This is an opinion editorial by Robert Hall, a content creator and small business owner.
If you follow U.S. politics, you understand that the country is on the brink of defaulting on its massive $31 trillion debt.
At the crux of the issue is that there are Republicans in one corner, who control the House of Representatives with a slim 222 to 213 majority. In the other corner, the U.S. Senate and the White House, under Joe Biden, are controlled by Democrats.
Both parties are diametrically opposed to what the other wants. Republicans want to significantly cut spending in order to raise the debt limit for a year. Democrats want a “clean” debt ceiling bill passed without strings attached. As you can see, both parties’ starting positions are nowhere near each other. Ultimately, this has turned into a game of chicken based on who will blink first. It’s all very tiring.
Is this the way a government should be run? It is absolutely crazy that these leaders would risk defaulting on money that has already been spent. This is like if you or I whipped out a credit card, went crazy buying all kinds of stuff, and did not make the monthly payment at the end of the month.
The government has been able to run up the debt for a long time because it has had willing participants, such as pension funds, hedge funds, sovereign wealth funds and regular joes who lent them money by buying treasury bills because they believed they would be paid back with interest.
This has been the case for a long time, but now this arrangement is being called into question with the will they, won’t they bull going on in Congress right now.
Are these politicians so detached from reality to think that, once the debt limit is breached and people stop getting paid what is owed to them, people will go right back to loaning them money?
If they do, they will demand even higher interest rates. The government can’t even afford the rates we have now! What happens if the borrowing cost for the government goes to 10% or 15%? Ain’t nothing getting funded; I can tell you that much.
Check out this: The federal government spent a record $475 billion on interest payments in fiscal year 2022. Interest costs grew 30% last year and are poised to jump another 35% this year, according to the Congressional Budget Office’s (CBO’s) own estimate!
The CBO believes the federal government will spend $640 billion in interest payments this year alone. Is this the debt spiral that James Lavish has been talking about lately? It sure as hell seems like it to me.
We are on a slow-motion collision course with the economic reality that you can’t print and borrow money without consequences. Inflation rears its ugly head first, and then people realize the money they are being paid back with has diminished purchasing power. Once people know they are losing money when they lend it to the federal government, it’s game over.
This debt-ceiling debate will highlight the dysfunction of the federal government and its inability to keep its promises. This is what surprises me about the politicians on both sides of the aisle.
Do they really want to show this level of incompetence to the world? It’s like watching your family fight in the front yard. It’s embarrassing as hell and will change the perception that your neighbors have about your family.
A debt default will change the perception of the U.S. from a trusted payer to a debt junkie unable to pay its debts.
How Is Default Good For Bitcoin?
The silver lining to this whole debt-ceiling debacle is that it’s going to throw rocket fuel on the price of bitcoin. As people see that their money is no longer “safe” with the federal government, they will seek an alternative to U.S. treasuries. Undoubtedly, some of the dollars that would have been earmarked for treasuries will flow into bitcoin.
New entrants to bitcoin will see that it is the safe haven asset they were looking for the whole time. There is no counterparty risk, and the supply can’t be diluted.
During the last contentious debate over the debt ceiling, under the Obama administration, the price of bitcoin went from $13 and ended the year at $755. It also reached an all-time high of $1,163 that year. Coincidence? Maybe, but it does make sense for people to protect their wealth during times of potential calamity such as a default.
So, I say to the politicians running the government right now: Go ahead and keep playing these games. Default or don’t default because, in the end, it doesn’t matter; you still lose. You have led the world to ruin, and it will be up to Bitcoin to save humanity from itself. The debt-ceiling debacle only accelerates the inevitable.
And to the Bitcoiners: Keep stacking them sats like your lives depend on it, because one day they might.
This is a guest post by Robert Hall. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.