The Federal Debt Fiasco
By Hermione Daguin
The United States of America has one of the world’s largest federal debts. It’s currently at a value of more than $21 trillion. That’s twice the value of Japan’s federal debt and more than the value of all the other first world countries combined. The US federal debt keeps rising annually. It is now up 115% in the last decade. While inflation is rising, wages have remained the same which means that over the last decade, the US government owes more than $60,500 to each American. Why does the US owe so much? Who’s spending that money? How can cryptocurrency help?
Where is it Being Spent?
Contrary to what many people believe, most of the US debt is not due to any humanitarian help. The money is not being spent on any international relations. Instead, it is being divided into programs and responsibilities at home. The Federal debt is split between intragovernmental holdings and debt held by the public.
Intragovernmental holdings pertain to the portion the government owes itself. It totals about 30% of the debt and goes to federal agencies. The Social Security Trust Fund makes up a large portion of the debt. It takes in more revenue than it should because the government keeps taking money out of it. The money taken out is written as a budget deficit to be reimbursed at a later date. The problem is that the government has yet to reimburse any of it.
The rest of the debt is held by the public. The public debt takes into account the federal debt held by individuals, corporations, state and local governments, and foreign governments. Of this debt, only 10% is held by businesses and individuals. About one quarter of it is held by federal corporations.
How Can Cryptocurrency Help?
With the growing national debt, confidence in the dollar is falling. While the US is living its largest economic expansion, it will not be stable enough to survive a crash. If a crash were to happen, the Federal Reserve would be unable to back the country as a last resort. Despite its current boom, the US economy is projecting to decrease significantly in the next couple of decades.
Most people don’t have the strongest confidence in cryptocurrencies, but they may prove to be the best and last resort for a crumbling economy. Cryptocurrencies are not backed by any government nor bank and are seemingly immune to any drop in the world’s economy. For example, people currently living in countries with crashing economies sometimes find it more valuable to rely on digital currencies than currencies backed by their government. Countries like Greece and Venezuela are already trading with cryptocurrencies rather than their national currencies. The financial crisis they are each undergoing is pushing their respective citizens to attempt to protect their properties in more reliable ways than their government can provide. There’s nothing to say that the US will never find itself in a similar predicament. This is why US citizens are currently broadening their horizons to cryptocurrencies. They present a backup plan in the midst of an uncertain future for the dollar.
Cryptocurrencies can help because they have a stable inflation rate. Inflation happens when there is more money supply than demand. Bitcoin and most other cryptocurrencies have a limited and controlled supply. In the case of Bitcoin, the currency is inflationary until it reaches 21 million Bitcoins. No more Bitcoins will ever be made once the 21 million target is reached.
The main argument against cryptocurrencies is their instability. Bitcoin’s value continues to drop and rise throughout the year. The market doesn’t fully trust it. However, as countries around the world begin to acknowledge them, cryptocurrencies will gain the footing they need to be continuously stable. A stable cryptocurrency will serve better as an international currency than the dollar can. The inflated dollar gives access to international markets, but cryptocurrencies can better help further the globalization movement. It would be a true international currency with no need for conversion, but it will take time to stabilize.
Although the US economy is currently booming, its footing is not entirely sound. Citizens and the rest of the world are aware of the high federal debt inflating the US dollar. Cryptocurrencies may be the answer to an almost inevitable fall of the global economy. Their decentralized and controlled properties would allow them to be a true international currency without risk of inflation.