Deutsche Bank published a report on July 8 based on Swedish economist Knut Wicksell’s 1898 theory to analyze US fiscal dynamics. The bank demonstrates that the gap between the US economy’s natural interest rate, boosted by technology sector dominance, and the rates set by the Federal Reserve remains wide enough to attract global capital. This phenomenon creates a self-reinforcing cycle where capital inflows strengthen the dollar, making trade and fiscal deficit reduction politically less urgent. Deutsche Bank notes that this situation could keep the dollar strong longer than expected, which represents a headwind for Bitcoin and other risk assets, while allowing the US debt trajectory to worsen further.
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