Can bitcoin solve the sovereign debt crisis? \ stacker news ~bitcoin

The United States is facing an unprecedented sovereign debt crisis. With national debt soaring and economic pressures mounting, traditional solutions like austerity measures and tax hikes may prove inadequate.

But what if there’s another way - a radical, forward-thinking strategy that utilizes digital sound money?

Imagine a scenario where U.S. authorities believe that the fiat-dollar system is sinking and can’t be saved. Here’s how they might utilize bitcoin as a lifeboat.

Strategically devalue the currency and suppress bitcoin’s price First, the U.S. could flood global markets with dollars, triggering inflation worldwide. This, combined with high interest rates, would destabilize rival economies while pushing other nations to seek an alternative to the dollar.

During this period, bitcoin prices could be kept low as speculative “crypto” projects are allowed to collapse, deterring investors and focusing attention on bitcoin’s true value as a store of wealth.

If this sounds familiar, it should, because it played out in 2022 with the collapse of FTX and the attacks on banks that maintained relationships with crypto companies. COVID stimulus was continued far beyond what was necessary to respond to the crisis, triggering extreme inflation. Interest rates were raised dramatically, raising rollover risk to anyone holding short-term dollar-denominated debt.

Trigger mass bitcoin adoption Next, the government could pivot sharply from its past stance, endorsing bitcoin as a legitimate reserve asset.

With BlackRock and other major institutions introducing bitcoin ETFs to the market, the U.S. could unlock the ability of pension funds, corporations, and individuals to add bitcoin to their portfolios. As adoption swells, bitcoin’s value would skyrocket, creating a unique hedge against the dollar’s decline.

Since the ETFs were approved this past winter, we have seen the fastest inflows of any ETF that has ever been launched before. Now, traders, pension funds, family offices, and tax-advantaged account holders all have access to bitcoin price exposure.

Monetize the debt Here’s where things get really weird. After the U.S. establishes a strategic bitcoin reserve, which may happen in the next quarter or two, its next move could be to monetize its debt and allow its dollar liabilities to devalue against its bitcoin holdings. If bitcoin were to reach multi-million-dollar valuations, the U.S. could theoretically wipe out its national debt through bitcoin's appreciation alone. While the dollar hyperinflates, large U.S. financial institutions and companies would have their wealth preserved through virtue of their bitcoin holdings.
A new era of fiscal responsibility and economic freedom With bitcoin established as a global reserve asset, fiscal responsibility would become necessary. Bitcoin’s fixed supply prevent reckless spending and currency debasement, forcing a return to sound money principles.

The U.S. would reorient itself toward investing in long-term, ambitious projects in science, engineering, energy, and architecture, while the dollar takes a backseat to bitcoin as the dominant reserve currency.

If even a fraction of this vision comes to pass, it could lead to a global race to accumulate bitcoin – a "bitcoin stack-off” – where the real winners are those who acted first.

Too bullish?

42 sats \ 0 replies \ @freetx 15 Nov

I sound like a broken record on this topic....but yes I think this is whats going to dawn (or has dawned) on both .gov and on the Federal Reserve itself eventually.

What you describe is how Gold was supposed to function on the Federal Reserves balance sheet. The gold holdings were supposed to be the counter-balance that underpinned its new currency issuance. (As more dollars were printed, the value of gold would increase to offset the devaluation, and conversely the more gold the Fed acquired the more currency it could issue without devaluing USD value).

However the US went bankrupt and Roosevelt issued the The Gold Reserve Act of 1934. This forced the Fed to transfer its physical gold to the US Treasury. In exchange The Fed received "gold certificates" from Treasury. The US Gov then officially fixed the price of gold to $42.2222 for both the physical gold it holds and, by extension, the gold certificates held by Federal Reserve.

The result has been this 100 yr stalemate between US Treasury and Fed that effectively demonetized Gold out of existence.

This is the potential that Bitcoin offers. It could come breakup this stalemate and this is where things get super interesting. Not only could game-theory break out among different nations, but could break out between national treasuries and their corresponding central banks. Each party would be incentivized to "beat the other side" to the punch.

Currently it seems like US Treasury is winning, but will the Fed counter?

131 sats \ 0 replies \ @DarthCoin 15 Nov

Sovereign debt is a moronic term. It's simple: you are not sovereign if you are in debt. You are a slave. And that "debt" you talk about is artificially created to keep you like endless slave.

And Bitcoin have nothing to do with that fiat crap. Bitcoin is creating a parallel society, out of fiat. If you mix fiat with Bitcoin you will get only shit and will always be a slave.