Elon Musk, the billionaire founder of Tesla and SpaceX, stirred up the financial markets this week by expressing deep concerns about the financial situation in the United States, while strongly supporting Bitcoin as a hedge against inflation. He warned that the U.S. economy is facing the risk of bankruptcy as the national debt continues to rise, leading to a financial crisis that Musk describes as "having no clear way out."
The Crisis from Gigantic Interest Rates
According to Musk, the annual interest costs from the national debt have exceeded $1 trillion, accounting for 23% of total federal budget revenue. He warned at a rally that "interest payments are currently exceeding even the U.S. defense budget," which has left many investors and observers deeply concerned. In a post on social media platform X (formerly Twitter), Musk asserted that this is the "biggest financial crisis in history" for the U.S.
Alongside this, many prominent investors, including legendary hedge fund manager Paul Tudor Jones, have also expressed concerns about the increasingly severe deficit in the U.S. Tudor Jones stated that the U.S. is facing a "debt bomb" due to uncontrolled fiscal policies, especially under both the previous and current administrations, where the federal deficit has increased from $500 billion to $600 billion each year.
Bitcoin Price Surge: “The Fastest Horse to Beat Inflation”
With concerns about national debt and inflation, Bitcoin and gold have become safe-haven assets that investors trust. The current price of Bitcoin is just shy of its all-time high of $70,000, while gold is also at new peak levels. Musk is not only an advocate but is also directly investing in Bitcoin with Tesla holding over 10,000 Bitcoins, valued at approximately $800 million.
However, recently, Tesla transferred this Bitcoin to a new wallet, fueling speculation that the company might be preparing to sell part or all of this digital asset. Meanwhile, Musk continues to believe that Bitcoin is "digital gold," a powerful tool for hedging against the depreciation of the dollar and the negative impacts of U.S. financial policies.
The Shadow from Financial Deficits and the Fed's 'Nightmare' Scenario
The U.S. national debt has skyrocketed to $34 trillion at the beginning of 2024, primarily due to the fiscal stimulus packages post-COVID-19 and the Federal Reserve's interest rate hikes to control inflation. With the budget deficit continuously increasing, Bank of America analysts forecast that this debt could surpass $36 trillion by the end of this year, with an additional increase of up to $1 trillion every 100 days.
The Fed is facing a 'nightmare scenario' as high interest rates are putting heavy pressure on the budget. Higher interest rates mean the government has to pay more in interest on debt, increasing the risk that the Fed will have to face the dilemma of increasing the money supply to alleviate this burden, putting significant pressure on the dollar and pushing the prices of gold and Bitcoin even higher.
Elon Musk and 'Cryptocurrency President' Trump
In addition to financial warnings, Elon Musk is also working to support former President Donald Trump’s return to the White House. With a clear stance in favor of cryptocurrencies, Trump is expected to advocate for friendlier policies towards the industry. Musk believes that having a "cryptocurrency president" will help create conditions for Bitcoin and other digital assets to thrive, amidst inflation and budget deficits that have caused many to lose faith in traditional investment vehicles.
Musk's support for Trump and Bitcoin is not only expressed through strong statements but also through specific financial moves. He encourages investors to seek Bitcoin as a long-term solution, while also continuing to influence with comments on the economic situation, aiming to present a view of a future where digital assets will become a pillar of the economy.
A Warning for the Future of the U.S. Economy
From Musk's and Tudor Jones' remarks, it is evident that the U.S. economy is facing an unprecedented period of instability. If the national debt continues to rise unchecked and interest rates remain high, the prospect of a financial crisis will no longer be a distant warning. Musk believes this is the time for investors to consider alternative investment channels like Bitcoin and gold to safeguard against financial risks.
Experts also agree that printing more money by the government to alleviate national debt will create a negative feedback loop, continuing to weaken the dollar. Therefore, the growth of Bitcoin not only reflects Musk's interest but also the trust from global investors in an asset capable of resisting inflation and looming financial crises.
