Raoul Pal’s latest analysis from the Global Macro Investor publication sheds light on some of the most crucial macroeconomic charts that are shaping both global markets and the cryptocurrency space. With a particular focus on demographics, government debt, and liquidity increases, Pal connects the dots between the broader economic trends and their implications for digital assets like Bitcoin.
Pal starts by underscoring the fundamental truth that “demographics are destiny.” The first critical chart Pal highlights shows that GDP growth is inevitably tied to the size of the labour force. As the global population ages and the working-age population shrinks, economies are left with fewer workers to drive economic output. This demographic shift leads to slower economic growth over time, which, as Pal explains, is already being reflected in the deceleration of GDP in many developed economies. The chart makes it clear: as the population ages, GDP growth becomes harder to sustain.
The second chart that Pal identifies is equally critical in understanding the global macroeconomic landscape. It explores the relationship between government debt and GDP, arguing that the debt-to-GDP ratio is essentially a function of the working population. As the number of workers declines, governments are increasingly reliant on debt to maintain growth and service the interest payments on previous borrowing. For Pal, this chart is the most important in macroeconomics today, as it underscores the long-term fiscal pressures governments face in a world with fewer working-age individuals to support public finances.
The third chart touches on how governments and central banks address these challenges: through the process of debasement. To service the rising debt, Pal explains that central banks resort to printing money, increasing liquidity in the system, which leads to currency debasement. While this may provide temporary economic relief, it also risks inflating asset prices, creating bubbles, and diminishing the value of fiat currencies. For Pal, this process is the key to understanding how both traditional financial markets and the cryptocurrency space evolve over time.
Pal summarises these points in his framework of “The Everything Code,” which defines a four-year cycle where these dynamics repeat. The core of this cycle is simple: an older population leads to lower trend GDP growth, which necessitates increasing debt to keep the economy moving. Governments then print more money to service this debt, a process that creates the conditions for asset price inflation—be it in stocks, bonds, or increasingly, in digital currencies like Bitcoin.
This analysis is not just a theory about the traditional financial system; it also has significant implications for the future of cryptocurrencies. As central banks continue to print money and increase liquidity, the demand for alternatives to fiat currency—like Bitcoin—could rise. Pal’s analysis suggests that the inflationary effects of printing money may lead investors to seek out hard assets, and crypto could serve as a hedge against the ongoing debasement of fiat currencies. For many crypto investors, this is the “everything code” in action: higher debts, more printing, and the consequent rise in the value of digital assets as people look for refuge from inflation.
Pal’s insights serve as a stark reminder of the macroeconomic forces at play in today’s world, forces that will continue to shape the economic future. As these trends unfold, the relationship between traditional markets and crypto will only grow more intertwined, with Bitcoin and other digital currencies potentially offering solutions to the very problems created by government debt and money printing. As Pal’s analysis makes clear, understanding these macro forces is key to navigating both the current financial environment and the future of global markets.
