Post by Chad Lupkes
As someone who would like to see the federal government in the US shrunk dramatically, I believe a strategic bitcoin reserve accumulated via a mechanism like Bit Bonds is the only viable path to make a smaller government possible.
This may seem counterintuitive - "if the US government acquires bitcoin it makes them stronger." However, when you take a step back and think of the problem of the ever expanding federal government you realize that a large part of the problem is driven by the need to roll over debt by issuing new debt to pay it back.
This leads to a forced expansion of the federal government that can only be reversed if something new is introduced that can defease the debt without having to issue new paper. As it stands today, bitcoin is the only thing that can practically produce this defeasment.
The beauty of the bit bond idea is that it expedites the debt pay back by enabling the Tresury to issue longer-term bonds at lower rates, which works to decrease interest payments on debt that is being rolled over. An incredible kickstarting mechanism that provides immediate results. Imagine being able to point at the chart of the interest expense on the debt and show that the number is falling.
Bitcoin is for anyone, including governments, and it is a great asset that enables individuals, businesses and governments to think creatively by leveraging the benefits that come with adopting it during its monetization phase.
The path to shrinking the federal government dramatically over the next few decades only exists in a world in which the government adopts bitcoin as a strategic asset to begin paying back the debt.
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Worthy discussion, and you make some good points. However, I will submit the reality that bitbonds still pay an interest rate. The proposed rate is much lower than current Treasury bonds at 1%, but it still leads to the expansion of the circulating currency, so while it might reduce inflation down to the stated goal of 2% or maybe even lower, that target rate still INCREASES the amount of debt, it doesn't decrease it. If the goal is to reduce the size of the US Federal Government, increasing the total debt is not going to do that. We need to combine it with other action that doesn't just reduce the rate of the increase, but actually decreases the amount of debt on the books.
The only real path forward is by balancing the budget so new bonds are not needed, in any form. We can cut spending all day long, but until the deficit is zero or the budget surplus is back, it's not going to have the impact we want to see.
I do see bitbonds as a fantastic innovation, and I would encourage their use for states, municipalities and corporations. But having the US Treasury use them would not actually solve the problem, at least not as far as i can see.
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