Why US Debt Matters Wherever You Live

The US government is currently in debt to the tune of $35 trillion.

The problem is, there is no signs of that debt getting repaid, in fact it is increasing.

This matters because high debts eventually result in that bill coming due, and the result is prolonged inflation and a loss in your overall purchasing power and wealth.

Let's break down exactly how this works using the US as an example:

FY24 US government income and expenses:

Income

Taxes (payroll, income, capital gains etc): ~$5 trillion

Expenses

Government spending was ~$6.8 trillion.

Net Income:

(Deficit of $1.8 Trillion)

According to a recent interview with Paul Tudor Jones, a hedge fund manager, the playbook for central banks to manage high debt loads throughout history is to print money to pay-off and devalue that debt over time. Ray Dalio also talks to about this in his book Principles for Navigating Big Debt Crises.

How does paying off the debt work?

Traditionally, if a government needs more money to spend, they can issue treasuries and bonds (forms of debt) which investors and other central banks may purchase in exchange for a small amount of interest called the coupon.

However, when overspending gets so large, that the deficit is still in the trillions and growing, foreign investors are less willing to buy that debt because a) there's a reduced likelihood of it being repaid (hard default) or b) it will be repaid by an inflating currency supply (soft default).

As you can imagine, most governments choose b), which means over extended periods of time, the currency loses its value and eventually the confidence of those who hold it.

In this video, Paul Tudor Jones notes that holding scarce desirable assets such as Gold and Bitcoin, whilst avoiding fixed income (e.g., treasuries and bonds) is going to be paramount to preserving capital in the years ahead.

You can watch the interview with Paul Tudor Jones below:

​https://youtu.be/KkAPeSnz5fY?si=lcHLU2vRkBYV7Gzl​

If you or anybody you know is interested in learning more about investing in digital assets like bitcoin in a secure way with insured custody, please feel free to reach out or contact me at james@blockbyte.com.au or find us at www.blockbyte.com.au

Thanks for reading,
James

James Brannan
Chief Executive Officer
BlockByte Capital
​
(+61) 412 393 634
​james@blockbyte.com.au​
​https://blockbyte.com.au/​

BlockByte does not provide financial advice. We provide execution support, research and insured custody for investing in digital assets. Reach out to our team to discuss how we can help.

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