Tesla’s Elon Musk roiled the markets this week with new endorsements of bitcoin as Tower of Debt threatens the US, under which the national debt – already around $34 trillion – is approaching the choking point. The annual interest payment on the federal debt now tops the magical $1 trillion, 23 per cent of federal tax revenue, which is more than the Defence Department budget. On top of these fiscal alarms, Musk is leading a charge to return Trump to the White House as a pro-crypto strongman.
The US debt crisis isn’t just weighing on financial markets. The bitcoin price – up by 140 per cent in dollars this year – has been within touching distance of its all-time historic peak of $70,000 per coin, as investors and money managers fret about inflation and rising interest rates. Well-known hedge funders such as Paul Tudor Jones have been singing the praises of bitcoin and gold as inflation hedges for some time, with Tudor Jones now saying that he can’t ‘see how we avoid inflation’ given current policies. The Tesla rumours, however, have not turned into reality as the car company continues to hold most of its 10,000 units, reassuring holders that it remains ‘digital gold’.
Meanwhile, analysts and observers are raising red flags about ballooning US debt, estimating that it will increase by $1 trillion every 100 days and predicting that it could reach $36 trillion by end-2024. Debt accumulation is being driven by COVID-relief spending and recent levels of federal government spending and is expected to bring investor plans for bond sales to a halt and boost demand for more stable assets such as bitcoin and gold. By criticising fiscal policies, Tudor Jones and Musk are drawing attention to a very difficult economic situation in the US that will make it hard to stimulate the economy further.
Source: Forbes
