Global debt has reached unprecedented levels this year. The International Monetary Fund (IMF) reports that debt has increased to $ 88 trillion, or 230 percent of global GDP.
The news is shocking given the previous major debt cycles. The last cycle – the crisis before 2008 – led to massive shortages and international suffering.
Debt has increased above all due to a new spending system in developing countries. Influenced by the desire to increase the infrastructure, the heads of state and government have increased spending. Since the funds are invested, the costs are enormous – and debts arise.
In more developed countries, spending is also unprecedented. However, expenditure has been made in these countries to increase and stabilize economic growth or to avert a disaster.
Nevertheless, the massive changes in debt ratios could herald rough times. Both the IMF and the World Bank have already warned that better fiscal policies are crucial to maintaining stability.
Print to output
The secondary problem at hand is also related to inflation and central banks. Given the massive rise in debt, governments often print money to repay debt. Africa alone accounts for almost 70 percent of the debt balloon.
When the country’s central bankers get the press going, inflation almost always rises dramatically. This inflation makes buying and selling difficult and leads to further stagnation of the local economy. This stagnation triggers a higher expenditure requirement – and the cycle continues.
The central banks are then forced to move in different directions to find stability. Lowering interest rates below zero and quantitative easing (QE) are just two of the possible options.
However, the IMF warns that these solutions are unsustainable in the long term. As the market moves towards debt, the tsunami will eventually crash and set these countries in turmoil. That is exactly the problem that Venezuela, Zimbabwe and others are already facing.
However, Bitcoin and other cryptocurrencies are functionally decoupled from government spending and poor fiscal policies. In fact, cryptocurrencies represent their own economy that differs from global market movements.
Of course, Bitcoin and other cryptocurrencies react to the global market – but they work independently. This is crucial when the economy starts to spin. This can be seen very clearly in the dependency on Bitcoin that already exists in Venezuela and other collapsing economies.
The future may seem bleak, but Bitcoin can offer a lifeline. For governments who are making a mess, Satoshi may have found the right solution.