"US Debt to GDP will continue to rise" - Chamath Palihapitiya on the US Dollar's Store of Value

To listen to the full discussion check out the All In Podcast at: https://www.youtube.com/watch?v=Zf2tYNhq5J8&t=2489s

The US dollar has been the dominant world reserve currency since the end of World War II, and it has remained relatively stable and attractive due to the size of the US economy, the depth and liquidity of its financial markets, and the stability of its political system. However, in recent years, some countries have expressed concerns about the risks and limitations associated with the US dollar's dominance as a reserve currency. For example, some countries have complained about the volatility and unpredictability of the US monetary policy, which can have spillover effects on their own economies. Others have argued that the US dollar's status as the world's reserve currency gives the United States an unfair advantage in international trade and finance.

As a result, some countries have taken steps to reduce their dependence on the US dollar and diversify their reserve holdings. For instance, China and Russia have increased their gold reserves and are promoting the use of their own currencies in international transactions. Most recently India, China, Saudi Arabia and Brazil have agreed to trade more freely in their own currencies With many interpreting this as a response to increased borrowing on the part of the Federal Reserve and a sign of the Dollar becoming depegged as the global reserve currency.

In a recent podcast Chamath Palihapitiya gave his opinion on the strength of the US Dollar. For Chamath the US economy and financial markets remain the largest and most liquid in the world, and the US dollar is still widely accepted as a medium of exchange and a store of value. The US also has a long-standing and reliable system of financial regulation and legal infrastructure that inspires confidence among investors and market participants. Debt to GDP will continue to rise to it higher levels since the Second World War.

And whilst relatively speaking this doesn't spell disaster for the United States Dollar, Chamath leaves it very much open as to how this will effect other countries around the world.

Here is what he had to say about about the effects of rising debt on other economies. Despite recent developments, it is difficult to predict whether the US dollar will be unpegged as the world's reserve currency anytime soon. So long as currencies are still pegged to the US Dollar conditions will always be favourable for the status quo.

What is unclear is the level of impact of increased US debt to other economies. Could changes in economic and political conditions potentially lead to a shift away from the US dollar's dominance as a reserve currency in the future? Additionally, could the creation of new digital currencies, such as Bitcoin and Ethereum, challenge the dominance of traditional reserve currencies like the US dollar?

Let me know what you think in the comments section below