So in the spirit of All Saints' Eve, let's go down the thought experiment of what would happen if the US Government decided to roll out Gold Standard vNext. During the days of the Gold Standard the dollar had a fixed peg to Gold. From 1834 until 1933 that peg was fixed at $20.67 per troy ounce. When FDR issues the infamous EO 6102, he added insult to injury by increasing the value of gold and decreasing the value of the Dollar by setting the peg to $35. I can only imagine this was to increase the value of the gold in government coffers and aid in the money creation for the various government programs he planned to address the Great Depression. This is all just for historical context.
What might this look like today? A quick back of the napkin calculation can be found here.
This takes in account:
- Current M2 money supply. This excludes M3, but is the best number available for total USD supply (20.7 trillion)
- Current Bitcoin supply held by US Government Agencies, best guess with Google (210,000)
- A buffer factor of Bitcoin used by issuing agency, Fed, to allow for new money creation. Set to .5 meaning they would only allocate half their supply.
Exchange Rate
The calculations indicate an approximate exchange rate of .51 sats per USD if buffered or 1.01 sats per USD if they used the entire allocation.
Potential Consequences
- With a fixed exchange rate this could limit the price expansion of Bitcoin, eventually
- The government would have incentive to rollout a "Hash Force" to both protect the network as well as build their Bitcoin supply.
- The CHIPS Act does not specifically mention ASICS, but it doesn't exclude it.
- This could compound issues in the Government Bond markets. If people turn in their USD for Bitcoin, this would provide the Fed with USD to purchase the Bonds, supplementing money printing.
This is all very hypothetical, but fun to think about...