Kim Dotcom, who has been under siege by the New Zealand and United States governments since the 2012 closure of Megaupload, says the USD is in an irreversible death spiral due to the United States federal debt. Therefore, according to the internet entrepreneur, now is the time to buy crypto and gold.
US Empire now pays half a trillion dollars in interest payments per year to service its debt.
US debt increases by a trillion per year. It’s a death spiral that cannot be undone.
Self destruction and USD collapse are unavoidable. Get out of USD and US stocks. Buy gold & crypto.
— Kim Dotcom (@KimDotcom) October 25, 2018
Dotcom specifically mentions the United States government debt, which has been rapidly increasing due to a worsening federal budget situation. From 1997-2001, the debt was relatively steady in the USD 5.5-5.8 trillion range. The events of 11 September 2001 initiated a global war on terror, causing US debt to rise to USD 7 trillion by early 2004. In Iraq, the conflict became a war of attrition and to fund this, debt increased to USD 9 trillion around the beginning of 2008.
Then the Great Recession of 2008 began, the worst economic crisis since the Great Depression. Ultimately, trillions of US dollars were used to bail out banks and corporations, and this practice continues to this day. During early 2009, US debt exceeded USD 11 trillion. Notably, this acceleration of debt coincided with the launch of Bitcoin, and was referenced in the Bitcoin genesis block with the phrase “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks“.
By 2012, US debt had skyrocketed to USD 15 trillion. The pace of debt increase never slowed down, breaching USD 20 trillion in late 2017, coinciding with Bitcoin’s record highs of USD 20,000. As of 25 October 2018, this debt sits at USD 21.7 trillion, up USD 1.25 trillion in a year, or an increase of roughly USD 3.45 billion per day.
The Bitcoin market cap is USD 112.5 billion as of this writing on 28 October, which pales in comparison to the United States debt. It takes only a month for it to increase by the amount of the entire Bitcoin market cap.
Buried deep down in the United States budget for 2019 are tables showing that the budget deficit will be nearly USD 1 trillion in 2019, with projections of an increase through 2028. Interest paid out for debts will be USD 364 billion according to the estimate, with a year over year growth of USD 50 billion, yielding USD 869 billion of payments for debt in 2028. These are just estimates and do not account for emergencies like major wars or serious economic collapses.
Tying this data together with Dotcom’s statements, the United States debt has increased tremendously over the past two decades. Budget projections indicate the United States can not afford to slow down the deficit, let alone start paying back the debt. This will require the country to increasingly issue bonds, where people give the United States money in exchange for some slight long-term interest.
Depending on the length of bond maturity, current United States Treasury bond rates range from 2.3% to 3.3%. Historical 10-year bond interest rate data shows that after a long period of decline, rates for 10-year bonds have climbed from 1.5% in the middle of 2016 to 3.2% as of October 2018. Therefore, the amount of money the United States has to pay for bond interest has increased by over 100% in the past two years. This is likely due to decreasing demand for United States bonds versus the number of bonds the United States is trying to sell.
As bond interest rates rise, eventually investors will get spooked, and the United States will have to print money on a mass scale to keep the country running. This will drastically devalue the USD, and perhaps this is already underway. There has been 53% USD inflation since the year 1998 according to consumer price index (CPI) data, which is roughly 2.7% USD inflation per year.
Increasing budget deficits, which leads to increasing bond rates, which ultimately leads to printing money as a last resort once bond buying demand dries up, could very well cause hyperinflation of the USD. This would be catastrophic for most of the global economy.
However, Bitcoin and gold should hold their value relative to the USD, since they cannot be printed by the United States.
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