The US debt, surpassing $34 trillion in January 2024, poses a significant global economic challenge. Driven by persistent budget deficits since the 2008 financial crisis, and exacerbated by the COVID-19 pandemic, the debt is now an astonishing equivalent to about 150% of the US GDP. Interest payments on this debt, topping $1 trillion annually in October 2023, account for approximately 16% of the federal budget for fiscal year 2024 and 4% of the GDP. The net interest payment tops $737 billion. The rising interest payment, fueled by Federal Reserve interest rate hikes to combat inflation, is the fastest-growing budget component. A high debt level restricts the government's capacity to respond to emergencies, invest in public goods, and support social programs, potentially leading to a debt crisis. Addressing this challenge requires a balanced and sustainable fiscal policy involving spending cuts, revenue increases, and structural reforms to enhance government and economic efficiency.
The US debt is anticipated to reach approximately $36 trillion by 2025, equivalent to around 140% of the US GDP. The estimated interest payment on this debt in 2025 is around $1.4 trillion, constituting approximately 4% of the US GDP and 23% of the federal budget.
As per the Congressional Budget Office (CBO), the United States' gross federal debt is expected to reach approximately 51.99 trillion U.S. dollars by 2030 under existing legislation. The projected net interest payments on this debt are estimated to be 819 billion U.S. dollars by 2030, surpassing more than double the amount recorded in 2019. The total debt interest payments will surpass $3 trillion by the end of this decade. By 2030, these interest payments are anticipated to account for about 11 percent of the total federal spending.
Upon reviewing this CBO forecast, it becomes apparent to me that the Federal Reserve (FED) may need to resort to reducing interest rates once more in order to mitigate the expansion of net interest payments.
Why is this a problem and why Bitcoin?
If you consider that China was one of the United States' biggest economic partners, holding massive amounts of US Debt, you should be able to grasp the catastrophic mess we're in. China, which no longer wants to buy American debt, poses the biggest threat to this financial system. After all, new money needs to be created to pay off the previous round of US Treasuries. This is all convenient if more demand is created for US Treasuries, yet we're experiencing the opposite: nations worldwide are being seduced by China to bypass the US Dollar and to do currency swaps directly with China.
Every time a country does this it is a nail in the coffin of the US Dollar global reserve currency status. Living in the West, this trend frustrates me enormously since it was China that benefitted the most from Western capitalism. In all fairness, empires come and go, that's just monetary history. That means I need insurance against systemic failure. When looking at the Weimar Republic's inflationary collapse, it is evident that no one will be able to escape an implosion of the US financial system, but you can take an insurance policy. That's where Bitcoin and gold come into play.
The nature of Central Banking is to lend out freshly printed currency and demand it back plus interest. The interest comes from newly printed money, and so on. The debt compounds, and we're now so deep into this debt spiral, that it is almost impossible to get out. Bitcoin can not be printed and debased. It is hard-capped at 21 million Bitcoins and it is an even harder asset than gold bullion. People have been hoarding gold for centuries, Bitcoin is now on a trajectory to do the same.
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