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Buying Bitcoin is neutral to spend (or "debt" in your framing). If you "borrow" $100 and "buy" $100 with it, nothing has changed. You didn't spend anything hen

by kjksf 2y ago

Buying Bitcoin is neutral to spend (or "debt" in your framing). If you "borrow" $100 and "buy" $100 with it, nothing has changed. You didn't spend anything hence you didn't incur any additional debt. If you buy $100 equivalent of Bitcoin then nothing changes either. Only future changes in Bitcoin price relative to dollar are changing your "debt". If price of Bitcoin goes down, you have a paper loss. If price of Bitcoin goes up, you have a paper gain. When you convert Bitcoin back to dollars, that paper gain or loss converts to a smaller or bigger debt. Strategic Bitcoin Reserve is motivated by the belief that the price of Bitcoin will go up drastically in which case the more Bitcoin U.S. buys today, the more debt it'll be able to reduce in the future.

spankalee 2y ago
All it does it turn the government into a hedge fund making bets, while paying off crypto holders with taxpayer money along the way.
- kjksf 2y ago
  The same argument applies to gold i.e. governments and central banks buying gold is just like a hedge fund making bets while paying off gold retail holders with taxpayer money. This is Status Quo Bias. If you accept that Bitcoin, like gold, is a hedge against devaluing currency, then it makes sense for China or US to stock up on Bitcoin just like they stock up on gold. Unlike gold, Bitcoin has a non-zero chance to supplant (or at least become a viable alternative to) US dollar as a global currency. In which case it's strategic for a country to own as much of such asset as possible.
Aurornis 2y ago
> If you "borrow" $100 and "buy" $100 with it, nothing has changed. You didn't spend anything hence you didn't incur any additional debt This is incorrect. You’re confusing a neutral net worth with a lack of debt. They’re not equivalent. If you borrow $100 then you have incurred $100 of debt. It doesn’t matter if you still have $100 in your hand, you still have $100 of debt to service. That last part is important: The government would have to service the interest on the money they borrowed. As time went on, the effective size of the debt will grow.
chairmansteve 2y ago
You are talking nonsense. If you borrow $100 to buy bitcoin, you owe the $100 + interest to service the debt. The govt is planning to hold the BTC forever, interest is 4% a year, currently. That debt will be paid either by your taxes, or by money printing, leading to inflation. Sure, maybe btc will go up. Or maybe it won't. Is it the government's job to speculate on crypto. If you think it is, why only crypto? Why not shares? Why not property?
- kjksf 2y ago
  If government spends $100, did that $100 came from taxes or from selling bonds (which you call "debt"). I object to calling it "debt" because you can't tell. And my greater point was that buying a liquid asset is neutral to, let's call it, "net worth" of country. The government does "speculate" on gold. That is the closest equivalent. Gold is a hedge against declining value of a dollar, just as Bitcoin would be.
  - chairmansteve 2y ago
    A bond is literally, by definition, a debt. You are betraying your ignorance. I am not engaging further. Go and educate yourself.

by kjksf 2y ago

spankalee 2y ago

All it does it turn the government into a hedge fund making bets, while paying off crypto holders with taxpayer money along the way.

kjksf 2y ago
The same argument applies to gold i.e. governments and central banks buying gold is just like a hedge fund making bets while paying off gold retail holders with taxpayer money. This is Status Quo Bias. If you accept that Bitcoin, like gold, is a hedge against devaluing currency, then it makes sense for China or US to stock up on Bitcoin just like they stock up on gold. Unlike gold, Bitcoin has a non-zero chance to supplant (or at least become a viable alternative to) US dollar as a global currency. In which case it's strategic for a country to own as much of such asset as possible.

Aurornis 2y ago

> If you "borrow" $100 and "buy" $100 with it, nothing has changed. You didn't spend anything hence you didn't incur any additional debt This is incorrect. You’re confusing a neutral net worth with a lack of debt. They’re not equivalent. If you borrow $100 then you have incurred $100 of debt. It doesn’t matter if you still have $100 in your hand, you still have $100 of debt to service. That last part is important: The government would have to service the interest on the money they borrowed. As time went on, the effective size of the debt will grow.

chairmansteve 2y ago

You are talking nonsense. If you borrow $100 to buy bitcoin, you owe the $100 + interest to service the debt. The govt is planning to hold the BTC forever, interest is 4% a year, currently. That debt will be paid either by your taxes, or by money printing, leading to inflation. Sure, maybe btc will go up. Or maybe it won't. Is it the government's job to speculate on crypto. If you think it is, why only crypto? Why not shares? Why not property?

kjksf 2y ago
If government spends $100, did that $100 came from taxes or from selling bonds (which you call "debt"). I object to calling it "debt" because you can't tell. And my greater point was that buying a liquid asset is neutral to, let's call it, "net worth" of country. The government does "speculate" on gold. That is the closest equivalent. Gold is a hedge against declining value of a dollar, just as Bitcoin would be.
- chairmansteve 2y ago
  A bond is literally, by definition, a debt. You are betraying your ignorance. I am not engaging further. Go and educate yourself.