Macro analyst Lyn Alden believes the Federal Reserve may already be tiptoeing toward a future in which ongoing balance-sheet expansion becomes the norm rather than the exception. In a wide-ranging conversation with Kitco News host Jeremy Szafron, she laid out a view of an American economy that appears strong at the headline level but increasingly strained beneath the surface — a backdrop, she argues, that ultimately pushes policymakers toward quiet, continuous liquidity creation.
QT Has Quietly Ended — and Liquidity Is Seeping Back Into the System
Alden pointed to the Fed’s December 1 halt of quantitative tightening as one of the clearest signals that something structural is shifting. She described the stoppage as a response to mounting liquidity stress in the repo market, a “don’t look over here” maneuver designed to keep the Treasury market from tightening further.
Her base case, she said, is a gradual resumption of balance-sheet expansion aligned with nominal GDP growth. Not a crisis-style flood of stimulus, but a steady institutional drip that becomes policy by default — even if officials avoid calling it stimulus at all. “They’ll say it’s about technical or plumbing issues,” she noted, “but functionally, it expands liquidity.”
This gradual re-liquefaction, she argued, is emerging at the same time parts of the U.S. economy begin losing altitude.
A Split Economy: Strong From 30,000 Feet, Hollow on Main Street
Alden described a two-speed U.S. economy. Big AI-driven corporates and financial heavyweights paint a glossy macro picture, yet most companies face soft investment, weaker consumer demand and constricted margins. Strip out tech giants and fiscal stimulus, she said, and the underlying economy resembles a “mild emerging-market dynamic,” where top-line strength masks shrinking breadth.
This disconnect, she emphasized, is becoming more political than economic. Americans see stock indices hitting record highs while wages lag — a contrast that increasingly shapes sentiment even when data looks stable.
Why Scarcity Assets Shine Under Permanent Liquidity
From Alden’s perspective, a world of ongoing balance-sheet expansion naturally benefits scarce assets, particularly bitcoin and gold. She was not surprised by bitcoin’s pullback from its 2025 highs, characterizing the decline as long-term holders taking profit after years of gains — a classic late-cycle “distribution” pattern. On the other side, ETFs, corporate treasuries and retail cold storage continued absorbing supply.
She dismissed the idea that bitcoin remains bound to a strict four-year cycle, arguing that structural forces have changed the asset’s rhythm. Voices like Strategy’s Michael Saylor and Bitmine’s Tom Lee share this view. To Alden, the recent correction looked like a leverage flush-out, not a break in the long-term thesis.
Gold’s surge past $4,000, she said, reflects sovereign positioning more than CPI worries. Countries aren’t dumping Treasurys in bulk, but they are buying fewer — and steadily accumulating neutral reserve assets that can’t be frozen. As global reserves diversify, she expects gold’s role to grow.
She placed bitcoin in that same conversation: an emerging reserve-style asset that sovereign wealth funds are reportedly accumulating on dips.
Not All Crypto Assets Are Built for Long-Term Value
Alden offered a blunt warning about utility tokens: functionality alone does not create investment value. High-efficiency blockchains compress their own margins over time, much like stock exchanges or ETF issuers. Useful? Yes. Compelling as long-term investments? Often not. Bitcoin stands apart because its demand stems from monetary properties, not toll-collection mechanics.
Risks Brewing Underneath — but No Systemic Break Yet
Alden highlighted risks building across major corporates, private credit and top-heavy equity valuations. She also warned that a sudden pullback in AI spending or a sharp shift in stock-market sentiment could destabilize the current two-pillar market structure. For now, however, she sees no single trigger indicating an imminent systemic breakdown.
What she does see is a world drifting toward a permanent-liquidity regime — one where central bank balance sheets expand quietly, political pressure rises and scarcity assets gain structural support.
