Bank of America stated debt-hedging bets are rising. The bank estimates the government borrows $1 trillion every 100 days. The rapid pace of borrowing helps gold and bitcoin reach record highs. Bank of America is increasing debt-hedging bets.
According to BofA strategists' Friday report, the US adds $1 trillion in debt every 100 days. Annual debt withdrawals total $3.6 trillion.
It appears the government is spending more than ever on the military. Funding "domestic bliss" and military aid for foreign conflicts has cost 9.3% of GDP over the last four years, the bank said.
"Little wonder 'debt debasement' trades closing in on all-time highs," experts said, citing gold and bitcoin as US dollar hedges. Gold prices rose to $2,081 on Friday and are up 6% in six months. Bitcoin reached $61,000, its highest level since November 2021, and is up roughly 50% in 2024.
That euphoria has primarily been attributed to spot ETF certification earlier this year and the imminent halving event, while bitcoin proponents have long championed the crypto as a hedge against dollar debasement and the US banking system.
As the flood of supply becomes difficult to absorb and high interest rates make servicing the debt more expensive, commentators have cautioned that US government bonds may lose their attraction. Commentators say the "debasement" of US Treasurys, the world's largest and most liquid market, might make it difficult for the government to sustain itself as purchasers diminish.
According to Capital Group, the US might spend more on debt interest than military in five years, making it the second-largest budget item.
Markets worry about the national debt as lawmakers argue over budget measures. If no agreement is reached, the US might face a partial government shutdown in March, which economists say could devastate the economy.
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