Lyn Alden at the Bitcoin 2025 Conference : Nothing Stops this train: government debt increasing and bitcoin valuation growing

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shortsegments2 days ago25 min read

Introduction:

This is my summary, short and hopefully sweet, of this important talk given by Lyn Alden at Bitcoin COnference 2025.

Lyn Alden's central thesis, encapsulated by the phrase "Nothing Stops this Train" (borrowed from Breaking Bad), is that the United States is locked into a trajectory of large, persistent, and structurally unavoidable fiscal deficits, regardless of short-term economic cycles or political party control. She argues that this situation creates a fundamental, long-term case for holding scarce assets.

1. The Breakdown of Fiscal Discipline

Alden presents data showing that the traditional relationship between deficits and unemployment has broken down. Historically, deficits would rise during recessions and shrink during recoveries. Since around 2017, however, deficits have ballooned (often reaching 6-7% of GDP) even while unemployment has remained relatively low. This indicates the deficits are structural, not cyclical.

2. The Unstoppable Forces Driving Debt

She identifies several structural, mathematical, and political reasons why these large deficits are almost impossible to fix:

Demographics and Entitlements:

The aging Baby Boomer generation retiring puts immense pressure on programs like Social Security and Medicare. As the ratio of workers to retirees shrinks, the spending on these entitlements becomes mathematically inescapable without massive, politically toxic cuts. Alden calls this a "third rail" of U.S. politics that no party will dare touch.

Healthcare Inefficiencies:

The U.S. spends significantly more on healthcare than other developed nations yet lags in outcomes. This inefficiency is a massive, persistent drain on the federal budget.

Accumulated Debt Interest:

As the total national debt has surpassed 100% of GDP and interest rates have risen (instead of structurally declining as they did for decades), the interest expense on the debt has begun consuming an ever-larger share of federal outlays. In this new environment, raising interest rates to fight inflation paradoxically accelerates the deficit due to the explosive increase in interest payments, meaning "the brakes are heavily impaired."

3. The Shift to Fiscal Dominance

Alden highlights a critical "turning point" after 2008 where public debt growth overtook private sector debt growth. This fundamental shift means the system is now governed by fiscal dominance.

In a fiscally dominant regime, the needs of the government (to fund its massive deficits) constrain the independence and effectiveness of the central bank (the Federal Reserve). The Fed's attempts to slow the economy with high rates are less effective and, crucially, make the government's interest bill "explode faster than it slows private borrowing." The system essentially becomes built on a necessity for constant growth and money supply expansion to support the debt.

4. Investment Implications: The Case for Scarce Assets

Alden's final conclusion is that the only rational hedge against this long-term, unsustainable fiscal trajectory is to hold assets that exist outside the fiat system's "flexible ledger," which always falls back on printing more units (inflation/devaluation).

She argues for owning the highest quality scarce assets—chief among them, Bitcoin (BTC). Bitcoin, being mathematically capped, transparent, and decentralized, serves as the "mirror" and the most potent protection from a system that is structurally geared towards inflation and devaluation of purchasing power over time.

You can watch a deep dive into these concepts here: Nothing Stops This Train w/ Lyn Alden | Bitcoin 2025.

Transcript below my Signature.

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Transcript of this video

0:00
Can everyone hear me? Okay, it's
0:02
good. So, over the past several years,
0:05
I've popularized the term Nothing Stops
0:07
This Train. And of course, that
0:08
originally comes from the show Breaking
0:10
Bad. Uh, and for those that have not
0:13
seen it, um, it's about a chemistry
0:16
teacher who gets diagnosed with cancer
0:18
and ends up going to the dark path of
0:21
cooking, uh, drugs in order to pay for
0:24
his own treatment and to support his
0:26
family. But of course, the moral arc of
0:28
the story is that he eventually cannot
0:30
stop. Even when he's passed his cancer,
0:33
he can no longer stop doing what he's
0:35
doing. And by the fifth season of the
0:37
show, his colleagues are telling him,
0:38
"We really have to slow down. We're
0:40
getting over our skis here." And he
0:42
says, "No, nothing stops this train."
0:45
And I've been using that term to
0:47
describe what's going on with US fiscal
0:49
deficits. And I'll go into during this
0:52
pretty concise presentation uh what that
0:55
means, why it matters, and why it's so
0:59
unstoppable because of course we're here
1:01
at a Bitcoin conference. Um but there is
1:04
this much larger dollar system that's
1:06
happening around us and all over the
1:08
place. And so the the inter exchange
1:10
between what's going on in Bitcoin and
1:12
what's going on in dollarland really
1:14
matters for things like the exchange
1:15
rate, uh things for the economy,
1:17
investing in general. And so we'll start
1:20
now. I'll go into these kind of pretty
1:21
concise slides. Uh some of them will be
1:24
uh simple slides, some of them will be a
1:26
little bit more complex, but I'll walk
1:27
you through the the parts that really
1:29
matter. So this chart here shows uh two
1:32
lines. One is the unemployment rate and
1:35
one is uh federal deficits as a
1:38
percentage of GDP. And this goes back
1:40
many decades. And as you can see from
1:42
the slides, there's always been very
1:44
good uh correlation between them. During
1:47
recessions, unemployment goes up, the
1:49
federal deficits go up, and during
1:51
better times, unemployment is low, and
1:54
federal deficits are low. Uh, the one
1:56
brief exception, if you can kind of
1:58
squint and see it on the chart, is
1:59
1960s. That's when you had the Vietnam
2:01
War. So, there's a little bit of an
2:02
exception, but other than that, these
2:04
are almost the same line. But what
2:07
you'll see on the right hand side of the
2:08
chart, and I circled it in green, is
2:11
over the past several years, ever since
2:13
around 2017, we've had a decoupling.
2:16
We've had uh shrinking unemployment.
2:19
We've had low unemployment levels. And
2:21
yet the deficit has blown out to six or
2:23
7%. Even even before and after the
2:27
pandemic. Uh this was already happening.
2:29
Obviously went into overdrive during the
2:31
pandemic, but we're kind of in this new
2:33
world now. Uh I'm not the first person
2:35
to talk about the deficits. Um but I am
2:38
trying to bring attention to what's
2:39
going on now that was not going on for
2:41
many decades. We're we're entering kind
2:42
of a new uh era. So that's what the
2:44
deficit is. But the second main question
2:47
is why does it matter? Why are we
2:48
talking about it here at a Bitcoin
2:50
conference? And the short reason is
2:52
because it matters for asset prices,
2:54
especially anything scarce. So this
2:56
chart shows uh in the the gold line is
2:59
the price of gold and the dark line, the
3:02
black line is real interest rates. And
3:05
again, we've historically seen um that
3:08
there's been a very strong correlation
3:10
between these two things. And so for
3:12
those that don't don't know what I mean
3:13
by real interest rates, this this one is
3:16
specifically the 10-year Treasury yields
3:18
minus CPI inflation. Uh and the reason
3:21
these two charts, gold and and real
3:24
treasury rates are so worth comparing is
3:26
because they're the two primary reserve
3:29
assets globally, they're the ones that
3:30
that compete with each other at at that
3:32
scale. And gold, of course, is pretty
3:35
scarce. the supply grows by an estimated
3:37
1 to 2% per year but you don't get paid
3:40
any yield to own it. If anything you you
3:42
incur an expense for storing it. Whereas
3:44
treasury yields uh you know dollars and
3:46
treasuries they grow at a much faster
3:49
supply growth but then you get paid this
3:51
yield to own them. And during periods
3:54
where the yield is rather high compared
3:56
to measured levels of inflation, some of
3:59
the investors that might otherwise buy
4:00
gold get enticed to come back to the
4:02
dollar and the treasury system. But then
4:05
during periods of time where the yields
4:07
are not high enough compared to
4:09
inflation, uh many investors flock to
4:11
gold. They basically say, "If I'm not
4:13
going to get paid anything on my
4:14
treasuries, why would I own treasuries
4:16
that are way more abundant than gold?"
4:18
And historically, this has been a very
4:19
strong correlation. High real rates
4:21
means uh higher gold prices. And on this
4:24
chart, the real rate is inverted. So
4:26
lower means higher real rates. And
4:28
again, as you've seen over the past
4:29
several years, this this one in
4:31
particular, starting around 2022, we've
4:33
had a complete decoupling in the price
4:35
of gold and real rates. So, something
4:37
new is happening here in this kind of
4:39
fiscally dominant environment. Um, and
4:42
of course, this is relevant for Bitcoin.
4:44
A lot of people, if you would have said
4:46
5 years ago, if interest rates are four
4:48
or 5%, uh, would Bitcoin be selling out
4:52
massive conferences in Las Vegas and
4:54
would it be worth over $100,000 per
4:56
coin? Most people would say no. In fact,
4:59
many critics kept saying that it's just
5:01
a zero rate phenomenon. It's some bubble
5:03
that's going to go away as soon as um
5:06
you know, the Fed gets any sort of
5:08
hawkish uh in them. Uh but what we've
5:10
seen over the past several years is the
5:12
Fed got about as hawkish as they could
5:13
get. They even broke some banks in the
5:16
process. And yet gold and Bitcoin both
5:19
soared anyway because something changed.
5:23
So these charts are a little bit
5:25
noisier, but I'll I'll direct you to the
5:26
parts that matter because this is the
5:28
inflection point that really shows up.
5:30
So the blue line on these charts is
5:33
private sector year-over-year debt
5:35
growth. So that's bank loans and that's
5:37
corporate bonds, that type of thing. The
5:39
red line is federal uh debt growth. Uh
5:43
so you have private markets and public
5:44
markets. The the pain on the left is
5:47
1955 to 1990 and the pain on the right
5:50
is 1990 to the present. So, this is a
5:52
70-year history. And if you look at the
5:55
the left side, for the most part, the
5:57
blue line, private sector debt growth
5:59
was going up at a faster rate in any
6:02
given year than public sector debt
6:04
growth. And there are rather few
6:06
exceptions that occur around recessions.
6:08
And I mark those in yellow on the
6:10
charts. And those are pretty, you know,
6:11
few and far between. During recessions,
6:13
the deficits would go up, bank lending
6:15
would go down, um, and then we move past
6:17
that. What you see in the chart on the
6:19
right is that ever since the 2008 global
6:21
financial crisis and especially ever
6:23
since in in recent years, we've been in
6:25
this period of time where federal debt
6:27
growth is consistently going up at a
6:29
faster rate than private sector debt
6:31
growth. Um, and I highlighted again in
6:33
those little green boxes, if you can see
6:35
them on the right, that even outside of
6:37
recessions, this is still the case. So,
6:39
this was happening before the pandemic
6:41
and after the dust settled, after all
6:43
the money printing, it's still happening
6:45
now. And the reason this turning point
6:48
really matters is because when we look
6:50
at what the Fed what their tool is to
6:53
control uh credit growth, it's mainly
6:55
interest rates. If they want to slow
6:57
down the economy, slow down uh credit
7:00
growth and try to slow down inflation,
7:02
they jack up interest rates to try to
7:04
make borrowing less attractive. On the
7:06
other hand, if they want to accelerate
7:07
things, they didn't lower interest
7:09
rates. The problem is that you know many
7:12
decades ago when federal debt was low
7:14
and most of the money creation was
7:16
coming from private sector whenever they
7:18
raised interest rates they would slow
7:20
credit growth they would slow the
7:22
private sector faster than they would
7:24
blow out fiscal deficits. The problem
7:26
now is that now that they have over 100%
7:28
of GDP, which only happened in recent
7:30
years, when they raise interest rates,
7:33
they ironically increase the federal
7:35
deficit at a faster pace than they slow
7:38
down private sector credit growth.
7:40
Basically, what that means is they don't
7:42
have brakes anymore. The train, nothing
7:44
stops this train because there's no
7:46
breaks attached to it anymore. Or
7:47
another way of putting it is the brakes
7:49
are heavily impaired. We've kind of gone
7:51
through the looking glass. We're in
7:52
Wonderland now where the rules that
7:55
worked for the majority of this time
7:57
frame now work backwards. They don't
7:59
really have a way to slow down total
8:02
credit growth in the system. And that's
8:04
a new phenomenon. So for the remainder
8:07
of this talk, I'll just go over a few
8:09
slides of why this is so unstoppable.
8:11
Why can't just a couple people get
8:12
together and figure this out? Why is
8:14
this so entrenched? Why is it that I'm
8:16
confident to say that nothing stops this
8:18
fiscal train even regardless of election
8:21
outcomes? I was saying it before the
8:22
election. I was saying it after the
8:24
election because it doesn't really
8:26
matter. Nothing stops
8:29
it. And so on this chart we have uh this
8:32
is a pretty simple chart. The blue line
8:34
is 10-year interest rates, 10ear
8:36
Treasury interest rates. And the red
8:38
line we have debt to GDP, federal debt
8:40
to GDP. And you know back in the 1980s
8:44
you had very low debt levels and you had
8:46
very high interest rates. And we've gone
8:47
on this like you know four to five year
8:49
four to five year decade journey of ever
8:51
higher debt levels but it's been offset
8:54
by this structurally declining interest
8:55
rate. And what that means like for
8:57
example if you double your debt but you
8:59
cut your interest rates in half your
9:01
interest expense is still manageable. So
9:03
for this whole 40 plus year period
9:06
interest expense was actually pretty
9:07
manageable. But what happened is
9:09
eventually we hit zero. Just mass kind
9:11
of reasserted itself. And so now we're
9:14
in an environment where the first time
9:15
in decades interest rates are not going
9:17
structurally down anymore and debt
9:20
levels are still very very high. They're
9:22
the highest that they've ever been since
9:23
the 1940s. And so interest expense is
9:26
actually becoming a very meaningful part
9:28
of the federal expense for the first
9:30
time ever. And there's no easy way to
9:33
get that under control. If they cut
9:34
interest rates super low, then everybody
9:37
wants to get into scarce assets. But if
9:39
they keep interest rates high, they keep
9:40
blowing out the federal deficit because
9:42
we're kind of, like I said, we're kind
9:44
of in wonderland now. So that's a really
9:46
big component. Another really big
9:49
component is social security. So this
9:51
chart shows the social security trust
9:53
fund. Uh, and as you can see, it went
9:56
from zero and it rose to about $3
9:58
trillion on that chart. And the reason
10:01
for this kind of change that's happened
10:03
over time is because of demographics. So
10:06
the baby boomer generation was an
10:07
unusually large generation born uh from
10:10
the late 1940s into 1960s after after
10:13
the World War II. A very large
10:15
generation and when when they entered
10:17
the workforce they were you know paying
10:19
into social security. So we had this big
10:21
ramp up in the amount of uh funds that
10:23
were invested. Now unfortunately they
10:25
didn't invest uh social security very
10:27
well. They held it in US treasury bonds
10:31
basically um which are not the best
10:33
long-term investment you can make. And
10:36
according to the social social security
10:38
administration's own numbers, uh by
10:40
about 2035, they're going to deplete
10:42
that trust. Uh and what that means in
10:45
practice is that they're going to spend
10:47
down this $3 trillion into the economy.
10:50
That's as the baby boomer generation
10:52
enters their retirement years, which
10:55
they're already doing and they're going
10:56
to continue to do. This is going to
10:58
continue to roll over. And if you notice
11:01
this, this kind of hit a peak in the
11:03
late 2010s. So 2017, 2018, it was kind
11:06
of hitting its peak and and kind of
11:08
starting the very early process of
11:09
rolling over. And that's when deficits
11:12
decoupled from unemployment. And that's
11:14
when the federal debt growth started to
11:16
exceed private sector credit growth. A
11:18
lot of this timing happened because at
11:20
around the same time interest rates uh
11:23
stopped going down and the baby boomer
11:26
generation that that funded a lot of
11:27
this on the upside is now in draw down
11:30
mode. So this is getting spent into the
11:31
economy via health care, via travel, via
11:35
housing, basically everything that
11:36
people have to spend money on. And so
11:39
this is a background expenditure that's
11:41
going to go back into the system over
11:43
the course of the next 10 years. Now
11:45
sometimes that ex exact depletion date
11:48
will get pushed forward or pushed back
11:49
by one year but this is mostly actuarial
11:53
math. It's it's kind of inevitable. And
11:55
importantly these people vote. Young
11:57
people protest but then they forget to
11:59
vote. This demographic actually votes.
12:02
And right now anything that touches the
12:04
expenditure of this fund is a third rail
12:06
of politics. Both major parties in the
12:07
US have vowed basically not to touch
12:09
social security over this time frame.
12:12
And so this is pretty much set in stone
12:14
even in a very politicalized
12:15
environment. It's one of the few things
12:17
the parties basically agree
12:20
on. One of my last slides is um to
12:23
emphasize the Ponzi nature of the
12:26
system. So even aside uh from from
12:28
current issues related to demographics
12:30
and and debt levels basically the way
12:32
the system is constructed and by the
12:35
system I mean central banking with
12:36
fractional reserve banking built on top
12:38
of it. the whole fiat system we've been
12:39
kind of operating under for over a
12:41
century. Uh it relies on constant
12:44
growth. It's like a shark that can't
12:46
stop swimming otherwise it drowns
12:48
ironically. It's a system that has to
12:50
keep increasing. And so on this chart
12:52
the top line is total debt in the system
12:55
in the US system. So that's public debt
12:57
and private debt combined and it's
12:59
actually over a hundred trillion dollars
13:01
for the first time and the bottom line
13:03
is the monetary
13:05
base. And what we see is that for the
13:08
entire period of this chart, so this
13:10
goes I believe from 1966 until uh 2025,
13:14
the entire uh period of this chart,
13:16
total debt never went down except for
13:18
one very brief exception and that was
13:20

And it went down by about 1% total
13:23
debt in the system. And what they did
13:26
was they rapidly increased the monetary
13:28
base from 1 trillion to right now about
13:31
$6 trillion. it was so like um
13:34
impossible for them to let even a tiny
13:37
amount of deleveraging occur that they
13:39
kept the party going and specifically
13:42
back in that time. So if we do the math
13:43
a little bit in 2008 the total debt in
13:46
the system was in the ballpark of $50
13:48
trillion. So it's about half as big as
13:50
it is now and they were on a monetary
13:52
base of about a trillion dollars. So the
13:54
system is levered 50 to1. That's the
13:56
type of leverage you see in like crypto
13:58
dgen derivatives contracts. It was like
14:00
the it was 50 50 to1 leverage across the
14:03
economy and specifically they hit zero
14:05
interest rates so they couldn't keep
14:07
propping up the the private sector debt
14:09
bubble and instead they rotated to the
14:11
federal level. Um and so that's that's
14:14
kind of shows how sensitive the system
14:16
is as you've kind of gone forward. We're
14:19
now more in the public sector debt
14:21
growth. I actually looked at the data
14:23
that goes back even longer than this
14:24
chart going back about 110 years and
14:27
there were only four other years where
14:29
the total debt level ever went down
14:30
nomally and that was during the great
14:32
depression. So 1930 through 1934 was the
14:36
only other period beside 2008 on the
14:38
chart where it went down. So 5 years out
14:41
of over 110 years of data um is their
14:44
tolerance level for ever letting that
14:46
Ponzi unravel. Um, and that that's just
14:49
kind of the system that's the math that
14:51
we find ourselves operating in and
14:53
that's the big contrast that we have to
14:56
Bitcoin. So my for my last slide, we
14:58
don't have to focus on the details here,
15:00
but just by looking at the shape of
15:02
these charts, these are century long
15:04
charts. And so my main point with these
15:06
charts is we've actually seen this story
15:08
before. We've gone through something
15:10
like what we're going through now in the
15:12
US one time in the past and that was
15:14
around the 1940s. So the reason that
15:17
debt growth is so smooth historically is
15:20
because when they do finally run into
15:22
something that actually challenges it,
15:24
they rotate the whole system around and
15:26
we're got we're going through it for the
15:28
second time. So basically you have a
15:30
private debt bubble buildup and then you
15:32
hit zero interest rates. So you can't
15:34
keep uh adding more and more on to the
15:37
accelerating private debt growth. And
15:39
then what happens is you find yourself
15:40
levered 50 to1 and you start to unravel.
15:44
And how do you unravel a system that's
15:46
uh levered 50 to one? The short answer
15:48
is you don't. You just print more base
15:50
units is how they always handle it. So
15:52
what that happens, they switch over to
15:55
federal debt growth and they switch over
15:57
to running massive federal deficits. So
15:59
that even as private sector debt levels
16:02
eventually kind of mellow out for a
16:03
period of time, it keeps growing on the
16:05
public side. And that tends to be more
16:07
inflationary and that tends to be more
16:09
persistent because as we get to the
16:11
point that I mentioned before, when the
16:13
Fed raises interest rates to try to slow
16:15
any of this down, they blow out the
16:17
federal deficit at a faster rate than
16:19
they slow down bank growth. So
16:21
basically, we're completely off the
16:23
tracks now. And notice nothing I said is
16:25
anything about Weimar. Nothing's about
16:27
hyperinflation. It's all about basically
16:30
long-term unseasing 7% debt deficit
16:34
growth. We're not talking about 70%
16:36
deficits of GDP. We're talking about 7%
16:38
but it's every single year like
16:40
clockwork. It's the relentlessness of it
16:42
that matters. And so as we go forward,
16:45
um this is the system that Bitcoin is
16:47
going to exist in. And if you kind of
16:50
summarize this whole talk, all these all
16:51
these charts, all these points, there's
16:54
two main reasons why nothing stops this
16:56
train. One is mass. the way that they've
16:59
constructed the Ponzi system that I've
17:01
talked about before, the way that it has
17:03
to always continue growing to ever um
17:06
not start deleveraging in in the crazy
17:08
way that it would. So that that's a
17:10
system that they've built. And two, the
17:12
second reason is human nature. None of
17:15
us want to pay higher taxes. People that
17:17
are on the receiving side of deficits
17:19
never want to cut them. Virtually no
17:21
politician is ever incentivized enough
17:24
to actually cut deficits during their
17:26
term. And basically this represents a
17:29
flexible ledger. This is this is the
17:32
ledger that we all kind of work with in
17:34
the US and globally. And because it's a
17:37
flexible ledger, they can always create
17:38
more units. And therefore, that's the
17:40
error correction that they keep falling
17:42
back on over and over again. And that's
17:45
what contrasts with Bitcoin. Bitcoin is,
17:47
you know, the complete opposite of the
17:49
system in many ways. It's the mirror of
17:50
the system. Instead of everinccreasing
17:53
units and indeed ever ever increasing
17:55
units that can't even slow down, Bitcoin
17:58
is absolute scarcity. And instead of
18:00
opakeness, it's transparent. And instead
18:03
of the error correction being able to
18:05
just print more units, the error
18:07
correction that happens in Bitcoin is
18:08
deleveraging can happen, but you can
18:10
never go after the unit itself. So
18:13
basically, nothing stops this train. For
18:15
the next 10 years, we're going to be
18:17
running very large fiscal deficits in
18:19
the US almost regardless of what else
18:22
happens. There are certain things that
18:23
can accelerate it a lot. There are
18:25
certain things that can maybe decelerate
18:26
a little bit, nothing meaningfully. And
18:29
so, the one way to protect yourself from
18:31
that situation is to own the highest
18:34
quality scarce assets. And of course,
18:36
the one we all like here is Bitcoin.
18:38
Thank
18:41
you.
18:46
[Music]
19:00
Heat.
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Heat.
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[Music]
19:13
[Music]
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Heat up here.
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[Music]