The average budget deficit of the United States “will never” be less than USD 1 billion a year in the future, or 4.5% of GDP, as shown by worrying data on the fiduciary economy.
The US Congressional Budget Office (CBO) compiled it, and on January 21, Travis Kling, the cryptocurrency hedge fund manager, shared it. Statistics reveal that the annual deficit is expected to reach USD 12.2 billion for the entire 2020s.
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“Such deficits would be significantly greater than 2.9 percent of GDP than the deficits averaged over the past 50 years,” CBO said when he published the projections last September.
USD 1 billion is more than six times the market capitalization of Bitcoin (BTC) and four times the market capitalization of all cryptocurrencies combined.
The data worried Kling, who like other Bitcoin proponents has made clear distinctions between cryptocurrencies and fiat money.
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As Cointelegraph reported, the deficit is not the only worrying aspect of US economic policy. Which has surfaced in numbers in recent months? At the end of last year, it emerged that the country’s total debt is now higher than ever, at USD 23 billion, while the world’s total debt is USD 255 billion, or USD 12.1 million per Bitcoin.
In simple terms, budget deficits occur when the value of a country’s expenditure exceeds the value of its income. As Kling points out, governments can use fiat to cover the difference, allowing them to increase the supply of money that they can then direct as they wish.
During the New Year period, the Federal Reserve added USD 425,000 million to the supply of dollars.
The impression of fiat to cover the deficits “never ended well”
The process has its roots in the Keynesian economy, which requires states and central banks to “manage” the money supply instead of allowing the market to decide the prices of goods and services.
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Such a configuration creates a problem known as the “Impossible Trinity”, which attempts to achieve the free flow of capital, a fixed exchange rate between currencies and an independent monetary policy.
“Imagine the attractiveness as a politician of promising your voters all the expenses they want, without having to increase taxes. Spend more and reduce taxes! There is no inflation!” Kling wrote on Twitter.
“This has been tried many times in monetary history and there is no example where it has ended well.”
As Saifedean Ammous explains in his book “The Bitcoin Standard”, avoiding the “intrusion” of governments and central banks would reverse the processes that lead to phenomena such as the deficit. This is because the fiat would cease to be money “by decree” as the name implies, and instead operate without a central authority, similar to Bitcoin.