The Increasing Debt Burden of Crypto Purchases

Despite positive reports on retail spending and the unemployment rate in the US, the country is facing significant structural challenges. It currently has a historic $34 trillion in public debt and $1.13 trillion in consumer credit card debt. This raises concerns about the sustainability of fiscal policies and their long-term impact on the economy. What was once a fringe topic has now become a more widely recognized issue, with figures in the banking sector warning about the gravity of the situation. There’s a growing public anxiety over government debt, with majority of Americans surveyed advocating for its reduction.

This concern gains further significance when considering its real-world implications on housing affordability and the broader economic landscape. Rising interest rates, influenced by the growing public debt, have had a precarious impact on the housing market. As the public debt grows, so does the cost of borrowing, making it more difficult for individuals to afford homes. The US dollar’s global standing has played a crucial role in managing the debt burden, but there are concerns that the loss of the dollar’s status could amplify the debt burden by as much as 30%. This emphasizes the need for a critical evaluation of the nation’s fiscal direction.

The challenge faced by the nation is mirrored in the behavior of many consumers. Americans are increasingly relying on credit cards to cover regular expenses without paying down the balance. A recent report shows that credit card debt reached record levels, increasing by $50 billion to $1.13 trillion. There has also been an increase in borrowers struggling with credit card, student loan, and auto loan payments. This indicates increased financial stress, especially among younger and lower-income households.

During periods of uncertainty, it is important for retail investors to diversify their investments. The way in which they diversify matters. Focusing solely on popular investments like the S&P 500 can be risky if the market plummets. Having some exposure to cryptocurrencies, such as Bitcoin and Ethereum, can also be beneficial for long-term value creation.

The upcoming year poses substantial macroeconomic risks for both the nation and the consumer. While some economic reports have been positive, it is important to analyze the underlying fundamentals and differentiate between transitory and permanent shocks. Policymakers need to develop fiscal policies that promote sustainable growth and productivity, avoiding situations where short-term expediencies lead to long-term economic liabilities. The current path resembles that of a borrower trapped in a cycle of debt, with interest rates surpassing their income. It is crucial to make significant changes to improve the situation in the future.