The US Government continues to spend like there is no tomorrow.

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“Thats what I love about those taxpayers man. We get older, they stay the same age.” - Congress, probably

Key Topics:

• The US Government continues to spend money like there is no tomorrow; what that means for Bitcoin.

• Crypto markets continue to grind higher as global tensions rise.

• The Fed appears to be close to the end of their rate hiking cycle and Bitcoin has started to price in the eventual return to a low interest rate environment.

• Why is Bitcoin doing so well? Because this is exactly the type of environment it was designed for.

The US Government continues to spend like there is no tomorrow

Once upon a time, the value of United States Dollar was actually backed by gold, meaning that the pictures of dead presidents in your wallet were once tied directly to a fixed amount of gold held in a government vault somewhere.

Paper money essentially represented an I.O.U. for a specific amount of gold. Money represents a unit of measurement used in the transaction of value.

During both World Wars, the ‘gold standard’ was temporarily suspended to allow the US Government to increase spending on the military and stimulate economic activity in the aftermath of the Great Depression.

However, in 1971 President Nixon “suspended” the US Dollar’s convertibility into gold, allowing the government to once again increase spending to service it’s debts and various obligations. 1971 was the re-birth of the government money printer. Visit wtfhappenedin1971.com to see just how alarming of an impact this had.

Fast forward fifty years to today and the US Government has racked up a $33 Trillion Dollar tab.

Despite the brutal levels of inflation that have re-accelerated over the past couple years, eroding away the lower & middle class, the US Government continues to spend (taxpayer) money like there is no tomorrow, adding unfathomable amounts of debt to an already unsustainable deficit. 

From The Kobeissi Letter:

• JUST IN: The US posted its 3rd largest deficit on record in 2023, spending $1.7 TRILLION more than it brought in. This was a $300 billion increase in deficit spending compared to 2022.

• The US is now spending 44% of GDP per year, the same levels as World War 2. We are now spending a higher percentage of GDP than what was seen in 2008.

• US deficit spending is officially higher than what was seen in 2008, one of the worst recessions in history.

• How is this not getting more attention?

In response to the fear of recession and deflation that was brought on by the Covid-19 pandemic, the US Government and Federal Reserve increased the entire money supply by roughly 40% from March 2020-April 2022.

Hope you enjoyed your stimmy check, kid.

Although the state and mainstream media love to blame inflation on “corporate greed” and those pesky billionaires running around, the out of control spending of the US government is the reason that your grocery bill has skyrocketed in the past few years.

The Zestimate on your neighbor’s house value that you’ve been stalking also went up 40% over 2-years.

Did that house actually get 40% better? No, the money we use to price it in, got that much worse.

—

From James Lavish: 

The government operates like a business. Just like a business, there must be enough revenue to cover all expenses for it to keep operating.

A budget is needed. And in the business of running a country, taxes should cover all gov't expenses: infrastructure, defense, entitlements, etc., as well as interest payments on its debt.

But of course, they don't.

We spend far more than we make, as the US is perpetually operating in a deficit.

Here’s what the US federal budget looked like it 2020:

What’s a debt spiral?  If a government is operating in a deficit, it can either cut expenses (ha!), generate more income by stimulating GDP (think war), or raise taxes.

Problem is, cutting expenses costs votes; war can lead to future productivity damage, higher taxes can impact companies’ ability to grow and in turn hurt the country’s GDP, leading to lower tax revenues The easiest thing to do? Just issue more debt to cover the budget.

Problem solved, right? Right? Well, we know what happens to a company that issues too much debt and winds up unable to pay the interest on it Exactly It becomes distressed, and if it cannot fix its budget problem, it eventually goes bankrupt.

To avoid this immediate problem, the Fed likely pivots by lowering rates and resuming quantitative easing They simply kick the debt can down the road and Inflation resumes.

To make a long story short:

• The US currently does not have enough revenue to cover its interest payments.

• The higher that interest rates rise, the more difficult it will be to service its debt.

• Therefore, the US government will eventually have no choice but to lower rates and resuming quantitative easing (QE).

• This will only kick the debt can down the road and make the inflation problem worse in the long run.

• Fiat currencies will eventually collapse under the weight of their own debts.

When in doubt, they will print their way out.

Enter, Satoshi Nakamoto

So why is Bitcoin rallying hard (up more than 100% this year) while the world appears to be falling apart? Because this is exactly the type of environment that Bitcoin was created for. 

In 2008, a pseudonymous person or group under the name Satoshi Nakamoto released the Bitcoin white-paper, detailing a new Peer-to-Peer Electronic Cash System. 

Launched shortly after was Bitcoin, an experimental form of money native to the internet that made its way around message boards and email lists of computer nerds around the world.

Upon the launch of the Bitcoin network, a short message was inscribed in the very first Bitcoin block transaction that read: 

"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"  

This message was a reference to a headline from the British newspaper, The Times on January 3, 2009. The headline was referencing the unfolding Great Financial Crisis, which resulted in governments and central banks printing massive amounts of new money in order to bail out the banking system that was imploding at the time. 

Thus Bitcoin was born, a new decentralized currency system that emerged during a time when the world needed it most. A tool for us to separate the value of our money from the actions of the (incompetent and parasitic) state.

With a fixed supply of only 21 million, Bitcoins were intentionally designed to go up in value as long as the value of government money (fiat) continues to go down. And as James Lavish explained to us, that is a mathematical certainty at this point.

The Bitcoin price does not have a top, while fiat (government money) value has no bottom.

If we look out across the geopolitical landscape, the US is currently funding two separate wars as global tensions continue to rise. War is a time of crisis and crises cost (taxpayer) money. Governments will continue to print, those who are saving in dollars, will continue to lose.

Below is a photo of The Times front page from January 2009 that is referenced in the Bitcoin genesis block. Take a look at the top headline and guess who’s still at war today? Spooky.

There will only ever be 21 million Bitcoin.

-Tommy Sullivan