Friday, March 8, 2024

Debt Bomb

Debt Bomb

Besides Defense, a stable currency is the best thing a nation can provide to its citizens. The current Administration is adding approximately $1,000,000,000,000 ($1T) to the National Debt every 100 days. This pace is unsustainable because an equal amount of value or productivity is NOT being created along with the corresponding debt. This is how a country is destroyed.
Over the centuries many governments have attempted to solve their economic problems by debasing their currency; whether by decreasing the content of gold or silver in coinage, increasing the supply of paper money relative to precious metal backing it, or altogether removing a currency from the Gold Standard

Almost always, the debasement of a country's currency has been the result of funding war. War is extremely expensive not only in resources, but also loss of productivity to the warring countries. The larger and longer the conflicts, the greater the hit to the Treasury.

Currently the United States is waging at least three (3) Wars; one in the Middle East, one in Ukraine, and the other one on the Southern Border. The argument could be made that there are also multiple other skirmishes happening 24 hours a day, 365 days a year around the world in which the USA is involved. Putting those aside though, the three major conflicts are costing America vast sums of money. Think in terms of TRILLIONS, not billions.

To look at the stock market or real estate or gold or Bitcoin one would think that this economy is booming. Record highs are being notched daily. There is jubilation in the trading pits. Every month a new high in single family home prices! Yet, just the opposite is occurring with the VALUE of the USD becoming increasingly worthless. As discussed frequently on this blog, inflation has by my estimate destroyed over 50% of the USD buying power over the past 3 years alone. And there is no end in sight.

Barring AI, the major increases in the share prices of many S&P 500 members has simply been a function of increased pricing. Anyone who shops at a grocery store knows this. Or fills up their car with gas. Or pays for health insurance. Or pays for education. Or resides somewhere other than a cozy cave. Truflation© has been running double digits for years. And that compounds quickly.

I have understood the relationship between gold and value for a long time; gold is hard to find, easy to buy, and can not be made by man. Similarly, I also understood that higher and higher stock prices are typically a result of both higher earnings, but also to a large extent, inflation. Same thing for real estate; a classic supply and demand scenario with the added factor of uniqueness. But Bitcoin has puzzled me.

I have come to believe that Bitcoin is a bet. It is a lasting bet against stupidity, greed, and corruption. Meaning Bitcoin, given its cap of 21,000,000 units, should continue to move higher in USD terms indefinitely until some time that sane monetary and fiscal policy is restored...but that day may never come.