, as seen with Square and MicroStrategy.
— Monitor yield curve control signals and Treasury-Fed coordination; if long-end rates continue rising and break credit markets (as in Q4 2018), expect Fed intervention that further weakens the currency.
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