(Kitco News) - With all eyes on the Federal Reserve and whether it will be forced to hike one more time this year due to high inflation numbers, Lyn Alden, Founder of Lyn Alden Investment Strategy, points to the opaque process of setting monetary policy and the 12 unelected individuals calling all the shots.
The Fed has a tremendous impact domestically and globally, but its policy is far from transparent or accountable, Alden told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News, on the sidelines of the Pacific Bitcoin Festival.
"Interest rates and balance sheet size affect the price of money," Alden said. "And if you look in most markets, price controls are not historically effective. But in this current era, we have price controls for the price of money, or specifically the price of credit."
Instead of letting the market determine an appropriate price of credit, the central bank is in charge, Alden pointed out.
"Various parts of the interest rate pricing mechanism are heavily set by the centralized group. And it's literally 12 people that decide. It's seven members of the board of governors, and then it's a revolving set of other central bank heads," she said.
And none of them are elected, Alden added. "It's almost like a council of elders deciding this is the price of money today. And then, they divine the tea leaves, and every six weeks, everybody tunes in to see what color smoke's going to come out of the group of 12 people sitting around the table to decide."
The Federal Reserve also has a massive influence globally since it's the ledger that almost every country ties into by owning U.S. reserves as assets, according to Alden. "[We have] hundreds of millions of people domestically, billions of people globally, and there are 12 people that can decide, should interest rates be 2%, 3%, 5%, 7%, should we expand or decrease the base layer of money?"
Alden described the Fed as the fourth branch of the U.S. government, which often ends up putting out fires that it itself started. Watch the video above for Alden's explanation.
For Alden's Fed rate hike outlook into the year-end, watch the video above.
With the BRICS expansion of six new members getting invited to join — Saudi Arabia, the United Arab Emirates, Argentina, Egypt, Iran, and Ethiopia — Alden foresees more bilateral currency agreements.
To get her take on a new common BRICS currency and why it is dangerous to back it up with something finite, watch the video above.
Bitcoin standard
As more people and countries decide to get out of the existing fiat currency system, the long-term development to monitor is the acceptance of a Bitcoin standard, said Alden.
"The way markets work in terms of money, especially on the global scale, is that people want to get out of weaker monies over time. And if some fencing keeps them in, technology is a way to break through that," she said.
The triggers to watch are an inflationary spiral, massive money printing, and unsustainable debt levels hitting the developed markets.
"The big question is what happens when eventually these major developed currencies fail or begin to have their kind of ongoing inflationary spiral? When their debt levels get so high, when their interest expense is completely untenable, when we have an energy shortage, and you see just money printing from these central banks, what happens then?" Alden asked.
There is an "apex predator asset" that would get adopted after all of the above happens. To get Alden's answer, watch the video above.
Pacific Bitcoin coverage sponsored by Swan Bitcoin ?Swan.com
