US Rising Debt Could Drive Bitcoin Adoption
The US National debt soars to over the $35 trillion mark
July 30, 2024 04:00 PM
Reading time: 1 minute, 48 seconds
TL;DR The U.S. national debt has reached a staggering $35 trillion mark, raising concerns about fiscal stability. Leading presidential candidates remain silent, and discussions about a Bitcoin reserve emerge as potential solutions. Meanwhile, rising debt could drive Bitcoin adoption.
National Debt Hits New Peak
This week, the U.S. national debt surpassed an unprecedented $35 trillion. Since 2020, the country has added around $12 trillion in federal debt, averaging $280 billion every month.
This rapid increase has resulted in approximately $105,000 in federal debt per U.S. citizen. Despite these alarming figures, leading presidential candidates Kamala Harris and Donald Trump have been notably silent on the issue during their campaigns.
Future Projections and Fiscal Challenges
According to usdebtclock.org, federal debt is projected to hit a staggering $46 trillion by 2028. The Congressional Budget Office warns that national debt could top $56 trillion by 2034.
Rising spending on Social Security and Medicare and high interest rates make curbing debt difficult. Michael Peterson, CEO of the Peter G. Peterson Foundation, emphasized, "We can't keep pretending this is not a problem."
"We can't keep pretending this is not a problem." - Michael Peterson
Bitcoin as a Potential Solution
As the debt crisis worsens, there has been talk about a strategic Bitcoin reserve. Independent presidential candidate Robert F. Kennedy Jr. and Senator Cynthia Lummis have proposed such systems.
Lummis stated, "A strategic Bitcoin reserve could stop this runaway train and help pay down the national debt for our future generations." However, using Bitcoin to reduce national debts would likely involve liquidating the asset, which could impact crypto markets.
Economic Growth and Debt-to-GDP Ratio
Despite the soaring debt, the U.S. economy showed signs of growth. Driven by increased consumer spending and business investment, U.S. real GDP grew at an annual rate of 2.8% in Q2 2024.
However, the debt-to-GDP ratio remains elevated at 122%, down slightly from its peak of 132% in Q2 2020. High debt limits the government's fiscal flexibility and could lead to increased borrowing costs.
Inflation and Bitcoin Adoption
The high national debt can lead to inflation, as the government might print more money to service its debt. This increased money supply without a corresponding increase in goods and services can reduce the dollar's purchasing power.
Jeff Yew, CEO of crypto asset manager Monochrome, noted that ballooning debt could drive further Bitcoin adoption. "Investors are reconsidering their risk-free status and looking towards alternatives like Bitcoin," Yew said.