The U.S. Debt and Digital Currency Conspiracy
In recent U.S. federal government bond issuances, there has been no major reaction. Contrary to pessimistic market forecasts, there was no situation where no one bought U.S. bonds, nor did the prosperous scene of people queuing up to buy U.S. bonds as predicted by Trump occur. However, when delving into the future prospects of U.S. bonds and the U.S. dollar, a shocking conspiracy related to digital currency emerged.
Why Are Trump and His Team So Enamored with Digital Currency?
Both Trump and his team, as well as senior Wall Street figures like U.S. Treasury Secretary Janet Yellen, frequently mention digital currency. Are they all just eager to "cut the韭菜," or is there some high-level operation with far-reaching implications?
The Growing Role of Stablecoins in U.S. Debt
Despite the ever-growing scale of U.S. debt, Trump's cabinet seems to have found a new major buyer for U.S. debt: stablecoins. As of the end of 2024, according to Morgan Stanley's statistics, approximately $114 billion of U.S. debt has been purchased as reserve currency for stablecoins. Although this is a drop in the bucket compared to the current U.S. debt of over $37 trillion, stablecoins are indeed the fastest-growing holders of U.S. debt. U.S. Treasury Secretary Janet Yellen also stated that the U.S. dollar will remain the dominant reserve currency and that stablecoins will be used to achieve this goal.
The Trump Administration's Motives
This explains why Trump and his cabinet members are so persistent in issuing digital currency. While making money for themselves is their primary goal, if there is a theory that can justify their currency-issuing and money-making behavior and combine it with rebuilding the U.S. financial system, then such behavior may seem more justifiable. This is the fundamental reason why the "Make America Great Again" (MAGA) ideology is so popular. The Trump cabinet, like Ah Q in Lu Xun's works, constantly brainwashes themselves with the "spiritual victory method." They claim that although they engage in money - laundering, insider trading, and corporate collusion, their ultimate goal is to benefit the U.S. economy.
What Are Stablecoins?
Let's take USDT, the largest - market - value stablecoin, as an example. USDT is a digital currency issued by Tether Limited. When an investor gives Tether Limited one dollar, the company puts the dollar into reserve and gives the investor 1 USDT. Tether Limited claims that each USDT is backed by one dollar, so USDT and the dollar always maintain a 1:1 relationship.
The Birth of Stablecoins
The question is, why issue a digital currency with a 1:1 ratio to the dollar? Since dollars can be directly used to buy digital currencies like Bitcoin and Ethereum, isn't adding USDT in the middle unnecessary? In the cryptocurrency market, this is not the case. Many countries do not support digital currency transactions, and a large number of digital currency transactions come from money - laundering, illegal activities, or the gray industry. Additionally, Bitcoin is highly volatile. To avoid regulatory attention, funds involved in such illegal activities use USDT for transactions. When there are opportunities to participate in other digital currencies, they do so; otherwise, they transfer through USDT. This can, to some extent, evade domestic regulations.
Regulatory Challenges and Responses
For companies like Tether Limited, which are similar to central banks, regulatory bodies are constantly trying to catch up with their expanding scale. In April 2017, Tether Limited was blacklisted by banks in the United States and Taiwan because it was considered to have over - issued USDT, and the dollars it held were insufficient to redeem all USDT. To address regulatory concerns and demonstrate its importance to the U.S. financial market, Tether Limited mainly used the dollars in reserve to buy U.S. Treasury bonds and regularly announced the amount of currency in reserve and underwent audits. Other stablecoins like USDC also followed suit.
The Similarities between Stablecoins and Central Banks
When looking at the balance sheets of stablecoin - issuing companies, they resemble those of central banks. The liability side is the USDT they issue, and the asset side is the U.S. Treasury bonds, corporate bonds, Bitcoin, etc., they hold. From the balance sheet perspective, USDT has the same structure as a central bank.
The Widespread Use of Stablecoins
Stablecoins like USDT and USDC are not only used for cryptocurrency speculation but also in merchant payment gateways and even for paying salaries. Since they claim to be able to exchange 1:1 with the dollar, many merchants and credit cards accept USDT payments. Thus, stablecoins have entered the circulation field and are no different from the dollar in terms of buying and selling goods.
The Problem with the Stablecoin System
However, let's look at Tether Limited's claim again. When an investor gives Tether Limited one dollar, the company gives the investor 1 USDT and puts the dollar into reserve. But the dollar in reserve doesn't just sit idle in a bank account; it goes to buy U.S. Treasury bonds. At the same time, the USDT corresponding to that dollar is still in circulation and is still worth one dollar. So, after an investor gives Tether Limited one dollar, it effectively becomes two dollars: one dollar buys U.S. Treasury bonds, and the other is still in use. This completely violates the original logic of the Federal Reserve when issuing currency.
The Trump Administration's Plan
This is why the current U.S. cabinet is so obsessed with cryptocurrency. By vigorously promoting cryptocurrency and having Americans use stablecoins as the main payment method, the dollars corresponding to the stablecoins can easily be used to buy U.S. Treasury bonds, solving the U.S. debt problem. This is the first "win."
Establishing a Parallel Central Bank
Secondly, the Trump cabinet has an opportunity to establish its own central bank bypassing the Federal Reserve. Although stablecoins are still based on the dollar, once dollars enter the stablecoin system, they can easily be split into two, or even three or four according to the Trump administration's current strong demand to relax cryptocurrency regulation. That is, one dollar entering the stablecoin system allows companies like Tether Limited to issue two USDTs or more. The Federal Reserve's money - printing becomes stablecoin - based money - printing. This is the second "win."
Profiting from Cryptocurrency
Furthermore, because stablecoins are inherently cryptocurrency, they are closer to Bitcoin, Ethereum, and even "Trump Coin." The more stablecoins there are in the market, the higher the price of cryptocurrencies can be pushed up, allowing Trump's entire interest group to make a fortune by issuing coins. This is the third "win."
The Future of the U.S. Dollar
If stablecoins really become Trump's lifeline, what will he do? First, he will vigorously promote stablecoins as a payment method. In the future, various industries under the Trump Group will accept stablecoin payments. Second, the process of one dollar becoming two dollars after entering the stablecoin system is, in fact, a form of money - printing. And the amount of money printed is not just that one dollar.
The Weakness of the System
The weakness of this seemingly flawless loop lies in the process of USDT being exchanged back into dollars. This process is actually the process of currency destruction. For example, when someone exchanges USDT for dollars with Tether Limited, the amount of USDT in circulation decreases. At the same time, Tether Limited needs to sell some U.S. Treasury bonds to repay the amount. In this process, both the amount of dollars and stablecoins in circulation decreases by one unit. This chain reaction will cause a "double - kill" in the market, making the connection between the U.S. Treasury bond market and the cryptocurrency market deeper and deeper.
The Impact on the International Market
The USDT loop only operates among companies that recognize USDT. For countries and the banking system, to exchange USDT for other currencies, they first need to exchange USDT for dollars and then for other currencies. That is, this loop is only effective within the United States and is ineffective in international trade.
The Risk of a Dual - Currency System
Continuing this logic, the United States may become a country with a dual - currency system. In international trade, it uses the dollar, and the dollar forms an exchange rate with other countries' currencies. Domestically, it uses USDT, which is equivalent to the dollar but actually has twice the purchasing power when one dollar becomes USDT. If this situation continues, it will easily lead to a complete chaos in the dollar exchange rate. One dollar is equal to one dollar abroad but two dollars domestically.
The History Repeating Itself
This scenario seems familiar. Before the collapse of the Bretton Woods system, one ounce of gold was equal to 35 dollars at the Federal Reserve's exchange window, but in the gold trading market outside the exchange window, one ounce was equal to 70 dollars.
The Future of the U.S. Economy
In this round of testing of the dollar system, no U.S. politician has stepped forward to reflect and think about how to correct the situation. Instead, everyone is trying to use a bigger bubble to plug the current bubble gap. On March 26, the Trump family business launched a new stablecoin, USD 1. On May 1, Ripple proposed to acquire the stablecoin - issuing company Circle for $4 - 5 billion and its stablecoin USDC, starting a battle for currency - issuing rights in the United States.
The Real Destination of the U.S. Economy
Attracting manufacturing back is just a joke. The United States is now headed further towards a virtual economy. Currency and finance were originally invented and applied to more effectively identify excellent real industries, withdraw funds from backward industries, and invest in advanced industries to obtain returns. In this process of optimizing the allocation of production factors, speculation is just a by-product. Digital currency is an accident that completely separates the speculative part of the financial field and makes it an independent system. In this system, there is only speculation, and no optimization of the allocation of production factors. Now, speculators are about to take over the right to issue U.S. currency, and the United States is going crazy.
Conclusion
This content was inspired by a news report about stablecoins gradually becoming the new major holder of U.S. debt. However, upon in-depth research, it is truly astonishing. The future of the U.S. dollar may not be as bleak as predicted, but Pandora's box has been opened. It is unknown how history and financial textbooks will describe this period in decades, but it can be imagined that the next page of this crazy history will definitely be an extremely bleak era.
Thank you for watching. This is Huang Dasheng Daodaodao. See you next time.
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