rajatsonifinance on Nostr: Why would sovereign nations want to hold US government debt if they know they will be ...
Why would sovereign nations want to hold US government debt if they know they will be repaid in devalued dollars?
Bitcoin is a much better solution for long-term savings.
Example:
If you hold $100 billion of US debt for 30 years, you'll be paid back in dollars that are worth SIGNIFICANTLY less. You'll get interest payments along the way.
Right now, 30-year Treasury rates are around 4.34%. If the money supply is inflated by 7% on average over that time (this number has historically been much higher - it keeps up with the S&P 500), the bondholder would lose ~2.7% to inflation per year!
In 30 years, at maturity, the bondholder would receive $100 billion (in nominal terms). The holder would also receive ~$130 billion in annual interest payments throughout the 30 years.
The $100 billion payout has a present value of $11.3 billion. The interest payments have a present value of $51.1 billion, so the bond is actually worth only $62.4 billion in present value terms.
The bondholder would have LOST ~$37.6 BILLION by saving in US treasuries.
Why would you pay $100B for something worth only $62.4B?
If the investor put 5% of their portfolio in Bitcoin - $5 Billion in Bitcoin and 95 billion in bonds - their portfolio would perform SIGNIFICANTLY better.
Bitcoin has historically returned 100%+/year, but let's be conservative and say it will return 20%/year for the next 30 years.
The 5% allocation would be worth $1.19 trillion. The portfolio would be worth almost $1.8 trillion.
Instead of taking a compounded -1.5% annually (a 1.5% loss),
The portfolio would have returned 10.1% annually (a 10.1% gain).
Bitcoin is a much better solution for long-term savings.
Example:
If you hold $100 billion of US debt for 30 years, you'll be paid back in dollars that are worth SIGNIFICANTLY less. You'll get interest payments along the way.
Right now, 30-year Treasury rates are around 4.34%. If the money supply is inflated by 7% on average over that time (this number has historically been much higher - it keeps up with the S&P 500), the bondholder would lose ~2.7% to inflation per year!
In 30 years, at maturity, the bondholder would receive $100 billion (in nominal terms). The holder would also receive ~$130 billion in annual interest payments throughout the 30 years.
The $100 billion payout has a present value of $11.3 billion. The interest payments have a present value of $51.1 billion, so the bond is actually worth only $62.4 billion in present value terms.
The bondholder would have LOST ~$37.6 BILLION by saving in US treasuries.
Why would you pay $100B for something worth only $62.4B?
If the investor put 5% of their portfolio in Bitcoin - $5 Billion in Bitcoin and 95 billion in bonds - their portfolio would perform SIGNIFICANTLY better.
Bitcoin has historically returned 100%+/year, but let's be conservative and say it will return 20%/year for the next 30 years.
The 5% allocation would be worth $1.19 trillion. The portfolio would be worth almost $1.8 trillion.
Instead of taking a compounded -1.5% annually (a 1.5% loss),
The portfolio would have returned 10.1% annually (a 10.1% gain).