Bitcoin May Not Kill the Dollar, But This Will: Top Economist

Bitcoin May Not Kill the Dollar, But This Will: Top Economist

The renowned economist Daniel Lacalle has voiced concerns about the future of the US dollar, not as a consequence of cryptocurrencies like Bitcoin, but due to fiscal policies.

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The renowned economist Daniel Lacalle has voiced concerns about the future of the US dollar, not as a consequence of cryptocurrencies like Bitcoin, but due to fiscal policies.

Lacalle points out the alarming increase in the national debt, which has exceeded 34 billion dollars and grows by one billion dollars every hundred days.

It argues that this trend is unsustainable, particularly in a period touted as a recovery, marked by strong job growth and rising incomes.

The unsustainable path of debt accumulation

The crux of Lacalle’s argument lies in the sheer speed of debt accumulation relative to the country’s GDP growth, which, adjusted for public debt accumulation, was the worst since 1930.

The economist highlights the paradox of experiencing seemingly solid economic performance while the national debt is skyrocketing at an unprecedented rate. He questions the perception of recovery, pointing to the declining purchasing power of wages and the growing financial pressure on American families, exacerbated by negative real wage growth.

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Lacalle points to Modern Monetary Theory (MMT), a controversial economic theory that some interpret as a carte blanche for governments to spend unlimitedly, as long as they control their own currency.

The theory postulates that the only real limit to public spending is inflation.

However, Lacalle argues that the United States’ continued fiscal expansion, despite a four-year official inflation rate of 20%, demonstrates a reckless disregard for the long-term health of the economy and the dollar. She warns that the ideological appeal of MMT masks the serious dangers of its practical application, ultimately burdening families with the consequences of fiscal irresponsibility.

The real threat to the US dollar

Despite the notable rise in the price of Bitcoin, which surpassed $62,000 amid rising national debt and inflation, Lacalle maintains that the cryptocurrency is not the main threat to the dollar’s status as the world’s reserve currency. In contrast, the erosion of confidence in the US government’s fiscal and monetary policies poses a much greater risk.

It warns that the loss of monetary sovereignty can occur abruptly when faith in a government’s fiscal discipline evaporates, leading to a vicious cycle of higher borrowing costs, higher inflation and, ultimately, the potential dethronement of the dollar.

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