The global economy is facing an imminent debt crisis, driven by decades of fiscal mismanagement, economic policies, and the inherent instability of fiat currency systems. This crisis is not just a possibility but an impending reality, driven by the sheer scale of national debts, the erosion of the dollar’s value, and the shifting dynamics in global financial systems. For this article, we will focus on the global superpower, the US, in light of the recent Bitcoin conference and the world’s dependency on the US dollar as the global reserve currency.
The combined market capitalisation of major tech companies like Apple ($3.4T), Microsoft ($3.3T), NVIDIA ($3T), Google ($2.25T), Meta ($1.25T), and Tesla ($0.78T) stands at $14T. This $14T is less than 10% of the $175.3T owed by the US government. The actual debt, including entitlements like Social Security and Medicare, is far higher than the officially reported $37T, as Druckenmiller has pointed out for years.
No political election or administration can pay off America’s $175T debt; only extensive use of the printing press can temporarily address it. Influential figures like Elon Musk and Ray Dalio foresee a sovereign debt crisis worse than the 2008 financial meltdown. The Federal Reserve made more emergency loans in 2023 than during the 2008 financial crisis, indicating the severity of the current financial stress. Moreover, the US government is borrowing more under the current administration than it did during the COVID-19 pandemic, but at significantly higher interest rates of 5%. Interest payments on the national debt have become the largest government expense, surpassing defense and social security.
The dollar has lost at least 25% of its value in the past four years due to inflation and interest rate hikes. Meanwhile, China, the largest foreign holder of US Treasury bonds, is rapidly selling off its holdings, signaling a lack of confidence in the US economy. BRICS countries (Brazil, Russia, India, China, and South Africa) are increasingly buying gold instead of US debt, reducing their reliance on the dollar. Additionally, China is using its own currency (CNY) for international trade more than ever before, further diminishing the dollar’s dominance.
Despite US sanctions, Russia’s economy has grown, illustrating the reduced geopolitical influence of the dollar. Furthermore, US peacetime debt levels are now comparable to those during WWII, indicating unsustainable fiscal policies. The true debt of the USA, including entitlements, is $175.3T, far exceeding the official numbers. This underscores the enormity of the fiscal challenge the US faces.
Against this global debt crisis emerges a new economy anchored in blockchain consensus and algorithmic trust, distributing power and control. Crypto now has the number one Super PAC in the US, Fairshake, which is dedicated to providing blockchain innovators the ability to develop their networks under a clearer regulatory and legal framework. This is vital if the broader open blockchain economy is to grow to its full potential in the United States.
With over $200 million raised, the leading US Super PAC reflects cryptocurrency’s growing political influence. The Bitcoin conference highlighted significant support for Bitcoin as a strategic asset due to its limited supply, independence from central banks, and protection against inflation. The natural deflationary state of the free market aligns with Bitcoin, making it a valuable store of value and medium of exchange. Recent political acceptance of Bitcoin is rising, with significant growth potential. Bitcoin mining fosters energy decentralisation and AI advancements, creating a more equitable economic system.
Robert F. Kennedy Jr. pledged to make Bitcoin a strategic U.S. asset, transferring 200,000 government-held Bitcoins to the Treasury and purchasing 550 Bitcoins daily until a 4 million reserve is reached. He committed to making Bitcoin transactions unreportable and non-taxable, emphasising transactional freedom and self-sovereignty. Kennedy highlighted Bitcoin’s potential to promote green energy investments and proposed backing U.S. debt with Bitcoin to restore financial stability. He also promised to make the U.S. a global hub for cryptocurrency innovation and entrepreneurship.
Donald Trump pledged to make the U.S. a leader in cryptocurrency by ensuring the government keeps all its Bitcoin holdings, creating a strategic national Bitcoin stockpile. He promised to end anti-crypto policies, eliminate capital gains tax on Bitcoin transactions, and stop efforts to establish a central bank digital currency (CBDC). Trump emphasised clear and favourable regulations for the crypto industry, vowing to fire Gary Gensler and appoint a supportive SEC chairman. He also committed to making America the Bitcoin mining powerhouse by harnessing low-cost energy sources.
In a letter dated July 26, 2024, 27 Democratic officials urged the DNC to adopt a pro-digital asset and blockchain stance. They highlighted the potential of these technologies for innovation, economic growth, and financial inclusion, noting over 52 million Americans use digital assets. The letter called for four actions: including pro-digital asset language in the party platform, selecting a knowledgeable vice-presidential candidate, appointing a pro-innovation SEC Chair, and engaging with industry experts to support and regulate the technology effectively. Embracing digital assets aligns with the party’s progressive values and offers a gateway to a new financial ecosystem grounded in Bitcoin’s scarcity and decentralised security, leading to a new Bitcoin-backed Bretton Woods system.
BeL2: The Bitcoin-Backed Bretton Woods System to Fix Debt Crises
To address the global financial challenges, BeL2 offers a revolutionary approach that uses Bitcoin’s strengths and innovative technologies to transform Bitcoin from a static store of value into a dynamic settlement layer for global financial systems. By using zero-knowledge proofs and smart contracts, BeL2 integrates Bitcoin with other blockchains, opening up smart contracts which open smart finance solutions for the world. BeL2 three S’s principles include:
- Secure: BeL2 enhances Bitcoin’s security by rewarding full nodes for their altruistic actions, strengthening the network’s resilience.
- Smart: By integrating zero-knowledge proofs and Cairo, BeL2 enables smart contracts from Ethereum to operate on Bitcoin without intermediaries or custodians.
- Stable: The Native Bitcoin settlement layer facilitates the creation of a new Bretton Woods System, allowing for the minting of a universal stablecoin with Bitcoin as its reserve.
BeL2’s vision is to integrate blockchain technologies with Bitcoin’s settlement layer, bringing trust to a trustless environment. This enables users to collateralise and enter smart financial applications such as stablecoin issuance, swaps, and loans. Acting as a portal to an economy where financial instruments are algorithmically ensured by global blockchain consensus and miners, BeL2 ensures these instruments are backed by Bitcoin, which is finite and cannot be manipulated. This approach echoes the Bretton Woods system’s goal of stable global finance, which was abandoned in 1971 by Nixon when the US could no longer secure its dollar’s gold-backed promise.
Just last week, Elastos and BeL2 were at the Bitcoin conference showcasing their technology. This was highlighted by the team’s large booth and by Head of Operations Sasha Mitchell who took to the stage to talk about this vision. To watch his talk, you can see it here.
Additionally, BeL2’s recently released Explorer for ZK nodes proves Bitcoin transactions which can be used for smart contracts across any Ethereum blockchain ecosystem to execute new financial applications. The vision allows nodes to use Elastos’ merged-mined ELA as collateral to support transactions in return for BTC rewards. More on this architecture will be released in the coming weeks.
The global debt crisis is driven by unsustainable fiscal policies, the erosion of the dollar’s value, and shifting global financial dynamics. From the massive national debts to the rise of alternative financial systems like Bitcoin, the current trajectory is unsustainable. We need to embrace decentralised financial systems and innovative technologies like BeL2. By leveraging Bitcoin’s strengths and introducing cutting-edge technologies, BeL2 aims to transform the global financial landscape, offering new possibilities for decentralised finance while maintaining the core principles of Bitcoin’s security and decentralisation. Did you enjoy this article? Follow Infinity for the latest updates here!
