The possibility of an imminent collapse of the US dollar causes debate in financial markets. Many bitcoiners repeat this idea and even dream of it like that. Because in theory it is beneficial for Bitcoin (BTC).
However, financial specialist Lyn Alden. He insists that a sudden crisis is unlikely. Instead, it increases the progressive degradation stage.
Alden commented that many extreme predictions arise from incomplete media incentives, which Some people who predict a nearby collapse “benefit from sensationalism.”others simply misunderstand current macroeconomic dynamics.
For example, some Bitcoin enthusiasts have predicted financial collapse as a direct result of a public debt crisis and an increase in fiscal deficits. In fact, they see it as a potential catalyst for the price of digital assets, as reported by encryption.
Nevertheless, That perspective omits important structural factorsaccording to Alden.
One of these factors is that the US currently has a fiscal deficit equivalent to 7% of GDP, which is more than $1.4 billion so far. This number is high, but It remains far from extreme levels. The problem is structural and difficult to reverse, analysts say, but it is not unsustainable in the short term.
Similarly, the federal government Over $36 billion in debt. The numbers seem surprising, but they cannot be analyzed on their own. As can be seen in this graph, American households have approximately $180 billion in assets and net worth of approximately $160 billion.
Alden said that it is not a direct comparison of public debt and private wealth; It helps to dimension the relative size of both quantities.
What’s more relevance is global financial dynamics. As can be seen in the following graph, the US monetary base is around $6 billion, while total debt and loans at the domestic and international levels exceed 120 billion.
That total, Approximately 18 billion corresponds to foreign debtThat is, it’s a contractual commitment outside the US. This means that many economic agents around the world need the dollar. And analysts say it is a structural and inflexible demand that limit the risk of sudden depreciation of green tickets.
Unlike countries like Venezuela, Argentina and Turquier, where currencies lack international demand, the dollar operates within a global financial network where multiple agents should not inter- They are obligated to comply with the dollar payment.
This creates a constant pressure acquisition pressure that does not disappear even when the money supply increases. Therefore, Alden, even if the financial base is doubled or triple, It does not automatically flow into hyperinflation. The amount of contractual demand absorbs most of the increase.
It’s not a harmless situation
Now, this does not mean that the situation is harmless. US fiscal policy It already affects the federal reserve capabilities To control credit growth, experts say.
According to Alden, the system operates in a state of “financial control,” where it needs to maintain liquid and functional treasure markets and limits financial autonomy. That means the Fed can do it You will be forced to intervene to avoid confusionat the expense of tolerating inflation.
Events such as the UK’s ties crisis in 2022 show what will happen. In the context of stress, central banks It can intervene in measures such as quantitative flexibility.
This usually stabilizes the system in the short term, but there is an inflationary cost. This is because it means a greater monetary impression that can distort the asset price. In any case, it does not create a total dollar crisis.
In that order of ideas, according to Alden, future evolution The train of the chamber was slower than a sudden explosion. It is difficult to reverse the current deficit, and a combination of increased debt, financial intervention and external demand for the dollar elicits scenarios where risk increases over time. There are no defined breakdowns. The situation gradually gets worse.
Alden says it would be more convenient to think of financial dynamics as a rotating dial rather than as a switch. The problem already exists, but can be extended for years Without implying an immediate collapse.
“The deficits are more unruly than the bulls think, meaning that the US federal government is very unlikely to control them in the short term, but on the other hand, it’s not as urgent as bassists think.
Lynn Alden, financial analyst.
Recent history shows that other countries are enduring high levels of financial degradation Without reaching a total collapse. For example, Egypt multiplied by six or more money supplies over a decade, as seen in the following graph, leading to a significant depreciation of the currency, but not a system outage.
In other economies such as China, Brazil and India, money supply growth is also higher than the US, with China reaching 145% over the past decade. Brazil, 131%. India, 183%. However, none of these currencies have completely collapsed. According to Alden, this shows it Devaluation can be broad and sustainable without reaching an absolute collapse.
The dollar faces structural challenges derived from debt and deficits. However, its position as a global reserve currency and the inflexible demand it generates protect it from a sudden crisis. According to Alden’s estimates, risks around the currency accumulate slowly and can last for decades until you feel it.
What’s interesting is that, on its tentative, Bitcoin takes up space, profiles itself as a true reserve asset, and removes its location up to $1.