Lightspark, co-founder and chief strategy officer, founder of the MIT Cryptoeconomics Lab, Christian Catalini, who was also a co-founder of the failed Facebook stablecoin project Diem / Libra, published a lengthy article on the 16th, sharing his views on the US debt, the proposal for a Bitcoin strategic reserve, and the calls for replacing Federal Reserve Chair Powell.
Christian Catalini believes that despite the many misleading propaganda, the US is not on the brink of a debt crisis, and the US debt-to-GDP ratio is indeed very high, but this is similar to the situation in other major developed countries, and reducing spending and improving government efficiency, whether through the @DOGE or otherwise, will bring tremendous benefits:
If the leading innovators in AI, cryptocurrencies, robotics, biotech, and defense tech are US companies, and we maintain a strong economy and fiscal discipline, we can replicate the success of the early commercial internet and continue to thrive.
3/ That doesn't mean reducing spending and improving government efficiency—through @DOGE or otherwise—is a bad idea. Fiscal discipline, cutting outdated bureaucracy, and clearing obstacles to innovation and entrepreneurship would be extremely beneficial.https://t.co/M6WKnWKcqI
— Christian Catalini (@ccatalini) November 15, 2024
Impact of the Bitcoin Strategic Reserve
Regarding the proposal for the US to establish a Bitcoin strategic reserve, Christian Catalini stated that in the best-case scenario, this indicates that the US is prepared to take a leading position in the cryptocurrency field, provide regulatory clarity, and position itself as the global center of DeFi, just as it has been in traditional finance.
But in the worst-case scenario, the establishment of a Bitcoin strategic reserve would signal doubts about the US dollar and the US's sustainable debt repayment capacity, which would be a disastrous strategic mistake, equivalent to handing a gift to Russia and China, who have long been trying to undermine the US dollar's global dominance.
Christian Catalini pointed out that the issuance of reserve currencies is a form of "exorbitant privilege", and the loss of this status would mark the end of the US's position as a global superpower, just as Spain, the Netherlands, France, and the UK have experienced before.
Opposing the Dismissal of Powell
Christian Catalini then expressed his views on the potential dismissal of Federal Reserve Chair Powell by the Trump administration, stating that the strength of the US dollar as a global currency depends on the independence of the central bank, and the Fed Chair can only be removed for serious misconduct, incompetence, or dereliction of duty, not merely due to policy disagreements.
Therefore, Christian Catalini warned that if the future Fed Chair is designated now and an attempt is made to remove Powell from office in January, this will undermine the credibility of the Federal Reserve and the US dollar, and raise doubts about the US's ability to maintain its debt repayment capacity. He concluded:
Combining the dismissal of Powell with a Bitcoin strategic reserve may mark the beginning of the end of the Federal Reserve System's global leadership in monetary policy.
If Bitcoin becomes the global reserve currency, the US will be the biggest loser, and contrary to some people's belief that "debt can be repaid through rising Bitcoin prices", during the transition period, the US will quickly find itself in a difficult situation to finance its debt.
