Musk will head the newly-created White House advisory office named D.O.G.E.
It’s a play on the Texas techno king’s love for Dogecoin and an acronym that stands for Department of Government Efficiency.
DOGE Aims to Whip Inflation Now
We either fix this or go de facto bankrupt https://t.co/hmjpx6uBfd
— Elon Musk (@elonmusk) December 26, 2024
The magnetic tech engineer has advised the once and future president Trump broadly on a number of matters relating to technology, business, and public policy.
His ideas for more government efficiency could help cut back overspending in Washington, DC, slow the growth in the federal budget deficit, and help curb rising prices across the economy due to inflation.
High deficits cause inflation as government spending gooses the velocity of money in the economy and drives up prices. Meanwhile, new dollars created by the Federal Reserve and loaned to banks to buy the government’s debt inflate the dollar and increase prices as well.
One recent study by the Princeton University Department of Economics estimates US budget deficits in 2021 caused about 30% of the US dollar inflation in 2021-22.
Rising prices as a result of big spending in Washington start in financial markets, then ripple through the economy until they push up prices at the gas pump and grocery checkout.
New Headwind for Bitcoin’s Price, Musk Warns
If dollar inflation is solved, the price in dollars to buy cryptocurrency will actually drop, other things being equal.
What matters is the ratio of dollars to crypto.
— Elon Musk (@elonmusk) January 7, 2025
The effect is especially dramatic in crypto markets and shows up conspicuously in Bitcoin’s price and that of other major token pools, such as ETH, XRP, SOL, and DOGE.
In fact, many cryptocurrency investors say they favor crypto assets like Bitcoin, Ripple, and Dogecoin as a shelter for their savings from dollar inflation.
While not all experts agree that Bitcoin is a hedge for dollar inflation, over any four-year period, money held as BTC has markedly increased in buying power while the inflating greenback loses its purchasing power parity.
But Musk warned in an X reply thread on Tuesday that if the D.O.G.E. office’s plans are successful, it will represent a headwind for Bitcoin’s price, not support for growth.
That’s because lower deficits and less inflation will slow the increase in prices across the board, including in traditional financial markets like stocks and Internet financial instruments like Bitcoin.
Bitcoin’s price corrected to a low of $94,600 on Wednesday after losing the $100,000 mark on Tuesday.
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