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The folks on Hacker News seem pretty anti-crypto, but I feel like they're missing the point. If we're actually looking for ways to fix the US debt, stablecoins

by m00dy 1y ago

The folks on Hacker News seem pretty anti-crypto, but I feel like they're missing the point. If we're actually looking for ways to fix the US debt, stablecoins are definitely worth considering

tgv 1y ago
How precisely?
turnsout 1y ago
Okay I'll bite—how would stablecoins help fix a $37 trillion problem?
- m00dy 1y ago
  Stablecoin companies back their coins with U.S. Treasury bonds, mostly short-term ones instead of 10 or 30-year bonds. So, when you hold a stablecoin, you're essentially helping the U.S. government kick the can down the road a bit more.
adastra22 1y ago
What does a separate payment rail have to do with the US debt?
- brunohaid 1y ago
  It’s a hilarious definition of “fix” but the basic argument is that when you mandate stablecoins to hold treasuries and they start seeing actual adoption, you create demand/sink for a couple extra trillion dollars of treasury bonds. Eg if Australian locals suddenly switch transacting cocaine at scale in Tether instead of AUD, the US government can borrow more money by providing that collateral to Tether. Edit: Izzy Kaminska recently had a, as always, solid and less snarky summary at https://www.financialsense.com/blog/21379/redollarization-and-digital-statecraft-how-stablecoins-are-rewiring-global-power https://www.financialsense.com/blog/21379/redollarization-an...
  - m00dy 1y ago
    First, Cocaine prices are way too expensive in Australia Second, Tether is not a regulated stablecoin in United States.
    - brunohaid 1y ago
      But they promised on their kitchen counter anyway?!?
      - m00dy 1y ago
        I'm not sure who promised what, best kitchen I've ever heard is in Brussels. Best quality/price ratio. Those EU diplomats are all on coke.
        brunohaid 1y ago
        Normally not too much sympathy for the 7 or so 'sober' ECB folks, but I do not envy them for having to endure their hyped up CBDC colleagues at Robert Johnson at 3am…
    - observationist 1y ago
      You might be onto something here... Make Australian Cocaine Cheap Again
  - rhubarbtree 1y ago
    In this scenario, what happens when there’s a run on a stablecoin? The bonds are sold en masse, and the value of those bonds will be hit, driving up gov borrowing costs (plus they just lost a source of demand), meaning the stablecoin “bank” could be bankrupt, right? With stable coins you’re really trusting a private company to invest your money in a way that is robust to a drop in confidence. Isn’t this high risk? If a coin gets large enough, is it a threat to government solvency?
    - brunohaid 1y ago
- wedn3sday 1y ago
  Adds another layer at the bottom of the pyramid scheme, keep the party going a little longer!
shigawire 1y ago
How and why?
- plywoodtrees 1y ago
  You can just mint more coins and use them to pay off the debt, obvious! /s
kube-system 1y ago
What does it mean to "fix the debt" anyway? The US isn't a household or a person, a country can roll over debt indefinitely.

by m00dy 1y ago

The folks on Hacker News seem pretty anti-crypto, but I feel like they're missing the point. If we're actually looking for ways to fix the US debt, stablecoins are definitely worth considering

tgv 1y ago

How precisely?

turnsout 1y ago

Okay I'll bite—how would stablecoins help fix a $37 trillion problem?

m00dy 1y ago
Stablecoin companies back their coins with U.S. Treasury bonds, mostly short-term ones instead of 10 or 30-year bonds. So, when you hold a stablecoin, you're essentially helping the U.S. government kick the can down the road a bit more.

adastra22 1y ago

What does a separate payment rail have to do with the US debt?

brunohaid 1y ago
It’s a hilarious definition of “fix” but the basic argument is that when you mandate stablecoins to hold treasuries and they start seeing actual adoption, you create demand/sink for a couple extra trillion dollars of treasury bonds. Eg if Australian locals suddenly switch transacting cocaine at scale in Tether instead of AUD, the US government can borrow more money by providing that collateral to Tether. Edit: Izzy Kaminska recently had a, as always, solid and less snarky summary at https://www.financialsense.com/blog/21379/redollarization-and-digital-statecraft-how-stablecoins-are-rewiring-global-power https://www.financialsense.com/blog/21379/redollarization-an...
- m00dy 1y ago
  First, Cocaine prices are way too expensive in Australia Second, Tether is not a regulated stablecoin in United States.
  - brunohaid 1y ago
    But they promised on their kitchen counter anyway?!?
    - m00dy 1y ago
      I'm not sure who promised what, best kitchen I've ever heard is in Brussels. Best quality/price ratio. Those EU diplomats are all on coke.
      - brunohaid 1y ago
        Normally not too much sympathy for the 7 or so 'sober' ECB folks, but I do not envy them for having to endure their hyped up CBDC colleagues at Robert Johnson at 3am…
  - observationist 1y ago
    You might be onto something here... Make Australian Cocaine Cheap Again
- rhubarbtree 1y ago
  In this scenario, what happens when there’s a run on a stablecoin? The bonds are sold en masse, and the value of those bonds will be hit, driving up gov borrowing costs (plus they just lost a source of demand), meaning the stablecoin “bank” could be bankrupt, right? With stable coins you’re really trusting a private company to invest your money in a way that is robust to a drop in confidence. Isn’t this high risk? If a coin gets large enough, is it a threat to government solvency?
  - brunohaid 1y ago
wedn3sday 1y ago
Adds another layer at the bottom of the pyramid scheme, keep the party going a little longer!

shigawire 1y ago

How and why?

plywoodtrees 1y ago
You can just mint more coins and use them to pay off the debt, obvious! /s

kube-system 1y ago

What does it mean to "fix the debt" anyway? The US isn't a household or a person, a country can roll over debt indefinitely.