Swan Bitcoin: Bitcoin & the Doom Debt Spiral
When it comes to the economy, investors may think about factors like corporate earnings or the jobs market. That’s true for big one-day swings in the stock market. Over time, however, other trends can either help or hinder investors.
One of those components is total debt. While debt can be used productively to help a company grow, it can also hinder an economy’s performance. It may take more and more work to make payments on that debt.
Today, the world is awash in trillions in debt. That doesn’t even include off-book government programs like Medicare or Social Security. Paying off that debt is now nearing a point of mathematical impossibility.
That raises the possibility of a debt crisis. And it could cause a country’s currency to lose value as creditors look to get out at any cost.
When a monetary system requires more and more intervention to work, it can override other institutions. That weakens trust in institutions, and can lead to a breakdown in the rule of law.
In short, a doom debt spiral could move beyond a monetary crisis. It could lead to a breakdown of society.
That bodes poorly for investment assets. But that could also create a situation where those with the ability to buy during a crisis further consolidate their wealth.
