Evaluating a Strategic Bitcoin Reserve for the United States
btcpolicy.org
btcpolicy.org
Why? Well, right now, every dollar that somebody makes selling bitcoin is a dollar which somebody else spends buying bitcoin. On every individual transaction, the buyer spends exactly what the seller makes. Net-net its zero. Even if you total up all the money gained and lost on bitcoin, the total will be the same amount, whether expressed in dollars, euros, or rubles: Zero.
But....what if the U.S. just starts buying bitcoin and holding it. Assume the U.S. never sells it, just like the never sell any gold from the strategic gold reserve. Well...
...That in effect reduces the supply of bitcoin, which will drive up the prices. The money which the U.S. spends to buy those bitcoin go to people who sell bitcoin to the U.S. And the U.S. gets nothing back from it, ever. I.E. it is tantamount to just welfare for bitcoin owners. I.E. the government just taking taxpayer money and giving it to owners of bitcoin.
I have to admit, I really admire just how seductive this scam is. You take a wolf (which is welfare payments) and dress it up in the sheepskin of libertarian/screw government controlled currency. It pushes every button which somebody who is suspicious of fiat currency.
People who otherwise would not support transfer payments from moral principles will be seduced into supporting this. Of course, people who have no moral principles about transfer payments (as long as they are transfer payments to themselves) support it.
Aren't all democratic elections about electing the person who will transfer wealth into the voters' hands? I think all voters have no qualms about transfer payments.
> Even if you total up all the money gained and lost on bitcoin, the total will be the same amount, whether expressed in dollars, euros, or rubles: Zero.
Not exactly, because the fiat denominator is inflated away by the printing of bank reserves , but the bitcoin supply is fixed and constant forever. That's what it means to hold an appreciating hard asset relative to fiat, in my opinion.
> the government just taking taxpayer money and giving it to owners of bitcoin.
Taxpayer money is a bit of a smokescreen in my opinion. The debt-to-gdp ratio is where the real story of government expenditure.
Interesting question. Consider, for example, Eisenhower's building the interstate highway system, which boosted the productivity of the entire nation.
Or the Apollo space program, which yielded back somewhere between 5 and 7 dollars for every dollar spent, by creating new technologies and whole new industries.
Contrast with the bitcoin reserve. Every dollar spent goes from the pockets of the taxpayers to the pockets of the bitcoin sellers, without doing anything to boost productivity, to create new technology, etc.
// That's what it means to hold an appreciating hard asset relative to fiat, in my opinion.
Well, bitcoin is not hard asset (it is created by consensus, and it has no intrinsic material form) nor is it intrinsically appreciating. It could be outlawed, have a flat tax imposed on it, or become obsoleted by, say, quantum computers.
But let's grant, for sake of argument, that in the long run, relative to puny fiat currencies like the dollar (which is merely backed by the full faith and credit of the U.S.) the price of bitcoin will generally keep increasing, due to inflation of the various fiat currencies. You may very well be able to sell your bitcoin for nominally higher prices, but in constant dollars, if you add up every bitcoin transaction from its inception to infinity, the total amount of dollars will still be zero.
// Taxpayer money is a bit of a smokescreen in my opinion.
However you want to phrase it, if we create a trillion-dollar bitcoin reserve, that trillion dollars has to come from somewhere. There's no such thing as a magic money-generating machine. End of the day, wealth comes from the productivity of laborers. If you spend money to increase their productivity, total wealth increases. If you just shuffle your money back and forth between gold and bitcoin, that does nothing to increase anybody's productivity.
// think all voters have no qualms about transfer payments // Certainly, not enough voters have qualms about transfer payments. But morality is just for suckers, right?
Banks literally print bank reserves out of nothing. It's one of the more hilarious aspects of modern economics.
E.g. somebody might borrow money to buy a McDonald's franchise. Now the nation can produce more burgers. It's really weird how banks do that, but it's not magic.
It increases cost and consequently reduces the incentive to produce outputs? So less incentive to produce, but if produced the result is a more expensive burger would be my read on this.
Happy to hear why you think it's different.
Sure, the money is created out of thin air. But that money gets invested in things which actually increase productivity and increase the GDP. E.G. a factory borrows money to buy new machines, which makes their workers more productive.
If the increasing money supply does start to cause excess inflation, the Fed tamps it down by increasing the interest rates. From Volker to Covid, it did a remarkably good job of keeping the inflation under 2%. Plague and unfunded tax cuts have pushed that up closer to 3%, but it is dropping.
My observation is that quality, affordability and availability of burgers have went down whilst price has increased since 2008, the date I became aware of th use of printing money.
I attribute this to the printed money being kept to a large degree by banks instead of going into the wider economy. Most of that money has led to increases in housing stock value/cost and subsequently unavoidable cost to most, than contributing to the wider economy.
I'm not in the US so maybe have a different experience from yourself, but printing money has largely just devalued money and decreased wages as opposed to ending up benefitting burger availability :-)
You're of course correct in general about asset prices. The entire game over the past 2 decades or so of low interest rates has been: borrow money and acquire more assets because U.S. monetary and fiscal policy has mostly only cared about the U.S. stock market (despite what pronouncements about other priorities might be made, the effect was the same).
We all knew this and it was almost irresponsible to do anything other than keep acquiring assets. The government will inflate their prices for you so why fight the Fed?
One didn't even need to gamble by trading, just accumulate.
Is this not the underlying argument for SBR? Buy and hold and have on your books something that has on paper appreciated, similar to Gold?
Exactly. And the best part about it, to me, is that literally anyone in the world can own Bitcoin and is aware that nation states will be buying it.
Unlike Gold, for now, Bitcoin's price can't be manipulated by removing it from the market and replacing it with a gold-backed instrument e.g $GLD.
Also unlike Gold, Bitcoin's supply is fixed and independently auditable by anyone in the world.
But that is just another way of saying that in the long run, gold does not appreciate or depreciate. "Stable" means "it doesn't change a lot". And an asset's value has to change in order for you to realize a gain on it.
But gold's value doesn't change that much, in the long term. Therefore, gold is not a way to make money. At best, gold is a way to preserve your money. This has been true for thousands of years, which is why we all have confidence that gold can preserve our wealth.
cf. with Bitcoin. We do not have thousands of years of experience with it. You can't make pretty jewelry out of bitcoin. Bitcoin is not an excellent conductor of electricity, like gold is.
Bitcoin has value by consensus gentium. It has less backing it than any fiat currency on earth. At any time, countries could ban its use. Advances in decryption will eventually render it unworkable.
It mystifies me how anybody who is afraid of fiat currency could be so comfortable with bitcoin.
Amusingly HN commentators have been saying exactly the same thing since the launch of Bitcoin and they've been wrong the whole time.[^0] It's crazy how people are unable to update their priors or recognize the dissonance between their mental model and reality. Oh well.
"It is backed by the only thing that backs any form of money: the credibility of its monetary properties."(https://unchained.com/blog/bitcoin-is-not-backed-by-nothing/)
And those monetary properties are based on proof-of-work.
> At any time, countries could ban its use. Advances in decryption will eventually render it unworkable
You have no idea what you're talking about. I don't mean that as an insult. I mean it literally. These are not points a serious knowledgeable person attempts to make.
You can't "ban" mathematics or code. And being code, cryptographic protocols are continuously updated. In fact, we added new cryptographic primitives to Bitcoin just 2 years ago, which you would know if you were actually honestly knowledgeable about what you're talking about.
Handwaving about cryptographic advances only tells me that you don't actually study cryptography. Perhaps you read a luddite talking point somewhere and were gullible enough to believe it?
> It mystifies me how anybody who is afraid of fiat currency could be so comfortable with bitcoin.
And that information asymmetry is what creates a market: those who understand an asset better own it and profit from it while those who don't or can't hold a less valuable commodity. That's how wealth is transferred to more knowledgeable people from less knowledgeable people in every aspect of life.
Anyway, Satoshi wrote:
" The root problem with conventional currency is all the trust that's required to make it work.
The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.
Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. " [^1]
Bitcoin's supply can't be manipulated. It's permissionless, censorship resistant, a non-custodial bearer asset, independently auditable, decentralized, programmable. It's the best form of money ever invented. That's all.
> cf. with Bitcoin. We do not have thousands of years of experience with it. You can't make pretty jewelry out of bitcoin. Bitcoin is not an excellent conductor of electricity, like gold is.
Central Banks don't buy gold because of the awesome chains and bracelets they will make nor because they want to have a supply of good wiring.
Throwing around Latin phrases doesn't make your point more credible.
There is no such thing as intrinsic value; all value is subjective and relative, which I think you know.
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[^0]: https://news.ycombinator.com/item?id=600813
[^1]: https://bitcointalksearch.org/topic/bitcoin-will-not-attackf...
Of course. That doesn't mean that all currencies are equally soundly backed, now, does it?
Bitcoin doesn’t even have any intrinsic properties. Its properties are also set by consensus genius.
// you can’t ban mathematics or code //
You can’t ban physical laws either, but somehow we manage to have speed limits. You can’t ban the laws of chemistry but somehow we manage to have laws banning drugs.
// . . . All value is subjective and relative . . . //
The word you’re looking for is “intersubjective”.
I'll just end up annoyed and my goal in 2025 is to be less annoyed and less annoying online.
I main ffs, the United States president owns Bitcoin (and just launched his own meme coin) and the largest asset manager in the world has well capitalized spot Bitcoin ETF but you're still regurgitating anti-bitcoin talking points from a decade ago about bans? Grow tf up!
Nonetheless, thanks for the conversation and for your time.
Exactly the right move. Don't waste any time with somebody who doesn't argue in good faith. Heck, these days, you have to worry about wasting time arguing with an LLM.
// Thanks for the conversation and for your time. //
You are welcome. here's a freebie: conversations on the internet never end in one person admitting they are wrong. Instead, as long as the two participants have rational reasons to disagree, they offer those rational reasons to each other. When one party runs out of such reasons, well...they insult the other guy and break off the conversation ;-)
You might remember years ago during ZIRP when most of us on HN figured out this "infinite money glitch". Basically as long as you're willing to start a company, and know who to talk to, you could issue shares, borrow money, buy assets, use them as collateral to borrow more and basically have all the money you need for the rest of your life.
It was a severe red pill and rather cool. Money really is free. Productivity is a story one learns how to tell but is not really related to how loans are taken or given.
I think most people understand this about loans at some level, if credit card debt is any indicator.