(Q1 + Q2) - QE = Everybody Loses
And Money Printing Explained in Exquisite Detail by Lyn Alden
In the first two quarters of 2022, BlackRock - the world’s largest asset manager - lost $1.7 trillion.
This Bloomberg article discusses how the firm - which, in 2021, became the first firm to break through the $10T assets under management (AUM) barrier - set another record, which was experiencing the largest loss by a single firm in a six-month period ever.
To contextualize how much BlackRock lost, it was greater than the GDP of Canada or Russia - and that of about 185 other countries. Ouch.
Then, we have Berkshire Hathaway, Warren Buffett’s baby…
Why do I share this info?
One, maybe to make you feel a little better to know you aren’t alone when you look at your 401K/investment portfolio and feel that pain in your gut.
Two, it’s an incredible illustration of just how fragile financial markets have become. Without QE, most asset prices go down. I’d hardly call that a free market. I’d call it more of a heavily manipulated mess.
And who better to explain this mess than the seemingly all-knowing Lyn Alden.
In the above video, Alden provides one of the most impressive and comprehensive breakdowns of how new money is created and how it affects both financial and consumer markets I’ve ever heard. Plus, she explains the Eurodollar (not Euros) - another quite challenging concept to grasp.
Lyn is an absolute champion. Highly recommended listening here.
Before I continue, a quick shout out to some of the brightest women in the economics/finance/crypto space:
Back to Lyn.
Here’s a pull quote from the interview:
“Essentially theres more debt than there is money; that’s a problem. This is inherently a Ponzi scheme essentially. If there's more debt than there is money, it means that those debts in aggregate can never be paid down; it’s not designed to ever end. It can only grow… All debts are claims for dollars and there’s just not that many dollars. -Lyn Alden
Speaking of this great Ponzi:
Admittedly, I don’t know where the info in the tweet above was sourced, but the initial statement is true: you can’t taper a Ponzi.
What does that mean for the average person holding dollars? I’m not sure exactly, but those dollars will likely continue to be worth less and less, while hard assets will likely continue to be worth more and more in the long run.
The only variable with US dollars that I can’t quite wrap my head around is the idea that 80% of the world’s debt is denominated in US dollars, and, as Lyn said, where there’s debt in a currency, there’s demand for that currency. I’m not sure how that demand will play into the strength or weakness of the dollar.
Maybe you have a good theory on what will happen with the dollar. Feel free to share in the comments.
Two Pieces I Wrote This Past Week
I wrote a review of the Ledger Nano X - the top-of-the-line crypto hardware wallet from Ledger - for Finder.
And I wrote a piece on behalf of Finder for Nasdaq’s website entitled “Will Crypto Markets Melt Up?” (Nasdaq’s editorial team added a hyphen between “Melt” and “Up” in the title on the site, though this is grammatically incorrect - and incredibly frustrating to yours truly). In it, I offer some thoughts on how you could theoretically play a crypto melt-up. Not investment advice.
Shout Out
Great piece from the Vladimir Club newsletter on the paranoia that can be associated with investing in crypto here. Check it out and subscribe.
Bonus Listen
If you liked what you heard above with Lyn, you might also want to listen to the below episode of Laura Shin’s Unchained podcast, on which Lyn was also a guest. The other guest, Mauricio Di Bartolomeo - a native Venezuelan and CEO of crypto borrowing and lending platform Ledn - also offers some great perspective on the importance of Bitcoin outside of the US.
Goodbye
I’ve typed all of the words I’d like to type for today.
Have a great week, everyone!
Best,
Frank
Twitter: @frankcorva
Currently Reading: Knowledge and Decisions, by Thomas Sowell; Bitcoin is Venice: Essays on the Past and Future of Capitalism, by Allen Farrington and Sacha Meyers; and The Cold Start Problem: How to Start and Scale Network Effects, by Andrew Chen
