More Debt, More Problems: The U.S. Government-Run Ponzi Continues

2023 has been a weird year so far. Everyone suddenly got on the AI hype train. People who used to be Metaverse and Web3 specialists suddenly became AI gurus. 

Investors who feared the worst was over from 2022 were in for a rude awakening. The Fed continued raising rates, which drove some banks into big trouble. Granted, most of them didn’t hedge at all against such aggressive rate hikes and needed to be bailed out. If you can even call it that, we’re not allowed to call it that anymore for some weird reason. 🤷

All while this was happening, Bitcoin rallied and proved to be a haven for investors and believers alike. While banks had to be saved or even failed, Bitcoin emerged as an alternative and showed its resilience in times of trouble. 

More Debt, More Problems & No Real Solutions in Sight 🌀

However, May and the early days of June proved to be another crucial period in 2023. 

At the end of April, Treasury Secretary, Janet Yellen, warned us about the U.S. debt ceiling. Every ten or so years, the U.S. runs into the same issue; They need to pay back their debt, either by printing new money or by raising the debt ceiling. 

She and Fed Chair, Jerome Powell, became more vocal in the past weeks and urged Washington to raise the debt ceiling quickly to avoid the U.S. defaulting on its debt. 

As a result, President Joe Biden and Speaker of the House Kevin McCarthy met over a few days and came up with a solution. 

While most of these meetings ended in a back-and-forth between the two parties, with both blaming the other party for the mess the country’s finances are now in. they managed to come to an agreement (surprise, surprise!) and created a debt-limit agreement.

This agreement was sent to the House of Representatives and had to be approved by a committee first and, later, by Congress. At the time of writing, Congress approved raising the debt ceiling and sent the final vote to the Senate for passage of the bill. As you can imagine, things were tight with the 5th of June around the corner. 

But the reality is that the U.S. will not allow itself to default on its government debt. 

If they did, the world economy would end up in a death spiral, and the U.S. Dollar would potentially lose its role as the world reserve currency. Who would hold on to a failed currency? 

This is not something the Democrats or Republicans want to risk. Washington does the only thing it knows to do; kick the can further down the road and profit from the U.S. dollar’s position in the world. 

The only way the U.S. has managed to stay afloat and at the top of the food chain is by issuing new debt, which is used to pay back old debt. If they run out of cash or need to change the rules of the game, they can do so because they know the entire world would be in big trouble if their system fails. 

Ironically, the biggest leverage the U.S. has is the default, which they use to their advantage. This essentially turns the U.S. Dollar and the U.S. into a giant Ponzi scheme. 

As long as there is always an influx of new money (or new debt), the system stays alive and can use that income stream as leverage, either by attracting new capital or forcing existing investors to step up and support the system in times of trouble. 

But what if the income stream stops? What if they cannot change the rules, and the system inevitably collapses? So far, no one has asked themselves these questions. Probably because they’re happy to stay alive and keep playing the game, unless we come up with alternatives or cut back on issuing new debt, we’ll always be struggling and could one day end up in huge trouble. 

However, these events have also had some positive news for the Bitcoin community. The proposed 30% tax bill on Bitcoin mining has been killed. This means miners don’t have to worry about the absolute craziness this bill would have been and can stick to finding new blocks every ten minutes. 

Unlike the U.S. dollar, Bitcoin doesn’t have rulers, nor is it a Ponzi scheme. 

Everyone in the network knew the rules from the first Bitcoin block on. If you don’t play by them, you get punished because you spent a lot of money trying to break something that can’t be broken. The system will reward you if you’re willing to put the proof of work in. 

Rekindling My Love for Zelda ⚔️

On a lighter note, the recent launch of The Legend of Zelda: Tears of the Kingdom has rekindled my love for Zelda. I even recorded an episode about Zelda, gaming, and how the P2E gaming model has emerged. 

You can tune in to it here. 👇

Supporting the Bitcoin Community 🧡

May was jam-packed with Bitcoin events, meetups, and conferences worldwide. It’s also the month when the infamous Bitcoin Miami conference takes place. 

Samara Asset Group’s asset management arm, Samara Alpha Management, was a sponsor and used the opportunity to announce a competition for emerging managers to win $1M in seed capital to execute trading strategies in the Bitcoin markets. 

This is the beginning of our bigger vision of supporting the wider Bitcoin community through conference and event sponsorships, grants, and investments in leading Bitcoin companies.  

For example, we support Bitcoin Core developers through a grant we gave to Brink and the Bitcoin Core development team. This is crucial as most Bitcoin development is open-source and relies heavily on grants to keep driving innovation forward. 

Our overall vision is to invest in and support Bitcoin businesses as they’re integral to getting more people on board and accelerating Bitcoin adoption worldwide.

Your Stacker in sats, 

Patrick Lowry