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Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better
A Comprehensive Overview of the Past, Present, and Future of Money
Broken Money explores the history of money through the lens of technology. Politics can affect things temporarily and locally, but technology is what drives things forward globally and permanently. The book's goal is for the reader to walk away with a deep understanding of money and monetary history, both in terms of theoretical foundations and in terms of practical implications.
From shells to gold, from papyrus bills of exchange to central banks, and from the invention of the telegraph to the creation of Bitcoin, Lyn Alden walks the reader through the emergence of new technologies that have shaped what we use as money over the ages. And beyond that, Alden explores the concept of what money is at its very foundation to give the reader a framework to analyze and compare different types of monetary technologies and monetary theories.
The book also takes a distinctively human look at how money impacts the lives of real people, and how new monetary technologies shape the power structures within society.
In the modern era, energy abundance and technological enhancements have broadly improved human well-being, but the global monetary system has been slow to keep up. There are over 160 active currencies in the world, each with a local monopoly over its own country, and with little or no acceptance elsewhere. Many of them are rapidly diluted, which continually devalues the savings and the wages of the billions of people who live and work within those jurisdictions. Being born in the "wrong" country makes saving money far harder than it needs to be.
Nigeria has a population of over 200 million people and has averaged 13% annualized inflation over the past decade. Egypt cut its currency in half relative to the dollar twice over the past decade, which instantly devalued the savings and wages of its 100 million citizens. Dozens of countries have experienced at least triple-digit year-over-year inflation within the past four decades, including Brazil that outright hyperinflated in the 1990s while it was the fifth most populous country in the world.
Europe and Japan had $18 trillion worth of negative-yielding bonds in 2019, right before a wave of inflation wiped their purchasing power away. In 2021, the chairman of the U.S. Federal Reserve dismissed the idea that the sharp rise in the money supply from the pandemic stimulus would lead to price inflation. By 2022, as major inflation emerged, the chairman rapidly changed his outlook and tightened monetary policy so quickly that it led to the failure of some of the largest banks in the country.
How did we get to this point? Why isn't our money better than this in the 21st century? Broken Money answers these questions by examining the current mix of technology that has led to these limitations, and then explores emerging technologies that may be able to provide us with a monetary system that is fit for the modern era.
Broken Money explores the history of money through the lens of technology. Politics can affect things temporarily and locally, but technology is what drives things forward globally and permanently. The book's goal is for the reader to walk away with a deep understanding of money and monetary history, both in terms of theoretical foundations and in terms of practical implications.
From shells to gold, from papyrus bills of exchange to central banks, and from the invention of the telegraph to the creation of Bitcoin, Lyn Alden walks the reader through the emergence of new technologies that have shaped what we use as money over the ages. And beyond that, Alden explores the concept of what money is at its very foundation to give the reader a framework to analyze and compare different types of monetary technologies and monetary theories.
The book also takes a distinctively human look at how money impacts the lives of real people, and how new monetary technologies shape the power structures within society.
In the modern era, energy abundance and technological enhancements have broadly improved human well-being, but the global monetary system has been slow to keep up. There are over 160 active currencies in the world, each with a local monopoly over its own country, and with little or no acceptance elsewhere. Many of them are rapidly diluted, which continually devalues the savings and the wages of the billions of people who live and work within those jurisdictions. Being born in the "wrong" country makes saving money far harder than it needs to be.
Nigeria has a population of over 200 million people and has averaged 13% annualized inflation over the past decade. Egypt cut its currency in half relative to the dollar twice over the past decade, which instantly devalued the savings and wages of its 100 million citizens. Dozens of countries have experienced at least triple-digit year-over-year inflation within the past four decades, including Brazil that outright hyperinflated in the 1990s while it was the fifth most populous country in the world.
Europe and Japan had $18 trillion worth of negative-yielding bonds in 2019, right before a wave of inflation wiped their purchasing power away. In 2021, the chairman of the U.S. Federal Reserve dismissed the idea that the sharp rise in the money supply from the pandemic stimulus would lead to price inflation. By 2022, as major inflation emerged, the chairman rapidly changed his outlook and tightened monetary policy so quickly that it led to the failure of some of the largest banks in the country.
How did we get to this point? Why isn't our money better than this in the 21st century? Broken Money answers these questions by examining the current mix of technology that has led to these limitations, and then explores emerging technologies that may be able to provide us with a monetary system that is fit for the modern era.
538 pages, Hardcover
Published August 20, 2023
1,113 people are currently reading
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October 17, 2023
Bitcoin could be, perhaps should be, a global-game-changer. Lyn Alden does a fine job of placing Bitcoin in larger contexts: technological, historical, economic, political. Her perspective is that of an engineer evaluating a new tool that has come on the market. By the end, she has compared Bitcoin to historical solutions (gold), current solutions (fiat), and other proposed solutions (other crypto). Only Bitcoin provides the functionality of a strong currency (value that cannot be debased, ease and speed of exchange, privacy, freedom from manipulation, and ability to operate across time and distance). Her historical analysis is necessary so that readers understand what the attributes of a universal currency should be and what vulnerabilities led - over time - to the failure of previous econo-politico-financial monetary solutions.
Implicitly, she asks, "Does Bitcoin meet the need?" "Does it avoid previous and recurring difficulties?" "Does it create new problems?" "Are there other crypto solutions that are just as good, but cheaper, safer, easier to implement, more acceptable to users, or more acceptable to regulators or governments?" This book is a 500+ page "software review." After years of research, thought, and due diligence, Ms. Alden concludes that Bitcoin could be a much-needed improvement and should be supported/adopted. She recounts her own journey, from moderate skepticism to cautious support. She believes that fiat currencies and the current global system of petro-dollars has/is/will fail most people in the world. She believes that proof-of-stake currencies are mortally flawed and that stable coins simply digitize the economic unfairness of fiat currency. All that is left on her workbench is Bitcoin (and a few much smaller proof-of-work currencies). Since Bitcoin has already attained considerable size, use, and acceptance, she recommends it. Her recommendation is not absolute, but considered and conditional. Alden is an engineer. She understands the evolution of tools, systems and technologies. She is pragmatic. Bitcoin is the best tool currently available. If the current fiat currency/national bank/petro-dollar system is imploding (I agree it is), drastic change is required. Economic and political forces advocate for their version of a new system (just as such forces did at Bretton Woods). Alden asks us to see that for what it is and reject the status quo's self-serving digital solutions. She asks us to embrace Bitcoin since it is the only solution that can give us, "the other 99%," some "control of the ledger."
I am less optimistic than Alden. I consider her evaluation of the global monetary crisis and Bitcoin's potential value sound. But I do not trust that most people or most companies will refuse the strongly marketed digital solutions offered by governments, regulators, and banks. Most people (sad to say) value convenience, personal costs, and immediate benefits more than privacy, public cost, and long-term benefits. Bitcoin should survive and grow, but it is unlikely to become a single, universal currency. Alden has little faith in public institutions. Sad. Apparently, I have little faith in people (even sadder). Or at least in their ability to resist popular trends.
The book is a must read for investors and onlookers, academics and non-academics, anyone who wants to understand the reinvention of money. The book's straightforward style and organization make it accessible and easy to translate. Even if Bitcoin fails to replace our current, flawed system, it can and should serve as a critical/useful alternative.
Implicitly, she asks, "Does Bitcoin meet the need?" "Does it avoid previous and recurring difficulties?" "Does it create new problems?" "Are there other crypto solutions that are just as good, but cheaper, safer, easier to implement, more acceptable to users, or more acceptable to regulators or governments?" This book is a 500+ page "software review." After years of research, thought, and due diligence, Ms. Alden concludes that Bitcoin could be a much-needed improvement and should be supported/adopted. She recounts her own journey, from moderate skepticism to cautious support. She believes that fiat currencies and the current global system of petro-dollars has/is/will fail most people in the world. She believes that proof-of-stake currencies are mortally flawed and that stable coins simply digitize the economic unfairness of fiat currency. All that is left on her workbench is Bitcoin (and a few much smaller proof-of-work currencies). Since Bitcoin has already attained considerable size, use, and acceptance, she recommends it. Her recommendation is not absolute, but considered and conditional. Alden is an engineer. She understands the evolution of tools, systems and technologies. She is pragmatic. Bitcoin is the best tool currently available. If the current fiat currency/national bank/petro-dollar system is imploding (I agree it is), drastic change is required. Economic and political forces advocate for their version of a new system (just as such forces did at Bretton Woods). Alden asks us to see that for what it is and reject the status quo's self-serving digital solutions. She asks us to embrace Bitcoin since it is the only solution that can give us, "the other 99%," some "control of the ledger."
I am less optimistic than Alden. I consider her evaluation of the global monetary crisis and Bitcoin's potential value sound. But I do not trust that most people or most companies will refuse the strongly marketed digital solutions offered by governments, regulators, and banks. Most people (sad to say) value convenience, personal costs, and immediate benefits more than privacy, public cost, and long-term benefits. Bitcoin should survive and grow, but it is unlikely to become a single, universal currency. Alden has little faith in public institutions. Sad. Apparently, I have little faith in people (even sadder). Or at least in their ability to resist popular trends.
The book is a must read for investors and onlookers, academics and non-academics, anyone who wants to understand the reinvention of money. The book's straightforward style and organization make it accessible and easy to translate. Even if Bitcoin fails to replace our current, flawed system, it can and should serve as a critical/useful alternative.
January 24, 2024
This books is actually two books in one or two separate parts.
First part deals with explanation of technical nature of money and how the modern FIAT currency system works and operates. I liked the clarity of the explanation and approach from system and engineering approach. It isn't financial system explanation from the money person, it is rather explanation of the money system from engineer point of view.
Second part is focused on cryptocurrency, in specific on Bitcoin as possible future basis for the monetary system or another type of money used in the system.
I found first part to be more informative and I think it is better as a book. What I liked is a concept of money and changing monetary systems as a function of speed of transaction and how it shapes the way we handle money.
The latter part provides very generic overview of Bitcoin (good for this level, but I also was familiar with it before) and then goes into a discussion on how it might be a solution for a future.
Good things about second part:
- Lyn makes a good points how solution like Bitcoin might be a needed evolution based on the need for the transactions in the network
- It is not a religious book, it isn't trying to convince person based on the faith in Bitcoin, rather on the basis of merit points discuses in the book.
- It approaches some risk analysis of the Bitcoin as a solution, not only as a technical solution but in overall as an approach
What I didn't liked about the second part:
- Whole part dealing with Bitcoin and energy is weak, much weaker the the rest of book. I get all those experiments and examples but it isn't convincing and it is not discussing the counterexamples (like building/reviving coal power to mine Bitcoin). IMO this is the weakest part of the book
- It isn't touching at all the potential risk from Bitcoin and moving towards the cryptocurrencies from social point of view ... not explicitly it makes an assumption that the result will be net positive
All in all ... I was wondering about 3/5 but gave it 4/5 as I found it as a well balanced, informative position and even with some drawbacks I think it is worth for people to read it.
First part deals with explanation of technical nature of money and how the modern FIAT currency system works and operates. I liked the clarity of the explanation and approach from system and engineering approach. It isn't financial system explanation from the money person, it is rather explanation of the money system from engineer point of view.
Second part is focused on cryptocurrency, in specific on Bitcoin as possible future basis for the monetary system or another type of money used in the system.
I found first part to be more informative and I think it is better as a book. What I liked is a concept of money and changing monetary systems as a function of speed of transaction and how it shapes the way we handle money.
The latter part provides very generic overview of Bitcoin (good for this level, but I also was familiar with it before) and then goes into a discussion on how it might be a solution for a future.
Good things about second part:
- Lyn makes a good points how solution like Bitcoin might be a needed evolution based on the need for the transactions in the network
- It is not a religious book, it isn't trying to convince person based on the faith in Bitcoin, rather on the basis of merit points discuses in the book.
- It approaches some risk analysis of the Bitcoin as a solution, not only as a technical solution but in overall as an approach
What I didn't liked about the second part:
- Whole part dealing with Bitcoin and energy is weak, much weaker the the rest of book. I get all those experiments and examples but it isn't convincing and it is not discussing the counterexamples (like building/reviving coal power to mine Bitcoin). IMO this is the weakest part of the book
- It isn't touching at all the potential risk from Bitcoin and moving towards the cryptocurrencies from social point of view ... not explicitly it makes an assumption that the result will be net positive
All in all ... I was wondering about 3/5 but gave it 4/5 as I found it as a well balanced, informative position and even with some drawbacks I think it is worth for people to read it.
November 16, 2023
This is easily the best book I've read covering the broader macroeconomy, including how our government-based currencies work, why we have inflation, how we got to this point, why things cannot last this way forever, and how our current situation is unique in history. It also paints a picture of a possible way forward.
This book does a great job of balancing the Keynsian reality of today with the Austrian ideal that many books argue for. This is one of the top books on currencies and macroeconomics that I'd recommend to someone new to the subject.
This book does a great job of balancing the Keynsian reality of today with the Austrian ideal that many books argue for. This is one of the top books on currencies and macroeconomics that I'd recommend to someone new to the subject.
June 8, 2024
How is this book so long - a friend bought it for me and I made it as far as the chapter where Bitcoin is proposed as a solution before finally tapping out. Alden does a decent job of explaining money creation in the American financial system although if you asked me to explain it I would still do a terrible job of it. The problem with the book is that it’s a typical libertarian conspiracy narrative that fiat money is the government stealing from you. While there are some valid criticisms and government can abuse the system, Alden offers up what I think is the most valid criticism of her position - when a system goes extinct (the gold standard) it is likely not fit for the environment. Everyone was once on the gold standard, and now they aren’t. That’s because the monetary system needs flexibility for expanding the economy (since we all depend on the absurd idea of endless growth) and responding to economic shocks when they occur. Alden takes the position with a “hard” money would result in investment that is more carefully thought out and economic shocks would be the medicine needed to work off any excess - ideas that sound good but everyone decided they suck in practice, especially after the Great Depression in the 1930s. I mean think about it - if you have a recession and can’t inject money to cause inflation, you get deflation. The people with the most money are incentivized to continue holding that money as it becomes worth more and more every day. How do you get out of the deflationary spiral if no one wants to spend money and you can’t create more? So tiring to read this particular narrative but I wanted to try to give it a fair shot and challenge my viewpoint. Use as many references as you want Alden, you’re still wrong.
September 11, 2023
Great book to understand money in the history of money the last third of the book describes decentralized bitcoin and some of the advantages and disadvantages.
November 14, 2023
I really enjoyed reading the first 2/3rd of the book. The last 1/3rd deals with cryptocurrency and bitcoin - I didn’t have enough of a background context or familiarity to grasp these chapters. I will re-read this section again in the near future.
The first 2/3rd of the book deals with history of money and the technological changes that led to a difference between speed of transaction and speed of settlement and the operational implications of this gap.
The book answers a lot of questions such as
1. Why did Gold and Silver became the universally adopted currencies ?
2. Why did we need both Gold and Silver ? And why today Silver isn’t considered as hard money as Gold ?
3. Why commodity money only works well when trading partners are at the same technological level?
4. Why the vector tech and banking innovations meant that a move away from the gold standard was inevitable?
5. How is money created in our fiat / Central banking system ?
6. How did the dollar become the reserve currency of the world ? And what are the dangers of having a lot of your liabilities denominated in dollars?
7. Why the reserve currency status of the dollar is a double edged sword for the US ?
8. Why didn’t money printing cause inflation in 2008 while it did in 2020 ?
9. How low interest rates, higher money supply and monetization of deficit have introduced noise in price signals?
10. Why increasing rates is less effective or even counterproductive to combat inflation which emerged due to monetization of fiscal deficit ?
Lyn Alden explores these and many other questions using a systema lens.
Recommended reading. But I do think you need to have some familiarity or an interest in exploring some of the above questions.
The first 2/3rd of the book deals with history of money and the technological changes that led to a difference between speed of transaction and speed of settlement and the operational implications of this gap.
The book answers a lot of questions such as
1. Why did Gold and Silver became the universally adopted currencies ?
2. Why did we need both Gold and Silver ? And why today Silver isn’t considered as hard money as Gold ?
3. Why commodity money only works well when trading partners are at the same technological level?
4. Why the vector tech and banking innovations meant that a move away from the gold standard was inevitable?
5. How is money created in our fiat / Central banking system ?
6. How did the dollar become the reserve currency of the world ? And what are the dangers of having a lot of your liabilities denominated in dollars?
7. Why the reserve currency status of the dollar is a double edged sword for the US ?
8. Why didn’t money printing cause inflation in 2008 while it did in 2020 ?
9. How low interest rates, higher money supply and monetization of deficit have introduced noise in price signals?
10. Why increasing rates is less effective or even counterproductive to combat inflation which emerged due to monetization of fiscal deficit ?
Lyn Alden explores these and many other questions using a systema lens.
Recommended reading. But I do think you need to have some familiarity or an interest in exploring some of the above questions.
November 20, 2023
Money. Often talked about, rarely understood...
This book should be a first read for anyone trying to understand how 'good' money works, when your money stops working for you, how bitcoin might be a solution, why governments seem perpetually indebted and how things usually progress from there on.
IMO, if you were to read just one economics/finance/investment book, this is it. The author really drills down to the nuts and bolts of our monetary/economic system and allows you to make your own deductions from there on. You can also read any chapter on its own and still get the message.
I've been following Lyn Alden for 4 years now. This book puts many of her newsletters together and highlights her genius in explaining abstract concepts in a straightforward, unbiased manner.
This book should be a first read for anyone trying to understand how 'good' money works, when your money stops working for you, how bitcoin might be a solution, why governments seem perpetually indebted and how things usually progress from there on.
IMO, if you were to read just one economics/finance/investment book, this is it. The author really drills down to the nuts and bolts of our monetary/economic system and allows you to make your own deductions from there on. You can also read any chapter on its own and still get the message.
I've been following Lyn Alden for 4 years now. This book puts many of her newsletters together and highlights her genius in explaining abstract concepts in a straightforward, unbiased manner.
July 16, 2024
Changed the way I think about Bitcoin.
November 25, 2023
This is the best accessible introduction to money, and the state of the global financial system that I've come across.
In particular I appreciated her contribution of framing all money as a ledger, with commodity money using nature and physical movement as a form of ledger. I haven't read all the Austrians, but this seems like a reasonable and obvious reconciliation between their views and the more dominant mainstream view.
Lyn is a clear thinker unencumbered by academic pedantry and dogma. Usually her next paragraph explains the obvious question that you would have as a normal person. Her deep mechanical understanding of finance and her breadth of knowledge assures you of the book's rigour despite actually being readable.
I'm probably being unfair by only giving a 4/5, but my only complaint is that the last ~200 pages seemed rushed/crammed.
There's so much noise and debate around money, the economy, finance these days. This book is pure signal and a great start and grounding around these topics.
In particular I appreciated her contribution of framing all money as a ledger, with commodity money using nature and physical movement as a form of ledger. I haven't read all the Austrians, but this seems like a reasonable and obvious reconciliation between their views and the more dominant mainstream view.
Lyn is a clear thinker unencumbered by academic pedantry and dogma. Usually her next paragraph explains the obvious question that you would have as a normal person. Her deep mechanical understanding of finance and her breadth of knowledge assures you of the book's rigour despite actually being readable.
I'm probably being unfair by only giving a 4/5, but my only complaint is that the last ~200 pages seemed rushed/crammed.
There's so much noise and debate around money, the economy, finance these days. This book is pure signal and a great start and grounding around these topics.
February 26, 2025
Quote incoming to give you a peek into why I loved this and her writing style.
Re: the United States,
"Institutions such as separate branches of government and founding documents that are held higher than any individual are what give the democratic system a degree of staying power. Strong and independent institutions make it so that for democracy to be lost, it requires a long period of chipping away at it rather than just one bad election."
This is not commentary on the recent election, FYI. Also, this book, while it references politics, is not inherently political in nature.
I thoroughly enjoyed this read and will most assuredly be picking it up again in the future. She's addressing big topics in an understandable way. Plus, she's a genius.
Re: the United States,
"Institutions such as separate branches of government and founding documents that are held higher than any individual are what give the democratic system a degree of staying power. Strong and independent institutions make it so that for democracy to be lost, it requires a long period of chipping away at it rather than just one bad election."
This is not commentary on the recent election, FYI. Also, this book, while it references politics, is not inherently political in nature.
I thoroughly enjoyed this read and will most assuredly be picking it up again in the future. She's addressing big topics in an understandable way. Plus, she's a genius.
February 14, 2025
A readable critique about the problems with fiat currency and the promise of Bitcoin. Alden is at her best doing "big history" particularly walking through the principles and history of money. The middle of the book that explains the process of inflation was a little challenging (I had to re-read and research a couple of time). The end of the book gets quite technical and defensive and Aldren's background as an academic writer in the crypto space takes over instead of her more casual, acessible tone at the beginning of the book. I think everyone would benefit from reading the first third of the book.
February 19, 2024
Fantastic overview of the history of money, what defines good money, how centralized banking works, and the case for cryptocurrency (especially bitcoin). Thankfully written in plain English!
September 29, 2024
It reads a bit like a text book, but it is very well researched and worth reading.
June 14, 2024
A very well written book on very interesting yet not often thought about concepts, highlyyyyy recommend!
August 9, 2024
Great book
October 12, 2023
Utterly fantastic, clear dive into what money is, how our current financial systems works and how it could work differently.
Starts with fascinating histories of money/banking/finance and deftly links them to our modern situation. Feel like I’ve gone from a 2/10 to a 5/10 in understanding these systems almost overnight (still a ways to go to 10/10…)
Then she jumps into Bitcoin and digital currencies and how they have the potential to change the system.
Can’t recommend enough if you’re even remotely interested.
Starts with fascinating histories of money/banking/finance and deftly links them to our modern situation. Feel like I’ve gone from a 2/10 to a 5/10 in understanding these systems almost overnight (still a ways to go to 10/10…)
Then she jumps into Bitcoin and digital currencies and how they have the potential to change the system.
Can’t recommend enough if you’re even remotely interested.
October 14, 2023
Thank you, Lynn!
Well written and very informative! Ending the Fed would be a good start. We shouldn’t have a known criminal cabal controlling the ledger.
Well written and very informative! Ending the Fed would be a good start. We shouldn’t have a known criminal cabal controlling the ledger.
March 30, 2025
Our money is broken, and the sooner we wrap our minds around the implications, the better. In Broken Money, Lyn Alden, a lucid writer and gifted teacher, offers a highly readable grand tour of monetary history: she explains the emergence of money, what makes a good or bad money, how money gradually became more and more "ab... [see the rest on my book review site.]
October 9, 2023
Perhaps the most important book written on the history of money and its impact on whether an economy works for the many or the few.
October 5, 2023
Probably the best contemporary book about money you can get your hands on.
April 17, 2024
Great history and explanation of money and banking. Definitely recommend for anyone seeking to understand these topics.
January 19, 2025
Sooooo long but very detailed and informative
September 10, 2023
Very helpful to understand what is money
Who controls ledger? I really agree with the question from the author and we need to try to find the answer for the question by ourselves. And I believe that this book will definitely help you find the answer. I strongly recommend this masterpiece, especially to Korean!
Who controls ledger? I really agree with the question from the author and we need to try to find the answer for the question by ourselves. And I believe that this book will definitely help you find the answer. I strongly recommend this masterpiece, especially to Korean!
February 10, 2024
I liked the detailed historical explanation about money even though I found it complicated and difficult to follow at times. The author lost me by describing the covid 19 restrictions in Canada and the protests related to it as an argument for supporting cryptocurrency.
October 20, 2023
The book is unfortunately very one-sided.
October 31, 2024
Bitcoin is inevitable
January 23, 2024
Well, I never expected to read a 500 page bitcoin thesis and I definitely didn't expect to give it five stars.
In truth, the first ~300 pages or so have nothing to do with bitcoin and are more an overview and critique of our fiat-based financial system. This part of the book explores the history of money through the lens of technology -- it begins with a very interesting review of what monies were used thousands of years ago. Some of the most important characteristics for money are that it is scarce, liquid, portable and durable. For a long time for example a popular money was shells, which were super labour intensive to make and thus for anybody at the time to produce a lot of shells required a lot of effort. They were also light and small so easily portable, and widely accepted as money which made them liquid. A key takeaway from this part of the book was that if some subsection of the population becomes adept at producing or procuring this money, probably through superior technology, it no longer becomes scarce and the money will be devalued. The population that is able to boost production will reap the rewards for as long as the item remains a widely accepted currency, but once the world catches onto these new production methods there is a high chance the item will be discontinued as an acceptable form of currency. Other examples of money used hundreds or thousands of years ago included feathers, silver, gold, cattle, salt and animal skins.
Then the book moves on to discuss how gold and silver became the default currencies around (I think) the 1700s and 1800s. Then the gold standard was the basis for the international monetary system from the 1870s until around World War One. Eventually the world moved toward fractional reserve banking, where gold was decoupled from the dollar and banks no longer had to hold as much cash as they have deposits. Leverage got higher and higher, making the system vulnerable to collapse. Of course, central banks have at their discretion the option to essentially print money and prevent collapses in the system. With bailouts frequently directed to corporations that were overly greedy and took on too much risk, this system favours the wealthy. The middle class and the poor -- who bear no responsibility for these failures -- are the ones who can least afford inflation but they have no choice but to bear it.
Edit -- Thinking back, I should clarify that Alden says bailouts like in 2008 directed at corporations and printing money to give to banks to use as reserves is not the type of money printing that is likely to lead to inflation. If I understood her right, the type of money printing that leads to inflation is when you give handouts directly to individuals, because then there is more money in the system competing for the same number of goods and services.
Inflation in North America has mostly been manageable so far, but many developing countries have had hyperinflation. This is devastating and many of these people are already poor. The author contends that, for these people, bitcoin can be incredibly valuable. Before reading this book I naively thought people in countries with hyperinflation could just convert their currency immediately to the U.S. dollar, but I didn't realize how much control the governments of these countries are able to impose. They can order banks to freeze bank accounts and not allow citizens to hold anything but Argentinian pesos (for example).
Overall I think the book was well researched, thoroughly explained and persuasively argued. There are more legitimate use cases for bitcoin or a technology along those lines than I had realized. Its scarcity, immutability and decentralization make it quite attractive if we want to live in a world where governments have less control and therefore power.
In truth, the first ~300 pages or so have nothing to do with bitcoin and are more an overview and critique of our fiat-based financial system. This part of the book explores the history of money through the lens of technology -- it begins with a very interesting review of what monies were used thousands of years ago. Some of the most important characteristics for money are that it is scarce, liquid, portable and durable. For a long time for example a popular money was shells, which were super labour intensive to make and thus for anybody at the time to produce a lot of shells required a lot of effort. They were also light and small so easily portable, and widely accepted as money which made them liquid. A key takeaway from this part of the book was that if some subsection of the population becomes adept at producing or procuring this money, probably through superior technology, it no longer becomes scarce and the money will be devalued. The population that is able to boost production will reap the rewards for as long as the item remains a widely accepted currency, but once the world catches onto these new production methods there is a high chance the item will be discontinued as an acceptable form of currency. Other examples of money used hundreds or thousands of years ago included feathers, silver, gold, cattle, salt and animal skins.
Then the book moves on to discuss how gold and silver became the default currencies around (I think) the 1700s and 1800s. Then the gold standard was the basis for the international monetary system from the 1870s until around World War One. Eventually the world moved toward fractional reserve banking, where gold was decoupled from the dollar and banks no longer had to hold as much cash as they have deposits. Leverage got higher and higher, making the system vulnerable to collapse. Of course, central banks have at their discretion the option to essentially print money and prevent collapses in the system. With bailouts frequently directed to corporations that were overly greedy and took on too much risk, this system favours the wealthy. The middle class and the poor -- who bear no responsibility for these failures -- are the ones who can least afford inflation but they have no choice but to bear it.
Edit -- Thinking back, I should clarify that Alden says bailouts like in 2008 directed at corporations and printing money to give to banks to use as reserves is not the type of money printing that is likely to lead to inflation. If I understood her right, the type of money printing that leads to inflation is when you give handouts directly to individuals, because then there is more money in the system competing for the same number of goods and services.
Inflation in North America has mostly been manageable so far, but many developing countries have had hyperinflation. This is devastating and many of these people are already poor. The author contends that, for these people, bitcoin can be incredibly valuable. Before reading this book I naively thought people in countries with hyperinflation could just convert their currency immediately to the U.S. dollar, but I didn't realize how much control the governments of these countries are able to impose. They can order banks to freeze bank accounts and not allow citizens to hold anything but Argentinian pesos (for example).
Overall I think the book was well researched, thoroughly explained and persuasively argued. There are more legitimate use cases for bitcoin or a technology along those lines than I had realized. Its scarcity, immutability and decentralization make it quite attractive if we want to live in a world where governments have less control and therefore power.
February 12, 2024
I could write a very long essay about all the trains of thought this book assembled, oiled and dispatched in my mind. I won't (for now). Here's a (long) review instead.
5 stars.
As the book progresses, it gets a bit more rambly and I wish Alden would have skipped part 6–her thoughts on the ethics around privacy and government control–altogether (it's easier to recommend a short book than a long one), but the total amount of "aha"-moments (as easily measured by the amount of notes I made) still easily justifies that rating.
Why am I so excited about this book?
For a few years now, I've been intensely interested in money. Not so much in just owning the thing itself (though there's certainly nothing wrong with having lots of money), but in the concept. What is money? How does it relate to debt? How is it possible that large countries keep piling on debt without the whole house of cards coming crumbling down? How does our modern financial system work? Is it fair? Is it working well? Is there a better way?
The two most important stops on my money-journey so far were Dalio's "Big Debt Crises" and Graeber's "Debt: The first 5000 years". I read, I learned a lot, but I was still confused. There wasn't anything tying together the different pockets of knowledge in my head and, had you asked, I still couldn't tell you what money is.
Broken Money changed that.
Money is a ledger of who owes what to whom. Repeatedly asking "who controls the ledger?" is an incredibly helpful step-by-step guide through financial history.
Is the system fair? It's not. Is it working well? Some things obviously aren't. Not while just a few people can alter the ledger at will to finance their goals at the cost of everyone else in opaque ways.
As human preferences tend to differ when it comes to who should owe what to whom (and how long you should be owed something in the first place), the answers to some of these questions will likely also differ with said preferences.
Is there a better way? I don't know. Many were answered, but I still have questions about money.
Alden jumped to the "obviously we should want deflationary money" conclusion too quickly for me and I'd love to understand that better. What would a world with deflationary money really look like and do we want that kind of world? Are we really sure we don't want inflationary money to incentivize people to go around chasing for new ideas and innovations to make a return on their "favors owed to them from the past" (aka their money).
If you take the long-term view: people in the future don't care about the state of the ledger (who owed what to whom) from days past. All they'll care about are new ideas and new technologies that make their lives better. Productivity growth is what drives wealth and well-being forever, whereas human quibbling about how to organize that wealth and how to relate to each other can only do so for a while. However, it's the quibbling that tends to have a much more noticeable effect on your well-being in the short-term (even when the short-term can be for the duration of your and your friends' lives). So maybe your take on inflationary versus deflationary money is just about your take on the long-term versus the short-term view?
Why not have Bitcoin but with small in-built inflation?
5 stars.
As the book progresses, it gets a bit more rambly and I wish Alden would have skipped part 6–her thoughts on the ethics around privacy and government control–altogether (it's easier to recommend a short book than a long one), but the total amount of "aha"-moments (as easily measured by the amount of notes I made) still easily justifies that rating.
Why am I so excited about this book?
For a few years now, I've been intensely interested in money. Not so much in just owning the thing itself (though there's certainly nothing wrong with having lots of money), but in the concept. What is money? How does it relate to debt? How is it possible that large countries keep piling on debt without the whole house of cards coming crumbling down? How does our modern financial system work? Is it fair? Is it working well? Is there a better way?
The two most important stops on my money-journey so far were Dalio's "Big Debt Crises" and Graeber's "Debt: The first 5000 years". I read, I learned a lot, but I was still confused. There wasn't anything tying together the different pockets of knowledge in my head and, had you asked, I still couldn't tell you what money is.
Broken Money changed that.
Money is a ledger of who owes what to whom. Repeatedly asking "who controls the ledger?" is an incredibly helpful step-by-step guide through financial history.
Is the system fair? It's not. Is it working well? Some things obviously aren't. Not while just a few people can alter the ledger at will to finance their goals at the cost of everyone else in opaque ways.
As human preferences tend to differ when it comes to who should owe what to whom (and how long you should be owed something in the first place), the answers to some of these questions will likely also differ with said preferences.
Is there a better way? I don't know. Many were answered, but I still have questions about money.
Alden jumped to the "obviously we should want deflationary money" conclusion too quickly for me and I'd love to understand that better. What would a world with deflationary money really look like and do we want that kind of world? Are we really sure we don't want inflationary money to incentivize people to go around chasing for new ideas and innovations to make a return on their "favors owed to them from the past" (aka their money).
If you take the long-term view: people in the future don't care about the state of the ledger (who owed what to whom) from days past. All they'll care about are new ideas and new technologies that make their lives better. Productivity growth is what drives wealth and well-being forever, whereas human quibbling about how to organize that wealth and how to relate to each other can only do so for a while. However, it's the quibbling that tends to have a much more noticeable effect on your well-being in the short-term (even when the short-term can be for the duration of your and your friends' lives). So maybe your take on inflationary versus deflationary money is just about your take on the long-term versus the short-term view?
Why not have Bitcoin but with small in-built inflation?
December 31, 2024
A Deep Dive into “Broken Money” by Lyn Alden: A Transformational Look at Monetary Systems
Lyn Alden’s Broken Money is a thought-provoking, meticulously researched exploration of monetary systems' history, mechanics, and future. The book delves into the core problems plaguing our financial infrastructure and presents a compelling narrative on why money, as it exists today, is fundamentally “broken.” With clarity and insight, Alden dissects complex economic concepts and makes them accessible to readers, offering a visionary roadmap for understanding and potentially fixing our monetary system.
The Evolution of Money
Alden begins with a historical perspective, tracing the origins of money from barter systems to the adoption of gold and fiat currencies. She emphasizes how money evolved as a tool for solving inefficiencies in trade, focusing on the principles of scarcity, durability, portability, divisibility, and recognizability. The book examines how deviations from these principles, particularly in fiat currencies, have led to systemic vulnerabilities.
The Flaws in Fiat Systems
Central to Alden’s thesis is the critique of fiat money. She argues that its lack of intrinsic value, combined with centralized control by governments and central banks, leads to inflation, wealth inequality, and economic instability. The book offers a detailed analysis of historical and modern examples where fiat systems have failed, providing evidence of their inherent fragility.
Technology and Money
A significant portion of the book is devoted to the technological advancements shaping the future of money. Alden explores the rise of cryptocurrencies, particularly Bitcoin, as a potential alternative to fiat systems. She meticulously explains Bitcoin’s design, emphasizing its fixed supply, decentralization, and ability to act as a hedge against inflation. Alden sees Bitcoin not as a panacea but as a robust improvement in monetary systems aligned with the digital age.
Monetary Policy and Social Impact
Alden skillfully connects monetary systems to societal outcomes. She discusses how broken money perpetuates inequality and impairs economic growth, offering a lens through which readers can understand today’s widening wealth gap. Her analysis highlights the need for reform to ensure monetary systems serve humanity more equitably.
Why Broken Money Stands Out
What makes Broken Money exceptional is Alden’s ability to blend rigorous economic analysis with storytelling. Her writing is engaging yet intellectually robust, catering to novice readers and seasoned economists. She brings a balanced perspective to polarizing debates about fiat currencies and cryptocurrencies, acknowledging the challenges of transitioning to new systems while championing innovation.
In conclusion, Broken Money is a must-read for anyone seeking to understand the foundations of modern economies and the future of finance. Alden diagnoses the issues plaguing our monetary systems and inspires readers to envision a more sustainable, equitable financial future.
Lyn Alden’s Broken Money is a thought-provoking, meticulously researched exploration of monetary systems' history, mechanics, and future. The book delves into the core problems plaguing our financial infrastructure and presents a compelling narrative on why money, as it exists today, is fundamentally “broken.” With clarity and insight, Alden dissects complex economic concepts and makes them accessible to readers, offering a visionary roadmap for understanding and potentially fixing our monetary system.
The Evolution of Money
Alden begins with a historical perspective, tracing the origins of money from barter systems to the adoption of gold and fiat currencies. She emphasizes how money evolved as a tool for solving inefficiencies in trade, focusing on the principles of scarcity, durability, portability, divisibility, and recognizability. The book examines how deviations from these principles, particularly in fiat currencies, have led to systemic vulnerabilities.
The Flaws in Fiat Systems
Central to Alden’s thesis is the critique of fiat money. She argues that its lack of intrinsic value, combined with centralized control by governments and central banks, leads to inflation, wealth inequality, and economic instability. The book offers a detailed analysis of historical and modern examples where fiat systems have failed, providing evidence of their inherent fragility.
Technology and Money
A significant portion of the book is devoted to the technological advancements shaping the future of money. Alden explores the rise of cryptocurrencies, particularly Bitcoin, as a potential alternative to fiat systems. She meticulously explains Bitcoin’s design, emphasizing its fixed supply, decentralization, and ability to act as a hedge against inflation. Alden sees Bitcoin not as a panacea but as a robust improvement in monetary systems aligned with the digital age.
Monetary Policy and Social Impact
Alden skillfully connects monetary systems to societal outcomes. She discusses how broken money perpetuates inequality and impairs economic growth, offering a lens through which readers can understand today’s widening wealth gap. Her analysis highlights the need for reform to ensure monetary systems serve humanity more equitably.
Why Broken Money Stands Out
What makes Broken Money exceptional is Alden’s ability to blend rigorous economic analysis with storytelling. Her writing is engaging yet intellectually robust, catering to novice readers and seasoned economists. She brings a balanced perspective to polarizing debates about fiat currencies and cryptocurrencies, acknowledging the challenges of transitioning to new systems while championing innovation.
In conclusion, Broken Money is a must-read for anyone seeking to understand the foundations of modern economies and the future of finance. Alden diagnoses the issues plaguing our monetary systems and inspires readers to envision a more sustainable, equitable financial future.
February 4, 2025
Lyn Alden legt hier ein sehr klares, sehr strukturiertes Werk vor, das kein volkswirtschaftliches Grundwissen voraussetzt. Im Gegenteil: der wirtschaftlich unbeleckte Leser wird nach der Lektüre zum ersten Mal wichtige Zusammenhänge erkennen.
Das Buch gliedert sich für mich in drei Teile:
Im ersten Teil geht Alden auf die Entstehungsgeschichte des Geldes selbst ein. Warum kam schon bei Jägern und Sammlern das Bedürfnis nach einem universellen Tauschmittel auf? Wie entwickelte sich dies im Laufe der Jahrhunderte weiter? Welche generellen Eigenschaften muss Geld aufweisen? Alden weist nach, dass sich neue Geldlösungen stets bei Technologiesprüngen entwickeln.
Im zweiten Teil (meiner Gliederung) geht es um die letzten 100 Jahre und die Entwicklung des heutigen Eurodollar/Petrodollar-Systems. Geld ist nun von jeglicher Bindung an Gold befreit und Guthaben existieren im Wesentlichen als virtuelle Einträge in Konten. Das "Hauptbuch" wird von der Zentralbank geführt. Bargeld ist ein Schuldtitel der Zentralbank. Die Zentralbank kann jetzt Geld "drucken" - out of thin air, wie Alden es schön beschreibt. (Ich habe das englische Original gelesen.) Das Ganze ist natürlich etwas komplizierter, aber ich habe mich als Leser an jeder Stelle mitgenommen gefühlt.
Interessant und beunruhigend ist die von Alden aufgestellte These, dass das derzeitige schuldenbasierte System nur dann funktioniert, wenn eine beständige Inflation herrscht: 2% ist das derzeitige Ziel der Zentralbanken. Die Schulden müssen somit beständig weginflationiert werden, damit sie uns nicht über den Kopf wachsen. Was sie aber bereits sind. Deshalb wagt die Autorin die Prognose, dass die Inflation bald für einen längeren Zeitraum ansteigen wird, ohne dass normale Zinsen dies kompensieren. Mit der gleichen Methode inflationierte die USA ihre Schulden nach dem zweiten Weltkrieg hinweg - freilich vor dem Hintergrund globaler Dominanz und einer florierenden Wirtschaft.
Im dritten Teil geht es um die Grundlagen der Kryptowährungen, insbesondere des BITCOIN. Es wird erklärt, wie dieser funktioniert, und es werden Vor- und Nachteile diskutiert. Der Hauptvorteil besteht darin, dass nicht der Staat (die Zentralbank) das "Hauptbuch" kontrolliert, sondern niemand. Als Wertsicherungsinstrument kann er somit in naher Zukunft eine prominente Rolle spielen. "Kann" wohlgemerkt, denn Alden macht keine Werbung für BITCOIN.
Mein Fazit: sehr viel interessantes Wissen vermittelt Lyn Alden, leider teilweise etwas zu detailliert (wenn auch lesbar). Ein wenig straffer und ich hätte dem Buch fünf Sterne gegeben.
Das Buch gliedert sich für mich in drei Teile:
Im ersten Teil geht Alden auf die Entstehungsgeschichte des Geldes selbst ein. Warum kam schon bei Jägern und Sammlern das Bedürfnis nach einem universellen Tauschmittel auf? Wie entwickelte sich dies im Laufe der Jahrhunderte weiter? Welche generellen Eigenschaften muss Geld aufweisen? Alden weist nach, dass sich neue Geldlösungen stets bei Technologiesprüngen entwickeln.
Im zweiten Teil (meiner Gliederung) geht es um die letzten 100 Jahre und die Entwicklung des heutigen Eurodollar/Petrodollar-Systems. Geld ist nun von jeglicher Bindung an Gold befreit und Guthaben existieren im Wesentlichen als virtuelle Einträge in Konten. Das "Hauptbuch" wird von der Zentralbank geführt. Bargeld ist ein Schuldtitel der Zentralbank. Die Zentralbank kann jetzt Geld "drucken" - out of thin air, wie Alden es schön beschreibt. (Ich habe das englische Original gelesen.) Das Ganze ist natürlich etwas komplizierter, aber ich habe mich als Leser an jeder Stelle mitgenommen gefühlt.
Interessant und beunruhigend ist die von Alden aufgestellte These, dass das derzeitige schuldenbasierte System nur dann funktioniert, wenn eine beständige Inflation herrscht: 2% ist das derzeitige Ziel der Zentralbanken. Die Schulden müssen somit beständig weginflationiert werden, damit sie uns nicht über den Kopf wachsen. Was sie aber bereits sind. Deshalb wagt die Autorin die Prognose, dass die Inflation bald für einen längeren Zeitraum ansteigen wird, ohne dass normale Zinsen dies kompensieren. Mit der gleichen Methode inflationierte die USA ihre Schulden nach dem zweiten Weltkrieg hinweg - freilich vor dem Hintergrund globaler Dominanz und einer florierenden Wirtschaft.
Im dritten Teil geht es um die Grundlagen der Kryptowährungen, insbesondere des BITCOIN. Es wird erklärt, wie dieser funktioniert, und es werden Vor- und Nachteile diskutiert. Der Hauptvorteil besteht darin, dass nicht der Staat (die Zentralbank) das "Hauptbuch" kontrolliert, sondern niemand. Als Wertsicherungsinstrument kann er somit in naher Zukunft eine prominente Rolle spielen. "Kann" wohlgemerkt, denn Alden macht keine Werbung für BITCOIN.
Mein Fazit: sehr viel interessantes Wissen vermittelt Lyn Alden, leider teilweise etwas zu detailliert (wenn auch lesbar). Ein wenig straffer und ich hätte dem Buch fünf Sterne gegeben.
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