Nostr

You’ve identified the upside with the immediate god candle of repricing, now let me tell you about the downside.

Every nation state in the US sphere now wants Bitcoin for international trade and they don’t have any. How do they resolve this?

They go get KYC lists from every exchange and start hunting down everyone who ever bought it in their jurisdiction. Any business which has reported it on their taxes too.

People say they don’t have the manpower to enforce this - this scenario is now an existential risk to these Govs, they will muster up the resources. This will become priority numero uno, overnight.

They will remand Bitcoiners who don’t cough up under the guise of National security. Forget about “rights”, they won’t exist. New laws will be created as needed and Bitcoiners will have a choice between handing over their keys or indefinite gulag (if the authorities can’t locate the seeds and outright steal it). They’ll have the media rile up their NPC drones about evil Bitcoiners and the people will be turned against them too - after all, why shouldn’t we “tax the rich”.

Fiat forcing hyperbitcoinisation is not a good thing. Yes they’d have to be desperate to try it, but does anyone here think this situation isn’t headed for desperate times? That the US empire won’t go to such lengths to maintain its power? That other nations won’t go hunting people for resources without which they will cease being able to be a government?

f0xr 1y ago

Okay, this one really tests my understanding of the financial system. Let me see if I can work through it...

So the US decides to peg the dollar to bitcoin. They have to acquire the bitcoin to back it with. That's the part that seems most dangerous to me at first glance, where do they get the coin? Say they 6102 the ETFs, that actually seems like it might be the least painful and threatening way. Say they end up with 2 million coins. If they decide to peg at 40% backing of the $5.8 trillion money supply, that would be $1.16 million per coin. So they announce that dollars are redeemable for bitcoin at the rate of 86.2 sats per dollar. Let's say for the sake of argument it's only redeemable by nation states like the end of the gold standard era pre-1971.

So the only immediate price change in dollar terms is the bitcoin price, your "god candle." Everything else should stay relatively the same in dollar terms, at least initially.

Now I'm trying to understand why nation states would need bitcoin for international trade. They don't use bitcoin now, they use the dollar. Just because the dollar is now backed by bitcoin, why switch to using bitcoin? Why not keep using dollars? Isn't the whole point of backing the dollar with bitcoin so that people will KEEP using the dollar? If everyone is still using the money the US banking system can print, why would they ever consider backing it with a hard asset in the first place?

Unless you're just talking about the fact that bitcoin is now worth 20x more and governments are keen to steal that increased wealth by any means, I'm not sure I understand why they'd suddenly be confiscating bitcoin from people any more than they currently confiscate dollars from citizens in Argentina or Ethiopia or China or Venezuela today. Plenty of people in other countries use dollars (cash, stablecoins) today and the governments aren't generally hunting people down en masse to confiscate it, even though they could use it for international trade.

It's hard for me to analyze the situation because I just don't believe it's workable on first principles. Again, the gold standard only worked because gold is worse than fiat as a way to transact, especially over distance, and is also difficult to store securely. As soon as you try to back a fiat with bitcoin, you'll run into the same problem the gold standard ran into, but 1,000x worse. Every nation state that holds dollar reserves will be cashing some of those in on the market and requesting bitcoin from the Fed instead. But they won't need to send a battleship like France did, just send a bitcoin address, and if that bitcoin doesn't hit their address in the next block all hell breaks loose. With almost $35 trillion of outstanding debt, it takes less than 6% redemption to shrink the base dollar supply by 40% and drain the Fed's $2.32 trillion bitcoin balance.

But of course the idea they'd even do that in the first place seems impossible, because it would completely obliterate the entire banking and financial system overnight, the instant reality struck. Running a fractionally reserved credit/debt system on top of bitcoin is absolutely impossible, as every bitcoin lending platform collapse over the past decade has shown.

And I don't see it as something the US empire would do to maintain their power. The ability to print the world reserve currency IS the empire's power. As soon as they give that up, they cease being the global superpower. The US can't compete on an equal footing with the rest of the world and come out ahead. If they could, they never would have had to close the gold window in '71 to avoid going broke.

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