Behind the thunderous "rising" of gold and Bitcoin

Both Bitcoin and gold are approaching historical highs this week, attracting market attention. Analysts have unearthed various reasons, including Bitcoin’s halving event, Bitcoin ETF’s strong gold attraction, changes in expectations for the Federal Reserve’s interest rate cut, and U.S. economic data. Falling short of expectations, rising geopolitical tensions, and more. But some industry insiders mentioned a deeper point of view: the rapid expansion of U.S. government debt is dragging down the dollar.

Daniel Lacalle, a well-known economist who served as a vice president at Pacific Investment Management Company (PIMCO) in his early years, expressed concerns about the future of the U.S. dollar on Monday, not because of the rise of cryptocurrencies such as Bitcoin, but because of the Ongoing U.S. Fiscal Policy.

LaCalle pointed to the current staggering growth rate of U.S. government debt: $1 trillion every 100 days, and the total size now exceeds $34 trillion. He sees this as contradictory during a so-called economic recovery and questions official claims of strong growth in the U.S. economy.

The key to Lacall's warning is the sheer speed of debt accumulation relative to GDP growth. He cast doubt on his view of the U.S. economic recovery, citing the decline in the purchasing power of wages and increased financial pressure on American households.

LaCalle criticized modern monetary theory, which holds that by controlling inflation, governments can spend unlimited amounts of money. He believes that although the United States has experienced a cumulative 20% increase in inflation over the past four years, it is still engaged in fiscal expansion, which is undoubtedly a reckless disregard for economic health.

LaCalle doesn’t think the surge in Bitcoin prices will threaten the U.S. dollar’s ​​status as the global reserve currency. Conversely, an erosion of confidence in U.S. fiscal and monetary policy could lead to a sudden loss of monetary sovereignty, higher borrowing costs, hyperinflation, and possibly even the dethronement of the U.S. dollar. He further warned that MMT’s ideological appeal masks serious dangers of fiscal irresponsibility.

It is worth noting that Bank of America has also discussed the topic of US debt growth in recent days, revealing the grim reality of US debt surge. Michael Hartnett, an investment strategist at the bank, believes that the U.S. debt growth rate will maintain a pattern of “expanding $1 trillion every 100 days” and will soon reach $35 trillion, which is good news. Gold and Bitcoin. According to Hartnett's forecast, U.S. government debt is expected to exceed $35 trillion in April 2024.

“It’s no wonder the ‘Bond Down’ trade is near all-time highs,” he wrote in a report last Thursday, when gold hit $2,077 an ounce and Bitcoin hit $67,734. Gold and Bitcoin are viewed as “devaluation hedges” when monetary or fiscal policy could lead to significant currency devaluation.

Hartnett predicts that the Bitcoin spot ETF, which has taken Wall Street by storm recently, is heading for an “explosive year,” in part due to the collapse of the U.S. dollar.

The following are earlier warnings issued by some well-known economic experts about the U.S. debt problem:

Wharton finance professor Joao Gomes has warned that growing U.S. debt could push the U.S. into a financial crisis next year. "Frankly, this could put the next administration in a difficult position," he told Fortune. "If they come up with a big tax cut or another big fiscal stimulus, the market could rebel and interest rates could go down." Surge immediately and we could be in crisis by 2025. That's very likely to happen. By the end of this decade, I'm very confident that we're going to get that no matter what."

Last month, "Black Swan" author Nassim Taleb said he believed the U.S. economy was in a "death spiral... as long as Congress continues to extend the debt ceiling and make deals because they're afraid of the consequences of taking the right actions." , that’s the political structure of the political system, and ultimately it’s going to get into a debt spiral, and a debt spiral is like a death spiral.”

JPMorgan Chase CEO Jamie Dimon predicted that rising U.S. debt could trigger a global "revolt," while Bank of America CEO Brian Moynihan described the national debt pile as "the worst we've ever seen." Predictable Crisis”. In February, legendary investor Jim Rogers warned that the massive $34 trillion U.S. debt meant the coming recession would be "the worst of his lifetime." Last year, Jefferies analysts predicted that the Fed would be forced to restart the money printing presses in 2024 due to a sharp economic downturn, which could cause the dollar to collapse and send the price of Bitcoin soaring, making it comparable to gold.

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