The U.S. dollar-centric global monetary system is on shaky ground, according to Luke Gromen, president and founder of research firm Forest For The Trees. In a recent interview, Gromen warned that the U.S. government’s fiscal situation is precarious, requiring negative real interest rates and continuous stock market gains to remain solvent. He believes the government’s ‘true interest expense’, including entitlements and interest payments, has reached a staggering 150% of tax receipts. This unsustainable situation will force the Federal Reserve to cut interest rates aggressively, regardless of economic conditions.
While Gromen remains skeptical of proposed anti-inflation measures, he predicts inflation will surge as the government attempts to inflate its way out of debt. In this environment, Gromen sees gold and Bitcoin as well-positioned assets, expecting gold to potentially hit $3,000 per ounce. Gromen also sees Bitcoin as a compelling alternative to gold, attracting investors who previously invested in gold mining stocks. He believes Bitcoin provides leverage for investors seeking exposure to precious metals.
Gromen sees both gold and Bitcoin as safe haven assets in a world where the most indebted nation relies on negative real interest rates to manage its debt. He warns that if stocks decline and stay down, the U.S. government’s revenue will not be enough to cover its interest expenses. This underscores the government’s dependence on rising asset prices to fund its operations. Gromen believes U.S. stocks must continue to rise to drive consumer spending and tax revenue, making a major market correction unlikely.
The influence of Bitcoin as an institutional asset class will be explored in-depth at Benzinga’s upcoming Future of Digital Assets event on November 19. The event promises to shed light on the growing role of Bitcoin in the global financial landscape.
