I've been hearing chatter about this for the last few months ever since the Circle IPO: the theory being that the US mainly wants stablecoin issuers like Circle to thrive so there is massive market for US treasuries as demand wanes in the traditional system. My question is what is the mechanism by which the US can reduce/dissolve its debt via this route?
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I don’t think there’s a solid way to wipe out the debt, maybe to roll it over in an easier fashion, but all new debt issuance increases the money supply and I haven’t seen any serious plan from anywhere in American politics to fix the deficit
Exactly.
An increased money supply means there is more debt to pay interest on, and the only way to pay off that debt is by increasing the money supply further.
In a world with $100, if the $100 is debt (as fiat is) and the interest rate is positive, let's say 3%, $103 needs to be paid off after a year, and $103 can't be paid off if there is only $100 in existence.
Nothing stops this train.
This isn't even slightly hidden, just listen to Michael Saylor or David Sacks. Its by far the dominant narrative about the benefits of StableCoins to US dollar dominance in international trade, and it just so happens to massively benefit the PayPal mafia and Stripe, because they're biggest cost burden is fraud. StableCoins are cryptocurrency, so NYKNYC is just as valid for USDT and USDC as it is for Bitcoin. Pushing that burden onto the consumer gives consumers cheaper online payments in return for responsibility, cutting out Visa and MasterCard, which is why Visa and MasterCard are rushing to adapt to this new US monetary strategy.
By establishing dollar backed StableCoin cryptocurrency as the dominant medium of exchange for international trade the US are attempting to route around national governments by selling their treasuries indirectly to their citizens, who either want access to dollars for store of value (over their own inflationary currencies) or for international trade and remittances, they intend to uphold demand for US treasuries, meaning they can continue the Ponzi scheme by paying off old creditors with the income from new ones, thereby exporting US inflation.
USD inflation is global taxation.
But this whole scheme is a massive scam run by the tech bros, the PayPal mafia, venture funds who want to break the regulatory barriers to keep the incumbents in place. Their motivation is to increase the efficiency of online payments, so this works for them.
But the problem for the US government is that the dominant player is international StableCoin issuance is Tether, who are hardcore Bitcoiners. They don't store their own wealth in USTs. All of their own substantial profits are converted to bitcoin and investments in the ecosystem around it. And if they could easily do it they would create a euro backed StableCoin, if euro bonds register. That's why people like Senator Lummis have been attacking them, trying to bring them to heel on behalf of Trump.
If the real market is international buyers of US treasuries, to keep USD inflation offshore, then USDC is a bit player,a rounding error.
The other problem is that national financial regulators are not toothless. Brazil and India's digital payments are far superior to those in Europe and the US.
And esteem for the US is deeply intertwined with the demand for USD, the integrity that the political system in the US has relative to those in other countries. But Trump is now looked on as a clown, a buffoon, a Boris Yeltsin figure, compared to Mikhail Gorbachev. Gorbachev may have been responsible for many tragedies, but respect for the Russian political elites only collapsed with Yeltsin. Trump's self-sabotage in international relations matters in terms of the dominance of USD in international trade. If I'm an Indian, I can say what I like about Modi, because he's my president. But if you insult him, as an American, you insult my country and me by proxy. Same for Brazilians, Australians, Canadians, Mexicans, even the Iranians, and all the "shit hole" countries.
This is so obvious that I have to question whether Trump's backup plan is in fact the collapse of the USD, a scorched earth strategy that will promote Bitcoin as the dominant world reserve currency, in combination with gold, allowing massive inflation in the US to wipe out the debt, while lubricating online payments through efficiencies provided by StableCoins, cryptocurrency, and the tokenisation of debt and equities markets. This would be like the shock therapy approach in the Russian federation in the early 90s, which impoverished a generation and lead to general societal collapse temporarily. This would be absolutely brutal, dystopian, but there are accelerationists in the administration who crave this over slow decline.
It's kind of funny.
Before Bitcoin there was a centralized digital currency, E-gold, and the government shut it down, using the argument that it facilitated money laundering.
And now the US government is allowing stablecoins, which are effectively the same thing, but backed by the USD rather than gold and they buy US treasuries. So maybe it wasn't about money laundering after all.
True
Thanks for this reply, this section especially makes a ton of sense
They become a buyer of US bonds. A new buyer
Basically, yeah.
As I understand the idea, it allows the government to spread out the impact of devaluing the dollar over more of the global population. So, the soft default of money printing is easier with these stablecoins.
I've seen stronger claims that didn't make sense to me about how they could do a bait-and-switch devaluation like they did after the gold confiscation, but those don't make sense to me. That would involve getting everyone on stablecoins and then changing the peg with the dollar.
Yeah plus all the outstanding debt has owners that is freely traded on the market. If a new market participant comes and bids up the price yields fall by supply and demand dynamics thus the US government can issue new debt to pay off old debt and keep yields pegged to the lower side. Plus all existing bond holders get a capital gain due to the price rise of the bond securities
How does increased demand for debt issuance dissolve debt?
It could reduce interest on the debt if you are able to issue new debt to retire higher interest debt but it doesn't reduce or dissolve the debt it increases it.
I can see them trying to push USD around the world through global platforms like Meta and X. Don't think they'll make much of a dent in the $37T of debt though.
Putin Adviser Alleges US Will Use Stablecoins to Address Debt #1214800
Its not so much dissolving debt as maintaining demand for USTs are global demand declines.
Stablecoin issuers are required to hold USTs and so they create a huge potential demand.
USTs also give USD digital payments speed and efficiency as the traditional SWIFT payments network struggles to compete with new protocols like Chinas mBridge and CIPS.
Stablecoins are a quasi CBDC but in PPP form.
Trump associates are positioned to make huge profits while the stablecoins potentially enable USA to remain solvent a bit longer than it otherwise would.
To understand more check this out- https://cryptohayes.substack.com/p/buffalo-bill
Not a theory, Trump told you in 2024, Bessent, Lutnick, and Miran have been building it out
Dollars are debt, banks hold debt and issue dollars against it.
The banks have leverage limits and market limits set by globalists to protect their other franchises in other countries.
Along with allowing banks higher leverage, and exporting dollars via stables, more of that debt can be monetized into dollars... Dollars that can buy Bitcoin.
Bitcoin then soaks up the excess dollars in the economy such that they don't inflate things like housing and energy.
This slowly turns the dollars from from a liability to an asset and saves the US from the Triffin Dilemma.
This is why the national security apparatus created Bitcoin, a transparent battery for dollars and global trade that can insulate the US during a transition away from globalist monetary policy.