Why the US Debt Crisis Won't Trigger the Crash You Expect
The debt doomers may be right about the problem and 30 years early on the timing. That is not the take you expect from a Bitcoin company.Cory Klippsten on why America can keep kicking the debt can down the road for decades, and why Bitcoin keeps monetizing the entire time.
On the Fed's own measure, total US nonfinancial debt was 253% of GDP in mid-2009. Today it is 257%. Debt grew plenty in dollars and barely at all against GDP. What actually changed is who owes it. Household debt fell from 98% of GDP to 66%, while federal debt rose from 57% to 108%. Leverage moved off households that can go bankrupt and onto a government that borrows in its own currency.
That government never has to pay off 40 trillion dollars. It only has to keep servicing the debt and rolling it over. The annual interest bill is already about a trillion. Andy Constan points out that another percentage point on rates would eventually add roughly 300 billion, and eventually is the word doing the work, because it takes years to feed through. In an economy above 30 trillion with decent growth prospects, that is painful and not fatal.
So the likely outcome is not collapse. It is mild inflation and lousy real returns on Treasuries for decades. Financial repression, not hyperinflation. The dollar can keep working as a medium of exchange while getting steadily worse as a store of value, and that gap is exactly what Bitcoin fills.
Chapters:
0:00 Kicking the can for decades
0:15 The debt barely moved against GDP
0:28 Who owes it changed everything
0:57 Servicing the debt, not paying it off
1:42 Financial repression, not hyperinflation
2:06 The gap Bitcoin is filling
2:37 Kicking the can and monetizing at the same time
Where does this argument break? Tell us in the comments. Receive SMS online on sms24.me
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