Expert Analysis: CBDCs, Fiscal Policies Seen as Dollar’s Demise, Not Bitcoin

• Lacalle warns that US debt accumulation and fiscal policies pose a greater threat to the dollar than cryptocurrencies.
• Legislative debates on CBDCs highlight privacy concerns and the need for Congressional approval, impacting the dollar’s digital future.

In the labyrinth of global economics and burgeoning digital landscapes, two narratives stand at the forefront of financial discourse, both wielding significant implications for the future of the US dollar. Renowned economist Daniel Lacalle raises alarms over the United States’ fiscal policies, while on another front, the US grapples with the challenges of embracing Central Bank Digital Currencies (CBDCs).

See more

Bitcoin will not kill the U.S. dollar… The government deficit will.https://t.co/dUoGJLgi7w

— Daniel Lacalle (@dlacalle_IA) March 3, 2024

The Debt Conundrum

Lacalle’s critique centers on the alarming rate of national debt accumulation, which has soared beyond $34 trillion, with a trillion added every hundred days. This trend, he argues, is unsustainable, especially in what is perceived as a recovery period characterized by robust employment growth and rising earnings. The velocity of debt accumulation, juxtaposed against GDP growth, paints a grim picture, reminiscent of the dire economic straits of 1930.

The paradox here is stark: ostensibly strong economic indicators shadowed by an ever-expanding national debt. Lacalle challenges the narrative of recovery, pointing to the erosion of purchasing power and the increasing financial burden on American families, exacerbated by negative real wage growth.

Central to Lacalle’s argument is his critique of Modern Monetary Theory (MMT), which some interpret as a green light for unchecked government spending. Despite MMT’s theoretical guardrails against inflation, Lacalle observes the US’s fiscal expansion—amid a 20% inflation rate over four years—as a reckless gamble with the economy’s long-term health and the dollar’s stability.

The Real Threat to the Dollar

Contrary to what some might think, Lacalle does not view cryptocurrencies like Bitcoin, despite their price surges, as the primary threat to the dollar’s global dominance. Instead, he points to the eroding confidence in US fiscal and monetary policies as the greater danger, warning of a potential loss of monetary sovereignty that could trigger a vicious cycle of borrowing, inflation, and the dollar’s potential dethronement.

Parallel to the debt discourse, the US faces challenges on the digital currency front. Despite Federal Reserve Chair Jerome Powell’s prioritization of a US CBDC, legislative pushbacks, particularly from Senators like Ted Cruz and Ted Budd, highlight privacy concerns and the potential for government surveillance.

The proposed CBDC Anti-Surveillance State Act seeks to limit the Federal Reserve’s authority, demanding Congressional approval for any CBDC issuance, as Crypto News Flash had formerly announced.

The Federal Reserve’s research underscores the delicate balance the US must maintain in the digital currency arena. The advent of foreign CBDCs or stablecoins could challenge the dollar’s role as the primary medium for international exchange, making the design and implementation of a US CBDC critical to maintaining the dollar’s global standing. To explore more about this development, you can watch the CNF YouTube video below.