US debt ceiling crisis strengthens case for cryptocurrencies


US debt ceiling crisis strengthens case for cryptocurrencies

The US Treasury Secretary Janet Yellen has said the United States would likely hit its $31.4 trillion debt ceiling on Thursday. This, to me, further strengthens the case for Bitcoin and cryptocurrencies.

The debt ceiling is the amount of money the US is able to borrow to pay its bills. Since the cost of running the government is far greater than federal tax revenues, the US must raise additional money by selling Treasury bonds – but it cannot do this after hitting the debt ceiling.

If the US is unable to pay its bills, it will default on its debt. That’s only happened once in history.

Should this happen, it would “cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability,” she wrote in a letter to new House Speaker Kevin McCarthy.

It’s not the first time she has sounded the alarm on the country’s debt ceiling crisis. In a column in The Wall Street Journal in September, she said that a failure to raise the ceiling would result in “economic catastrophe” with highly detrimental effects throughout the US economy, she said. 

“We could see indefinite delays in critical payments. Nearly 50 million seniors could stop receiving Social Security checks for a time,” she said. “Troops could go unpaid. Millions of families who rely on the monthly child tax credit could see delays.”

She added: “I can’t think of anything more harmful to the role of the dollar than failing to raise the debt ceiling.”

However, the now Republican-controlled Congress is seemingly pushing for a debt-ceiling showdown, with Speaker Kevin McCarthy endorsing a push by some of his colleagues to insist upon spending cuts by Democrats as part of any extension of the country’s borrowing authority.

But their conditions are unlikely to be accepted by the Democratic-led Senate or President Joe Biden, who are demanding that the debt limit be raised without conditions.

Should they fail to resolve their differences and trigger a default, the volatility of stock markets would be immense, there could be a severe recession, and the dollar is likely to be permanently weakened.

Without question its global reserve currency status would be shaken to its core and would have profound implications for the international financial system.

The stakes are high. But so is the political divide – and increasingly so.

All of this underscores that the US dollar’s future trajectory is precarious and lies in the hands of opposing politicians reaching difficult agreements.  And all of this underscores the benefits of for Bitcoin and cryptocurrencies.

The US dollar has reigned supreme for around 75 years. But there’s no doubt that the world is shifting away from a dollar-dominated system. 

The times ahead are destined to be radically different from what we have all experienced in our lifetimes so far. 

I believe that increasingly, there will be a mixed system. Some will be currencies from governments, including digital and non-digital, and some will be digital and decentralised, such as Bitcoin.

Due to astronomic levels of debt, and the enormous, ongoing amount of money printing to monetise these debts, we’re experiencing the considerable drop in the long-term value of the global reserve currency.

As the gridlock in Washington DC intensifies over the dollar debt ceiling, it seems inevitable that a growing number of retail and institutional investors will want to circumnavigate the shenanigans and look to digital alternatives which are outside of political controls, as well as having other advantages such as being global and borderless.

Source: www.cityam.com