To investors,
The Wall Street Journal published an op-ed over the weekend from former House speaker Paul Ryan titled Crypto Could Stave Off A US Debt Crisis.
In the article, Ryan highlights the impending crisis our country faces:
“The American experiment is being tested. Nowhere is this more evident than in the trajectory of the national debt. The U.S. is headed toward a predictable yet avoidable debt crisis. If nothing is done, the economy will stall while government promises of healthcare and retirement security will be broken. Cuts to national defense will put the country at risk.
With no fiscal solution in sight, the crisis is likely to start with a failed Treasury auction forcing an ugly surgery on the budget. As the economy contracts, the dollar will suffer a major confidence shock, further imperiling prospects for growth. The obvious answer is to deal with the root causes of the problem. Entitlement programs are driving the debt and require reform, but politicians can’t find the courage to do what needs to be done. The country thus proceeds down this perilous path. What can be done?”
One of Ryan’s proposed solution is to watch what is happening with dollar-backed stablecoins. He isn’t claiming that stablecoins will be the only solution, but the following two paragraphs highlight the current momentum in stablecoins and increasing importance of their rise:
“We might start by taking stablecoins seriously. According to the Treasury Department and DeFi Llama, a cryptocurrency analytics site, dollar-backed stablecoins are becoming an important net purchaser of U.S. government debt. If fiat-backed dollar stablecoin issuers were a country, it would sit just outside the top 10 in countries holding Treasurys—smaller than Hong Kong but larger than Saudi Arabia. If the sector continues to grow, stablecoins could become one of the largest purchasers of U.S. government debt and a reliable source of new demand.
Their emergence as a mechanism for promoting the dollar couldn’t be timelier. The U.S. benefits from the dollar’s status as the primary international reserve currency. Among the perks: cheap, reliable financing for fiscal spending and substantial influence over the global financial system. Most financial activities eventually flow through U.S. banks thanks to the dollar’s dominance. As the global economy becomes more digital and multipolar, the dollar’s primacy is constantly under threat.”
This analysis would be important regardless of who was presenting it, but it carries more weight when coming from the former House speaker. Paul Ryan intimately understands the economic and monetary policy issues we face as a country.
His focus on stablecoins will only bring more attention to the potential solution.
Stablecoins are not the only solution though — I was talking to friends at lunch yesterday about an interesting scenario worth sharing. The explosion in artificial intelligence is drastically increasing the efficiency and productivity of companies.
I am not talking about the shiny, new “AI companies” that seem to be everywhere, but rather the existing companies that are leveraging AI internally to improve operations.
These companies can now get more done with less people or less capital. This efficiency boom in productivity will lead to an increase in GDP. Based on some of the early data I am seeing, the GDP growth could be faster than the US debt growth.
If this holds, which there is no promise that it will, then we could have a scenario where the debt-to-GDP ratio declines in the US over the coming months and years. This seemed impossible less than two years ago. If it happens though, the GDP growth would be a much-needed relief valve for a debt environment that seems out-of-control.
The true solution is probably a mix of options. Stablecoins are going to provide a new set of buyers for US debt. Artificial intelligence is going to drive GDP growth at a faster pace than without it. Hopefully serious, responsible politicians are elected into office who attempt to balance the budget as well.
Complex problems like the US economy can’t be solved with magic bullets. We need many different things to go right, which means we need various groups of people to work together. Politicians on both sides of the aisle. Wall Street, Silicon Valley, and Washington DC. We need everyone.
Let’s work together like our country depends on it. Hope you all have a great day. I’ll talk to everyone tomorrow.
-Anthony Pompliano
Phil Rosen, the Co-Founder of Opening Bell Daily, interviews Anthony Pompliano. Topics include bitcoin, President Trump's recent support of the industry, interest rates, financial media, and more.
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Anthony Pompliano on Bitcoin, Bull Markets, Interest Rates, and the Presidential Race
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