US Debt To Soar By $1 Trillion This Month

Having struck a deal over the debt ceiling earlier this year, the US has hit the "Spend" button in style.

As October rolled around, the country added an incredible $275 billion in debt to its $33 trillion total. As Zero Hedge (and others) noted, this puts the US government on track to add $1 trillion to its debt in October alone.

As interest rates rise, the government has to offer higher yields on the bonds it sells in order to attract buyers. (Existing bonds that are trading on the secondary market also fall in price, meaning their yields rise towards the current interest rate.) As a result, it becomes more expensive to pay the interest on those bonds. The US now spends more on servicing that debt than it does on national defense.

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The US crossed the $1 trillion debt mark back in 1981, under Ronald Reagan. This total has increased under both Republican and Democrat governments, but the pace of growth has accelerated in recent years.

The recent spike in debt comes immediately after a failed attempt by hard-line Republicans to rein in spending by threatening to cause a government shutdown at the end of September if their demands were not met.

As the debt rises, an increasing portion of tax revenues must be spent servicing these payments—or else, the money must be printed into existence. Neither fosters confidence in the US economy. The current levels of debt are filtering back into the conversation about Bitcoin.

Back in 2020, as the last major bull run was getting under way, Bitcoin was touted as an inflation hedge by (among others) Michael Saylor, whose company Microstrategy is now one of the largest holders of BTC.

We really felt we were on a $500 million melting ice cube. Once the real yield on our treasury got to more than negative 10%, we realized that everything we are doing on P&L is irrelevant.

That narrative did not gain enough traction to achieve escape velocity, for various reasons. The necessary infrastructure did not exist for a critical mass of individuals and institutions to adopt BTC as a hedge. Today, however, things are changing. While it's still difficult for ordinary retail investors and institutions to allocate funds to Bitcoin in a secure and compliant way, a new wave of ETF filings suggests that change might be on the horizon.

If these are approved, then there will no longer be the same technical and regulatory barriers to entry for the vast majority of citizens and institutions. At that point Bitcoin has a real shot at becoming the leading hedge against spiraling debt and persistent inflation.

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