The US government deficit has already ballooned to $1.613 trillion by 2023 and billionaire Larry Summers is worried. Major concerns About. In an interview with Bloomberg at the Aspen Economic Strategy Group Summit, he predicted a scenario in which US government deficits would continue to widen.
Current estimates are too positive, according to Summers, who predicts a deficit of 10 percent of gross domestic product (GDP) in the short term.
America’s unsustainable deficits
During the interview, Larry Summers says the US government’s deficits are “unsustainable”. “I’ve written about it and I don’t think we’re on a sustainable fiscal path. […] “I think the deficit will increase to 7 percent of GDP in eight to 10 years,” Summers said.
The Congressional Budget Office creates estimates for deficits and expects defense spending to fall relative to GDP. Summers says that’s foolish given the threats he sees on the global geopolitical scene right now.
“This year, if you get the estimates right, I think you’re talking about a 10 percent deficit,” said Summers, who is deeply concerned about America’s fiscal health.
What does this mean for Bitcoin?
You could argue that these predictions of the summer are positive for the price of Bitcoin. What makes Bitcoin an interesting option for investors is the absolute scarcity of 21 million units. It becomes even more attractive if the U.S. government has to fill its deficit by issuing additional debt.
This additional borrowing leads to the creation of new money, further reducing the purchasing power of the US dollar. There is a $221 billion deficit on the books for July 2023 alone.
The graph shows that the US government spent $497 billion and only $276 billion came in. That is not a healthy situation.
Currently, 13 percent of all spending ($67 billion in July) goes to pay interest costs on debt. If interest rates stay where they are, that number will increase if the U.S. government has to borrow more at higher interest rates.
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