- Aging demographics shrink labor force, forcing states into unsustainable debt cycles.
- Massive Fed liquidity injections quietly debase fiat, inflating hard asset values.
- Bitcoin’s fixed supply makes it a rising hedge amid growing fiat currency dilution.
A silent transformation is underway in the global economic landscape, driven by long-term demographic decline and aggressive fiscal maneuvering. According to Raoul Pal, Founder and CEO Global Macro Investor, as aging populations shrink the workforce and lower productivity, governments are forced to rely more heavily on debt to maintain growth and social obligations.
This debt cycle, now entrenched in major economies like the United States, fuels rising monetary expansion. Consequently, assets that cannot be inflated such as Bitcoin are increasingly viewed as safe havens in a world of financial engineering.
Over time, due to aging demographics, governments need to borrow more money to support GDP growth to pay interest on the debt.
— Raoul Pal (@RaoulGMI) June 4, 2025
At over 100% of GDP in debt there isn't enough economic cash flow to fund the debt growth so it gets "printed" via Fed Net Liquidity and also forced,…
Shrinking Labor Force, Growing Debt Burden
Since the early 2000s, the U.S. labor force participation rate (LFPR) has steadily declined. From a peak of nearly 67% in 2000, it now hovers around 62.5%.
While part of this drop reflects the retirement of Baby Boomers, it also signals a disengagement from the workforce that reduces tax revenue and economic output. Hence, the government leans more on borrowing to fill the gap.
Debt-to-GDP ratios now exceed 100%, a level historically associated with fiscal strain. However, the system remains afloat not through organic growth, but through increasing liquidity from the Federal Reserve.
This liquidity now over $6 trillion was injected to stabilize markets, yet it also functions as a silent method of currency debasement. As the dollar weakens in real terms, hard assets rise by comparison.
Fed Liquidity and Currency Debasement
Federal Reserve Net Liquidity saw dramatic increases during the 2008 financial crisis and the COVID-19 pandemic. Liquidity jumped from under $1 trillion in 2008 to over $8 trillion by 2020. While this averted deeper recessions, it diluted the dollar’s purchasing power. Inflation followed, further eroding the real value of savings.
Moreover, regulation often compels banks to absorb new government debt, anchoring this system artificially. Consequently, fiat currency loses its ability to store value over time. Investors increasingly seek alternatives that resist inflation and cannot be arbitrarily expanded.
Bitcoin as a Monetary Life Raft
Bitcoin, with its fixed supply of 21 million coins, offers an escape from this debt-liquidity trap. It not only offsets the average 8% annual debasement of fiat currencies but also benefits from growing global adoption. As of press time, Bitcoin trades at over $105,714, with a market capitalization exceeding $2.1 trillion.
