Stablecoins as Inflation Drivers \ stacker news ~econ

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Stablecoins as Inflation Drivers mises.org/power-market/stablecoins-inflation-drivers

413 sats \ 4 comments \ @Undisciplined 2h econ

By Thorsten Polleit

Stablecoins are the next big thing. So, what are stablecoins and what economics effects will they have?

The stablecoin issuer sells stablecoins for US dollar and uses those dollars to buy T-Bills issued by the US government. The latter, in turn, spends the Greenbacks on wages, social transfers, paying for military equipment, etc. Both the original dollars and the new stablecoins are now available for spending, effectively raising the quantity of the means of payments.

Okay, but let's think about this: if Tether is holding $100m treasuries and other assets¹ backing 100m USDT they issued in 2024, and if inflation is running at 6% per year, then the assets that Tether is holding for the 100m tokens issued in 2024 are now worth $106m. Unless Tether adjusts their holdings (either issuing more tokens or selling assets), wouldn't this act as a deflationary force?

I'll admit this is kind of hair brained, but I'm not sure the story in the article has it right.

Tether says "Tether tokens are backed 100% by Tether's reserves, which include real-world assets such as cash and cash equivalents, as well as other financial instruments." ↩

102 sats \ 0 replies \ @justin_shocknet 52m

Mises is just another NGO-backed rag for econ larping tylenol babies with a net worth of 3 ounces of silver, absolutely clueless.

Stablecoins are not supply increasing on their own, the bills back hot currency lended by banks and others already. All they do is bypass banking infrastructure in foreign countries that artificially prop up their own local currencies.

I'd love to hear this muppet articulate how "gold backed stablecoins" are any different than margin against a gold ETF.

The lack of friction afforded by stablecoins abroad could increase velocity, but people generally only demand dollars to the extent they have liabilities in dollars, that leads to debt destruction (deflation) not inflation.

There will surely be a lot of supply inflation for a number of reasons, but stablecoins serve to slow the price inflation in dollar terms by drinking the milkshake of foreign currencies, not multiply the inflation.

We're watching a currency war play out that's been war-gamed for decades and these clowns have the hubris to think they found a blind spot, lol.

102 sats \ 0 replies \ @Undisciplined OP 1h

I'm not sure they have it right, either. I reread that part several times and was hoping you'd chime in since you know the mechanics of these operations better than I do.

Here's what I came away with:

Somebody has some ordinary fiat and would rather have some stablecoin
When they exchange fiat for stablecoin, they exchanged one MoE for another, so they have the same purchasing power as before (assuming the same things can be purchased with each and neither carries a discount)
Stablecoin Inc. uses that fiat to create an equivalent amount of stablecoin, so there are now twice as many units of currency as before
I don't think it matters what the government uses the fiat for, it's enough to say that it was used to purchase bonds that allowed for the creation of new currency units
The buying of bonds bids up their price and no other prices should be immediately impacted by this transaction.

So, there seem to be more currency units (classical inflation) and higher prices.

42 sats \ 0 replies \ @SimpleStacker 2h

I guess that's one sense in which the Russian accusations that stablecoins are a way for the US to inflate away its debt is correct.

The answer, as usual, is to buy Bitcoin.

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