- The foundation of fiscal and monetary plans rests on trust; eroding this faith might catalyze a reduction in the dollar’s dominance.
- Lacalle emphasizes that America’s escalating debt, now over $34 trillion, is a larger hazard to the dollar than the rise of Bitcoin.
Daniel Lacalle, shocks the financial sector with a blunt warning: the real danger to the hegemony of the US dollar lies not in cryptocurrencies, but in unsustainable US fiscal policies.
Debts and deficits: The real kryptonite of the dollar
Did you know that the U.S. national debt has surpassed a staggering $34 trillion, increasing by $1 trillion every hundred days? Just as you read it. According to Lacalle, this frenetic pace of debt accumulation, at a time that many consider to be a time of economic recovery, is unsustainable.
As we have mentioned at some point in ETHNews, the consistent rise in employment and earnings masks a grimmer truth: public debt is expanding at a pace unprecedented since 1930, an aspect both shocking and worrisome.
Modern Monetary Theory (MMT) is touted as a miraculous fix, granting governments the freedom to spend boundlessly, provided they manage their currency. Nonetheless, Lacalle highlights that the persistent escalation of fiscal expenditure in the US, in spite of a 20% inflation rate over four years, demonstrates a disregard for the dollar’s long-term economic vitality.
The dollar’s true rival
Now, with Bitcoin surpassing $65,000 amid this backdrop of rising debt and inflation, many might think that this cryptocurrency is the biggest challenge to the dollar. But according to Lacalle, it’s not as simple. The decline in trust towards U.S. fiscal and monetary policies carries a significantly higher danger.
A sudden loss of monetary sovereignty could happen if faith in the government’s fiscal restraint diminishes, initiating a harmful loop of increased borrowing costs, escalating inflation, and ultimately, the threat of the dollar relinquishing its status as the global reserve currency.
What does this imply for you and me? Beyond just monitoring Bitcoin and other cryptocurrencies, it’s vital to be aware of our government’s fiscal actions. The choices being made now, particularly those concerning expenditure and indebtedness, could drastically change the worth of our currency, thereby affecting our buying power and economic security.
