Last month, we delved into how bond market activity is casting doubt on the stability of the U.S. government’s financial strength, shaking up the long-held belief in fiscal stability.

Now, tech billionaire Elon Musk has sounded the alarm on Twitter regarding President Donald Trump’s significant tax bill, which could increase the fiscal deficit by $2.4 trillion over a decade.

This comes amid mounting concerns that investors are shifting away from U.S. assets towards alternative options like bitcoin and gold. As of FY 2024, the fiscal deficit stood at $1.8 trillion, while the national debt now sits at a staggering $36 trillion, with annual interest payments totaling $1.13 trillion.

Musk’s public declaration of fiscal worry could catalyze a further move away from U.S. assets. Corporate adoption of bitcoin and other tokens like XRP has been on the rise, potentially fueled by these concerns.

Additionally, investors troubled by the government’s fiscal condition may demand higher inflation-adjusted yields to lend money. This could keep yields elevated, adding complexity to the fiscal situation and economic growth prospects.

In theory, the government has been bankrupt for years, as evidenced by continuous increases to the debt ceiling. The current debt limit stands at a whopping $36 trillion, suggesting a facade of control over the country’s financial health.

Bitcoin believers have long warned of the fragility of the debt-based fiat system, advocating for a rethink of traditional monetary models. With government debt surpassing 100% of GDP in advanced economies, the ability of debt-based fiat money to spur growth is diminishing.

Economist Russel Napier suggests that governments may resort to higher inflation levels to reduce debt-to-GDP ratios in order to manage their debt burden. This could drive increased interest in assets like bitcoin and gold.

Alternatively, curtailing fiscal spending could be the key to decreasing debt ratios and reviving the effectiveness of the debt-based fiat system in promoting growth.

If governments fail to address growing debt concerns, the era of debt-based fiat currency could be in jeopardy, potentially leading to a broader exploration of alternative financial systems like blockchain and cryptocurrencies.

The future remains uncertain, but the evolving financial landscape is set to provide interesting developments in the coming years.