- Bets hedging the effects of America's huge debt pile are ramping up, Bank of America said.
- The government is taking out around $1 trillion of debt every 100 days, the bank estimated.
Bets hedging against the impact of America's growing debt pile are ramping up, according to Bank of America.
The US is adding $1 trillion worth of debt to its total balance every 100 days, BofA strategists estimated in a note on Friday. That amounts to around $3.6 trillion worth of debt taken out every year.
The government also looks to be spending more than ever on its military budget. Funding "domestic bliss" and military aid for conflicts overseas has cost 9.3% of GDP over the last four years, the bank said.
"Little wonder 'debt debasement' trades closing in on all-time highs," strategists added, pointing to popular hedges against the US dollar, like gold and bitcoin. Gold prices edged higher to trade around $2,081 on Friday, and are up about 6% in the last six month. Meanwhile, $4, its highest level since November 2021, and the token is up almost 50% in 2024.
That enthusiasm has mostly been chalked up to the approval of spot ETFs earlier this year and the coming halving event, though bitcoin proponents have long touted the crypto as a hedge against the debasement of the dollar and the underlying US financial system.
$4 that the pace of borrowing threatens to diminish the appeal of US government bonds as the flood of supply becomes difficult to absorb and high interest rates make servicing the debt more and more expensive. The "debasement" of US Treasurys, the market for which is the largest and most liquid in the world, could make it harder for the government to fund itself as buyers dwindle, commentators have said.
Over the next five years, the US could soon be $4 than it does on defense, per an estimate from Capital Group, making it the second-largest burden on the budget.
The national debt has been of particular concern for markets as policymakers continue to spar over budget cuts. The US now risks a $4 in March if agreements aren't reached, an event economists have warned could be devastating to the economy.