What’s the point of blockchain anyway?
That’s oft the criticism.
And while I hope I’m economically literate enough to know that debt in-and-of itself isn’t necessarily a bad thing, it remains the case that the growth in US government debt has been staggering over the past two decades — as the US Treasury website itself makes clear.
Of course, during the past 100 years, the US has gained and grown global hemegony, also growing the size of its economy from around $100 billion in 1922 to a predicted $27 trillion in 2023. Total global trade is estimated to be around $110 trillion.
Brutally put, if you’re the world’s reserve currency, accounting for more than 85% of international trade and 60% of all foreign reserves, you can — within reason — print as much money as you want, and cut enemies out of ‘your system’ without much kickback.
Whatever happened to the BRICS’ reserve currency … again?
For all its economic power, the Chinese yuan isn’t a free floating currency and hence accounts for a not entirely massive 7% of international trade, not much bigger than the Japanese yen or good ol’ pounds sterling.
(Complexities of trade means the total is >100% because many transactions are in multiple currencies.)
That stated, the ability to print money doesn’t come without counterparty risk. Nothing in life does.
Debt payments currently account for 14% of US government spending — $726 billion annually — and I don’t think anyone expects future administrations to be cutting spending. Indeed in 2024, the US government expects to spend $1.8 trillion more than it brings in; a considerable chunk given the total budget is $6.9 trillion.
Correlation or cause, it’s worth pointing out that the US dollar departed its nominal peg to the gold standard in 1971. The US’ debt-to-GDP ratio has been going one way ever since.
Which — again — isn’t to say that debt is bad.
If you want to handle the banking credit crunch and Covid and then decide to onshore green technology and chip manufacturing, improve medicare and child care, pay off student loans (since scrapped by the Supreme Court), as well as deploying 72 nuclear-powered submarines, 400 planes that take off like helicopters, plus spending $100 billion to defend Ukraine — in addition to the $2.4 trillion spread across the Iraq and Afghanistan operations — as well as directly employing 15% of your national workforce, you have to spend a lot of money every year.
Yet you can have too much of a good thing: US debt is surely getting to that point.
But with the exception of Rand Paul, I don’t get the impression there’s any political consensus that thinks the US should be spending less and paying down debt. There’s always a good cause to spend more on. And it isn’t only the US either. It’s everywhere. It’s just that the US is the most decadent case.
Which brings us back to what’s the point of blockchain anyway?
I’m planing to address the point of blockchain games in a future post, but suffice to say it strikes me that given the aforementioned and growing limitations of government-issued fiat currency, it’s not an unreasonable hedge to assume the world economy will find a place for an alternative; at least one non-governmental global currency — a compute-backed digital currency in fact.
It really is that simple.
This Substack is sponsored by Hiro Capital: investing in the future of gaming
Calendar
NFL Rivals launches its Kickoff event — 24th August
Wreck League box rarity reveal — 24th August
Hunters On-Chain chest mint on Magic Eden — 28th August
Wreck League box open and game launch — 14th September
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