In some sense, the circularity of the financial system is almost poetic; it represents how dependent we all are on one another. However, it’s also very fragile. Everything is a claim of a claim of a claim, reliant on perpetual motion and continual growth to not collapse.
— Lyn Alden, Broken Money, Ch. 23, para. 24
When I started paying more attention to Bitcoin, I felt a desire to develop a better understanding of money in general. It seemed necessary if I wanted to really "get" Bitcoin and why it was so important. I looked for a book that could explain how money really worked, in an accessible format. I couldn't find anything at the time.
That was around 2019, before Broken Money was written. Broken Money was published by Lyn Alden in 2023. It's a really approachable text that describes the history of money, different forms of money, and the underlying qualities that make money useful.
In his article “On the Origin of Money,” Menger described that an ideal money transports value across both space and time, meaning that it can be transported across distances efficiently or saved for spending in the future.
— Alden, Ch. 8, para. 20
Money is a system that efficiently transports value across space and time. I'd add "people" as a 3rd dimension of transport. I think that's a good definition to start with.
99 Problems
There's no way to argue that the author isn't biased to some extent. She's both personally and professionally invested in the success of Bitcoin and therefore is going to make the problems with the current financial system as pronounced as possible.
With that said, I don't think she's making this stuff up. Most of the explanations and theories presented were believable to me, and the evidence is hard to ignore. But we have to accept that macroeconomics is incredibly complex and the best we can do is have theories. Modern Monetary theory, Austrian economics, Chicago School of Economics, girl math....these are all popular schools of thought that attempt to explain how money and the economy works. But the economy is a complex, dynamic system of forces and no one theory can perfectly explain it.
Alden spends a good deal of time in the book writing about the history of money and how we arrived to our present day financial framework. Bitcoin isn't mentioned until chapter 20 actually. This dissection of money really highlighted many of the flaws and limitations in our global monetary system.
I'm going to focus on the parts I found most interesting and, frankly, concerning.
Inflation by Design
Today, every fiat currency on Earth is inflationary. This just means the value of a "dollar" (in the general sense) decreases over time. It's highly debatable whether this is good for a society, and who it's good for. Alden makes the case that inflation is counter-intuitive to how prices should work—but it's a necessary evil that the government enforces so our highly leveraged financial system doesn't collapse.
A 2% inflation target means that prices on average will double every 35 years. This is interesting, because ongoing productivity gains should make prices lower over time, not higher. Central bankers do everything in their power to make sure prices keep going up.
— Alden, Ch. 25, para. 69
The problem with constant change to the "price" of a dollar makes it hard to make long-term financial plans. Prices are the only mechanism for communicating information about value, so if these prices change over time in non-predictable ways then we can't properly reason about long-term saving and spending decisions.
In general, inflationary money rewards debtors (people who owe money) and incentivizes spending. At first that sounds fine, since the most financially vulnerable people in society are usually those in debt. But the total amount of debt owned by the lowest earners in society doesn't even scratch the surface compared to the debt owned by the largest corporations, and even the government itself.
So really, inflation rewards those at the top of the economy, it debases people's savings, and it incentivizes consumption and spending. It's a roller-coaster we have no choice but to ride.
A Dollar is not a Dollar
The breakdown of the modern banking system was eye opening for me. There's a distinction between the base money supply, which is all the money that actually exists, and the broad money supply, which is the total amount of dollars in circulation in the economy. Maybe you are as surprised as I was to find out these aren't the same thing.
In essence, base money is all the dollars that have been created by the government's central bank; either by printing money or by issuing treasury reserves. Broad money is what you get if you added up every individual and corporate bank account balance in the country.
For both base money and broad money, most countries currently work the same way as the United States. A country’s central bank manages the base money of the system, and the commercial banking system operates the larger amount of broad money that represents an indirect and fractionally reserved claim to this base money.
— Alden, Ch. 24, para. 28
What I took from this is that every dollar you see in your bank account does not represent a whole "dollar loan" that you'd be able to go claim anywhere. It's a fraction of a fraction of a claim on a real dollar somewhere in a huge system of hierarchical ledgers.
Money lent from one institution can be deposited at another institution and immediately (and fractionally) lent from there, resulting in the double-counting, triple-counting, quadruple counting, and so forth, of deposits relative to base money. At that point, people have far more claims for gold than the amount of gold that really exists in the system, and so in some sense, their wealth is illusory.
— Alden, Ch. 13, para. 21
Although this is exactly how fractional reserve banking is designed to work, it still makes me feel uneasy. Everyone is just loaning assets they don't own, buying and selling these loans, and in general just creating money out of thin air based on false promises. It's a shaky foundation that our entire society depends on.
The Human Aspect of National Monetary Policy
The biggest flaw I see with modern economic systems is how much power is centralized—a small group of individuals make all the decisions on how much money to print, what the cost of borrowing should be, and other monetary policies that influence millions of people. Although this is mainly a consequence of democratically elected leadership, the fact that humans make these macroeconomic decisions on behalf of everyone seems fallible at best, and downright corruptible at worst.
It only takes one unethical or despotic leader to destroy a national currency:
To a less extreme extent — as I describe later in this book — this is sadly what happens throughout many developing countries today: people constantly save in their local fiat currency that, every generation or so, gets dramatically debased, with their savings being siphoned off to the rulers and wealthy class.
— Alden, Ch. 8, para. 83
It's seen time and time again in developing countries, sadly.
Even in non-developing countries, economic policy tends to favour those who already have money and, by extension, political power. That means big corporations and their wealthy owners.
Over a 2-year period from the start of 2020 to the start of 2022, the broad money supply increased by approximately 40%. Printing money in this way devalued savers, bondholders, and in general people who didn’t receive much aid, and rewarded debtors and those who received large amounts of aid (keeping in mind that the biggest recipients of aid were corporations and business owners)
— Alden, Ch. 27, para. 18
This sort of hair-trigger, reactionary decision-making is kind of unavoidable with the system of government we've devised. Democracy works in extremes and pushes those at the top to make rash decisions to appease voters and to maintain the appearance of leadership by making change for the sake of change. In essence, what I'm saying is human decision making is too flawed and influenced by emotion to be the way we make these decisions.
The American Aspect of Global Monetary Policy
People being at the centre of national fiscal policy is bad enough, but in the case of the United States, it's even worse. Because the U.S Dollar is the world's base currency, that means the decisions made by members of the Federal Reserve and Treasury Department affect the entire world. The buying power of every other currency is measured relative to USD, so if the U.S government decided to print a ton of money and give it to themselves, they are effectively stealing from the the rest of the world.
This seems like an unfair advantage for one country to have. I know life isn't fair, but I believe we, as a global society, could come to a consensus on a way to transact across borders that doesn't depend on any specific country's economy.
The most shocking part about this system is that it's not actually beneficial for America long-term!
it artificially increases the purchasing power of the U.S. dollar. The extra monetary premium reduces the United States’ export competitiveness and gradually hollows outs the United States’ industrial base. To supply the world with the dollars it needs, the United States runs a persistent trade deficit. The very power granted to the reserve currency issuer is also what, over the course of decades, begins to poison it and render it unfit to maintain its status.
— Alden, Ch. 21, para. 8
This is certainly debatable, but it makes sense intuitively. If one country is allowed to issue currency which is globally accepted, and it's the only country with this ability, then their currency will carry an extra monetary premium above all others. This "built-in" economic premium granted to the American people allows them, collectively as a society, to rest on their laurels and not have to work as hard.
In other words, America has the option to "buy instead of build" because they are so wealthy. This is the fundamental reason for the trade deficit it has with almost every other country. Learning about this was highly relevant in 2025 in the midst of the trade war the current U.S President has launched. You could view the tariffs he's introduced as a way to neutralize this monetary premium and force their stagnated economy to start building and manufacturing in a way they haven't needed to since the Bretton Woods system was established.
Bitcoin
After a lengthly explanation of the history of money, and then several chapters bashing the current monetary system, Alden finally introduces Bitcoin to the reader. I won't go into much detail here as there are plenty of better resources than me which will explain Bitcoin's core concepts, if you're interested. I'd also recommend reading this book. It's explains Bitcoin really well.
I'll briefly summarize how Bitcoin attempts to solve the problems I discussed above.
Inflation
Bitcoin is a deflationary currency. It has a fixed supply of 21 million total coins, which means it's purchasing power will trend upwards over time. In the best case scenario, this means everyone will continuously get richer as we all equally benefit from improvements in production efficiency and technological innovation. In the worst case, it means society comes to a halt as people delay purchases indefinitely waiting for their savings to be worth more.
Either way, I believe a globally recognized, alternative currency model would be a healthy counter-balance to our existing fiat currency systems.
Fractional Reserve Banking
At it's core, Bitcoin is a bearer asset. Ownership of Bitcoin is instantly verifiable via the blockchain ledger. Money, in it's physical form, is similar in that it's a bearer asset. But the dollars in your bank account don't represent ownership at all. They're a promise by your bank to give you that amount of dollars if you asked for it. This promise can't always be fulfilled. Bitcoin is unique in that it's purely digital, yet it has the same qualities as physical dollars.
Centralized Human Control Over Monetary Policy
Finally, Bitcoin—as a monetary system—is completely decentralized. No single entity or government has any control over its rules. And it's rules are decided algorithmically and predictable for the rest of time, in theory.
Nothing can change about Bitcoin unless the change is accepted by a majority of participants in the system. Couple that with the fact that Bitcoin's value is directly tied to the network size and its popularity as an accepted form of currency. So its incentive structure is designed to ensure the network will remain fair and accessible to everyone. Otherwise, no one will want to use it.
Is it perfect? No...but it's fairer than how monetary policy is defined today.
Summary
Broken Money is a sobering look at the state of money today. It traces the origins of money throughout human history—from the rai stones of Yap island to the post-COVID global inflation surge of the 2020s. It was well researched and well written.
I don't think Bitcoin is going to overtake the fiat currency systems of the world. But I believe it's going to be around for a long time, acting as a hedge against the government's centralized control of money. In the worst case, it will act as a store of value akin to digital gold. In the best case, we will continue to innovate and build technology on top of Bitcoin that expands its utility in both familiar and novel ways.
In a recent post on Nostr, Alden makes the case that Bitcoin is something like an open-source decentralized Fedwire, the settlement system that underpins the entire U.S banking industry. This feels like an apt comparison to me—mainly because the Bitcoin network can support basically the same transaction throughput as Fedwire can. Maybe one day Bitcoin will become the global settlement system for an entirely new class of banks and financial service providers.
In my view, open-source decentralized money that empowers individuals, that is permissionless to use, and that allows for a more borderless flow of value, is both powerful and ethical. The concept presents an improvement to the current financial system in many ways and provides a check on excessive power, which makes it worth exploring and supporting.
— Alden, Ch. 41, para. 79