The average budget deficit in the United States will “never” be less than $1 trillion a year or 4.5% of GDP in the future. These are very worrying figures for the global economy.
The deficit will be at least USD 1 trillion
Statistics compiled by the US Congress Bureau of the Budgets (CBO) and made available by Travis Kling, the crypto fund manager, on 21st January show that the annual US deficit will be as high as 12.2 trillion USD in 2020.
This is a chart from @USCBO showing that the US deficit will never be less than $1tn a year again.
Never. Less than. A trillion. A year.
Bitcoin is an insurance policy against monetary and fiscal policy irresponsibility from central banks and governments globally. pic.twitter.com/pnOAG1bwuY
— Travis Kling (@Travis_Kling) January 21, 2020
The future of US finances
USD 1 trillion is more than six times Bitcoin’s market capitalization (BTC) and four times the market capitalization of all cryptoes combined. This shows how small the digital currency market is still, what potential it has, but also what kind of trouble almost all Americans may be in in some time.
However, the deficit is not the only worrying aspect of US economic policy that has emerged in recent months. At the end of last year, it turned out that the total debt of the country is now higher than ever before, amounting to as much as $23 trillion. At the same time, the total world debt is 255 trillion dollars – 12.1 million dollars for every Bitcoin.
Simply put, budget deficits occur when a country’s expenditure exceeds its income. Generating a deficit is a little bit like living on credit. As Kling notes, governments can still use fiat currencies to cover that debt today. This is real by increasing the money supply, but this leads to inflation. The US, by the way, has chosen this path. During the New Year, the Federal Reserve increased the supply of the dollar by 425 billion dollars.
The process of printing fiat currencies has its roots in the Keynesian economy, which in a way authorizes states and their central banks to manage the money supply, instead of allowing the market to decide on the prices of goods and services. This limits the free market.
This arrangement of power creates a problem known as “Impossible Trinity” – it makes it difficult to achieve free capital flows, fixed exchange rates and independent monetary policy. Unfortunately, for politicians it means something completely different – the possibility of conducting a generous social policy and almost constant indebtedness of the state budget.