The United States financial system has crossed a threshold that threatens to alter the rules of the global economic game. This is something that macroeconomist Lyn Alden defines as an era of “fiscal dominance.” In this scenario, the magnitude of public deficits eclipses the traditional tools of the Federal Reserve (FED), making interest rate policies less effective in the face of a debt that seems to have a life of its own.
According to Alden, author of the book Broken Moneythis transformation was conceived after the 2008 crisis and reached a point of no return in 2019. For the first time in decades,public debt exceeds the creation of new private crediteven in periods of growth.
«We are already in the period where debt matters. “The devaluation is already happening,” says the analystpointing out that structural deficits, which are around 6% of GDP, went from being an accounting problem to becoming the driving force, and at the same time the burden, of the US economy.
This fiscal imbalance today faces a barrier that financial capital cannot jump: the physical reality of energy. Since last February 28, The armed conflict between the United States, Israel and Iran led to an unprecedented supply crisis.
As CriptoNoticias has reported, the closure of the Strait of Hormuz in March blocked the transit of 20 million barrels per day, evidencing a vulnerability that the monetary system cannot correct by simply printing more currency.
Regarding this, Alden is blunt in pointing out that although central banks can inject liquidity to support Treasury bonds, “they cannot create oil or fertilizers.” This shortage, which makes fuel more expensive, also fractures global food production.
The result is an inflationary pressure that hits developing economies especially hard, where the room for maneuver to absorb these costs is non-existent, as Alden explains.
We are already in the period when debt matters. The degradation is already happening. That’s kind of the straw that breaks the camel’s back. If people can’t go to work, if they can’t turn on the lights, a catastrophe is created. What worries me most is what is happening in the Strait of Hormuz due to the energy shortage, the shortage of raw components. If they stay closed long enough…energy shortages or food shortages are the worst-case scenario for any economy. The Federal Reserve cannot print oil.
Lyn Alden.
The role of Bitcoin in the face of the exhaustion of the traditional model
Faced with a fiat system that Alden considers anchored in the limitations of the 70s, Bitcoin emerges as an alternative payment infrastructure. The economist argues that, while gold depended on slow financial intermediaries to settle transactions, bitcoin offers almost immediate final settlement. For Alden, this is a way to eliminate layers of trust in institutions that today are forced to monetize debt to stay afloat.
Is there a chance this could be the last debt cycle? Could this be the one that really breaks the fiat system? I think I could. The fiat system as we know it only dates back to the 70s. Trade is carried out globally. It is those intermediaries who have all the power. Until the dawn of Bitcoin, there was no quick settlement and now we have alternatives.
Lyn Alden.
To understand Alden’s position, it is necessary to distinguish between the speed of a payment and its final confirmation. In the current system, when we use a card, the transaction is instantaneous, but settlement, the actual movement of money between banks, can take days or weeks. Historically, this slowness forced the world to rely on financial intermediaries who “guaranteed” the money while it arrived.
Alden maintains that bitcoin breaks this scheme by allowing the asset to move and ultimately settle in minutes, eliminating the need to trust institutions that today are under the pressure of state debt.
Bitcoin is the opposite of fiat. It is scarce, decentralized and mathematically limited… There are two reasons why nothing stops this train. That’s mathematics and human nature. Bitcoin is the mirror of this system and the best protection against it.
Lyn Alden.
However, the path is not without debate. While part of Wall Street trusts that artificial intelligence will generate a leap in productivity capable of diluting the weight of debt, the reality of 2026 presents a panorama of regional scarcity and high prices.
With the commercial flow of the Strait of Hormuz reduced to a minimum and a debt that feeds on its own interests, Alden’s analysis suggests that The end of the fiat era is a transition process which is already reflected in the deterioration of global purchasing power.