X owner Elon Musk has been voicing concerns against the spiralling US debt and has warned everyone of the looming bankruptcy which will be like a federal reserve 'nightmare' coming true. The price of bitcoins has surged after Donald Trump being voted as the elect-US President. The surge was also witnessed due to him confirming plans of creating a bitcoin reserve as a new way to combat the rising debt and sticky inflation.
Since Trump has been pitched a 'capital markets renaissance fueled' by bitcoin to 'unlock trillions in wealth', Musk warned that 'de facto' bankruptcy will happen in the US without a 'fix'. Musk on X wrote, "We either fix this or go de facto bankrupt."
He wrote this while quoting a post from the prediction market Kalshi's account that warned everyone of US having a severe spending "problem [with] current national debt is now at $36 trillion and growing" and proposing a "potential solution" in the form of Musk's D.O.G.E. (Department of Government Efficiency).
Economic Crisis Lies Ahead For US?
At the start of 2024, US national debt surpassed $34 trillion, driven in part by extensive government spending during the Covid-19 pandemic and subsequent lockdowns. These stimulus measures contributed to soaring inflation, which exceeded 10 per cent in 2022. In response, the Federal Reserve implemented aggressive interest rate hikes, increasing debt servicing costs and raising concerns about a potential financial "death spiral."
Elon Musk has been vocal about reducing excessive government spending, leading to the creation of the Doge Department of Government Efficiency. Musk claims this initiative could potentially cut $2 trillion from federal expenditures. The name "Doge Department" is inspired by the popular Shiba Inu meme associated with dogecoin, a cryptocurrency Musk has referred to as his "favourite." Tesla, one of Musk’s companies, accepts dogecoin as payment while also retaining approximately 10,000 bitcoin—valued at around $1 billion—on its balance sheet.
Earlier this year, former President Donald Trump suggested the idea of using Bitcoin to address the national debt. He humorously proposed issuing a “crypto check” to pay off the $35 trillion debt, implying it could help resolve the fiscal challenge. Back in July, Trump promised the creation of a 'strategic national bitcoin reserve' and predicted that Bitcoin might overshadow gold's $16 million market capitalisation. Earlier this month, he said, "We're gonna do something great with crypto because we don’t want China, or anybody else … but others are embracing it, and we want to be ahead."
Earlier this year, Republican Senator Cynthia Lummis presented a bill to Congress called the Boosting Innovation, Technology, and Competitiveness Through Optimized Investment Nationwide (BITCOIN) Act. The proposal suggests that the US acquire 1 million bitcoins over a five-year period as a strategy to help address the rapidly growing $35 trillion national debt.