Subnostr

I think that's a flavour of a very realistic scenario.

I don't think the US would go straight to fully backing the currency, and they probably wouldn't 100% confiscate either.

Much of bitcoin's value is that it's widely owned as emergent money, so it would be self defeating to take all of the ETFs. Better to impose some kind of limited "one time currency swap" at a nominal profit for ETF holders, plus give a future date so that self custodial holders get tempted to buy the ETF too and fall under closer control of the USG.

Then they just need to keep it at the treasury as one of the assets counter-balancing the national debt. They don't need to balance/remove all the debt, just enough to buy a few more years of credibility. They still have their future USD (now inflated) tax cash flows to set against the rest of the (not inflated) debt.

Chris Liss 1y ago

that's also plausible to me, but you wonder whether once it were obvious that the dollar was unbacked and essentially only good due to an eroding collective faith if getting only say 100K BTC would be sufficient. I mean we have gold now, but it’s just not enough as a percentage of world GDP to back the outlays of USG. But 2M BTC at that price would do it because it’s 10 percent of the entire supply. It’s enough of a hard money backing to remain on top.

In the end, once faith is gone, they’d need sufficient real reserves.

Reply to this note

Please Login to reply.

Discussion

Gunson 1y ago

I don't think it will ever be obvious enough that the dollar is unbacked. I know it's a statist argument, but it's somewhat true that it's backed by the US economy and their ability to collect taxes in the USD - that will always drive (fiat) demand for the USD, even if it's now partly backed by BTC. They just don't need to solve the entire debt problem in one go, just get it down a bit or change the trajectory. Ultimately this still involves inflation and more Bitcoin adoption, and maybe in the much longer term the dollar succumbs to Bitcoin.

Chris Liss 1y ago

The problem is if it erodes enough so will the power to collect taxes. They need to pay IRS agents, and they need to maintain a standard of living such that people would keep choosing to pay. I think we’re getting to the point even now with the debt and the in-your-face grift that many people are thinking of just not complying. Gradually and then suddenly.

So while I agree the tax power is part of the backing, ultimately that still comes down to faith too. And once you lose it — and you always lose it when the debt is large enough — it’s gone.

My hypothesis begins on the edge of the event horizon of that happening. We can’t be far, and it’s possible we’ve even crossed it. The biggest question to me is would the government officials really be that sober-minded and clear-headed about it in time to make the move.