‘Severe Devaluation’ of Dollar Only Way Out for US Government Debt As Argentina-Style Inflation Approaches: Luke Gromen

Macro strategist Luke Gromen is warning that the skyrocketing US national debt may cause the dollar to plummet in value.

In a new YouTube update, Gromen says that the US will likely address its growing $36 trillion national debt by printing more money, which debases the dollar, rather than allowing Treasury yields to soar to try and attract investors.

“Now the credit risk is at the Treasury market level, except Treasuries have no credit risk. The government can always just print the money to make interest payments and avoid default. So there’s no credit risk in Treasuries, there’s only inflation risk.

In my opinion, what we’re seeing in Bitcoin treasury companies, particularly, is logical in light of this primrose path that we’ve followed over the last 25 years, as more and more people begin to realize that the only way out of this is severe devaluation of US debt, of US sovereign debt, of Western sovereign debt. In that case, I would expect credit spreads to remain relatively low, because all else equal, I’d rather own an Apple bond or a Microsoft bond than a US Treasury bond.”

Gromen also says the US may be facing an Argentina-style economic future, a reference to the South American country’s problems of high inflation and devaluation of its local currency.

“And now huge caveat, unless the US government ever decides, even for a period of time, to stand aside and let the Treasury market dysfunction, but then you’re going to get credit spreads to really blow out as we’ve seen. The credit risks of everything goes to the moon, except for probably gold in that case, to be honest. But again, I don’t think that’s going to be allowed to happen for more than a few weeks, few days at a time.

Ultimately, I think what we are watching … is something we’ve long called for to happen and referred to as Argentina with US characteristics, or US with Argentina characteristics, however you want to phrase it. Stocks are up this year in dollars. They’re down in gold, in Bitcoin. We’re seeing pressure from the President’s administration on the central bank [chairman] because they need interest rates down to be able to afford the debt, to be able to reduce the interest expense, to reduce the fiscal pressures.”

 

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