The Task of the US Treasury Secretary
The new US Treasury Secretary is Bessent, who worked with George Soros to help break several different sovereign currency pegging mechanisms. He clearly understands what needs to happen economically for the US to succeed in the face of all these issues.
This is a photo of Bessent giving a sales presentation. I believe some of you have seen the movie Glengarry Glen Ross and that iconic scene where… I forget the actor’s name, but he stands there telling the salespeople ABC—Always Be Closing. So what is Scott Bessent’s job? Every time you see him on TV, imagine him as a used car salesman trying to sell you something. What is he selling to you? Bonds. His job is to sell bonds because his boss—the U.S. government—needs to finance itself.
So why are bonds a bad investment? The yellow section here is a chart of the total U.S. national debt starting from 2017. You can see that, using 100 as the baseline, the debt supply has increased by approximately 80%. I then compared this index to TLT (an ETF tracking long-term Treasury bonds) divided by the Nasdaq 100 index. So if the chart goes down, it means the Nasdaq outperformed bonds. From 2017 to now, the Nasdaq outperformed bonds by approximately 80%. So, yes, you may have made money from bond coupons, but if you had invested in the stock market, you would have made an additional 80%.
Let’s look at the same chart compared to gold. A similar situation. If you had not held U.S. Treasury bonds but instead purchased gold, your performance would have been approximately 80% better. Clearly, this is not a gold or stock market discussion. We are talking about Bitcoin here. How does it compare to Bitcoin? That’s even more striking. By purchasing Bitcoin instead of bonds, your performance would also outperform bonds.
Therefore, while many investment professionals may come forward and tell you, you know, I think the bond market will perform well over the next one or two years, and so on, that may be true. You may indeed make money by holding bonds, but you would make more money by holding something else. The goal of investing is to maximize the money you make in the current environment, and holding government bonds is not a good deal.
Now, this clearly brings us back to my point, which is that Bessen’s job is very difficult because as more investors read these charts and realize that if they continue to hold government bonds, their performance will be far worse than what they could have earned for themselves and their clients, more government action will be needed to ensure that the U.S. government can finance itself. So it’s clear that after the Trump administration took office, they talked about the U.S. government having spending issues.
U.S. Debt Deficit and Inflation
This is a chart from the Peterson Institute. The U.S. fiscal year begins in October. As of March this year, despite significant efforts and rhetoric aimed at controlling excessive government spending, our spending for the 2025 fiscal year has already surpassed that of the 2024 fiscal year, which was already a record-breaking deficit year.
It is clear that in the media, we have been extensively discussing how certain individuals—we will mention that person later—will control government spending by eliminating fraud and abuse. We discussed this for some time, but the main protagonist of this effort, the Doge “pioneer” Musk, has since disappeared from the scene. We have not heard from him for some time, as this is poor political maneuvering. Every dollar the government spends goes into someone else’s pocket. If you stand up and say we need to cut trillions of dollars from the deficit, that will obviously have a negative impact on many people and businesses. We have seen the negative reactions from the media and individuals. Ultimately, I think politicians realized, hey, this isn’t a good political strategy. Let’s recall our “attack dog” and have him fade from the public eye to run his private company.
But what does that mean for balancing the books if they can’t meaningfully reduce the deficit? Recently, Scott Beasley has been making the rounds in the media, talking about how he’s focused on growth. He’s all about growth. So what does that mean if you’re facing a massive deficit? It means you need to have a nominal GDP growth rate that exceeds your interest costs, which is very difficult unless you plan to increase the amount of credit in the economy.
Many of you here are Americans or have spent a long time in North America. I have spent most of my adult life in the Greater China region. When you live in China, you come to understand that GDP or growth is simply the output of how much credit you are willing to inject into the economy. If we want to understand what the Trump administration—or any administration, for that matter—would do in the face of these mathematical realities, we must understand that this economy is credit-dependent. So, if you are willing to inject more credit into the system, you can achieve any growth target you desire. So if Besant says they want 6% or 7% nominal GDP growth, fine, how much credit do you plan to create? We want to know how much credit they plan to create because that is ultimately what drives Bitcoin outperforming all other assets when priced in fiat currency.
So, how do we get past a sustained deficit of 7%? What can they do? Typically, authorities would inflate another financial bubble. Maybe that’s Bitcoin and cryptocurrencies. Politicians take a very lenient stance and say, “Hey, we want our crypto brothers and sisters to get very rich, pay capital gains taxes, you know, consume a lot, and boost economic performance.” They could encourage the banking system to lend to the real economy, which I referred to in an article I wrote a few months ago as “quantitative easing for the poor.” Essentially, if the banking system were to use its balance sheet to lend to ordinary companies rather than engage in financial engineering, this would create jobs and economic growth.
Now, the issue with both of these is inflation. Inflation is necessary to balance the balance sheet. I know it’s an unpopular term in politics and economics, but inflation is necessary for governments to manage their massive debts. So we’ll face inflation, and clearly everyone here understands that Bitcoin is the best hedge against it. But we need to spread this message worldwide.
Bitcoin’s Path to $1 Million
Finally, I want to discuss a few things. The path to $1 million for Bitcoin, I believe, primarily involves three aspects.
First is capital controls and tariffs. I recently wrote an article delving into why I believe tariffs are a poor political tool, as they encourage commodity inflation and empty shelves, which ordinary Americans dislike. However, you can achieve the same economic rebalancing goals through capital controls. So we are starting to see some fringe economists—who will soon become mainstream—discussing how they can eliminate certain tax incentives enjoyed by foreigners investing in the US and redistribute that revenue to voters or use it to purchase government bonds with specific maturities.
The second thing is the exemption from the bank supplementary leverage ratio (SLR), which I will explain in detail later. Scott Biesent has mentioned this in multiple interviews, and he recently even strengthened his rhetoric in interviews with Bloomberg and Fox News, stating that he believes this ratio will be exempted this summer, just as large banks were able to leverage unlimited purchases of Treasury bonds during the COVID-19 pandemic.
Finally, an increasingly prominent area of focus is the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which, if permitted again, could inject significant funds into the mortgage market.
Let’s take a look at this “trinity.” “Foreigners must pay” is a good political strategy. If you want to tell voters, “I’m going to give you something,” it’s obviously better if someone else pays for it. Politics around the world operates this way. As early as 1984, the U.S. government faced another issue—the same issue: How do we get people to buy our debt? At the time, the yield on 30-year Treasury bonds was around 12%. They said, “Hey, why don’t we exempt foreign bondholders from withholding tax?” Now, if you’re an American, all the interest you earn from holding Treasury bonds is subject to a specific tax rate, I think around 20% to 30%. But if you’re a foreigner, you don’t have to pay that tax.
So there is now discussion about eliminating this exemption for several purposes. First, by essentially taxing income earned by foreigners, this could raise over one trillion dollars over ten years. Now, obviously, if you are taxed, you might not want to hold Treasury bonds anymore. So one idea is whether we can set a very low tax rate for holding long-term government bonds—these are the ones that are hard to sell—and impose a high tax on government bonds (short-term bonds)—these are the cash-like instruments you might hold in a money market account. Everyone wants this; everyone wants high-yield cash accounts. So let’s penalize you for holding short-term bonds but allow you to hold long-term bonds. This is a mild form of yield curve control. How do we get demand for long-term bonds from foreigners? Just change the tax rate.
Now, the ultimate question is who will replace foreigners as the marginal holders of debt. Clearly, this means they will print money to make up for the funds lost due to foreigners not investing in these debts.
Another thing: the bank bond-buying frenzy. Supplementary Leverage Ratio (SLR)—if you don’t remember anything else from this speech, remember this. This is a way for banks to purchase bonds with unlimited leverage. There is something called Basel III, a very complex regulation established after the global financial crisis, which did a wise thing. It said, “Hey, banks, you don’t have much capital, so why don’t we require you to hold more capital?” So if I hold a bond, I must invest some of my own equity capital. This makes sense. This means U.S. banks will face limits on the amount of U.S. Treasury bonds they can purchase. Remember, the Federal Reserve needs to sell two trillion or more in bonds each year, and it needs to ensure someone will buy them. So if I were to eliminate this exemption, it would allow commercial banks to purchase Treasury bonds with unlimited leverage. When they can do that, their profits skyrocket because the interest rates they pay on commercial deposits are very low. Clearly, the smiling Jamie Dimon is eager for this to happen. He has stated on multiple occasions that he believes the banking system needs this exemption. As I often say, Jamie Dimon gets what he wants.
There is one more thing: stablecoins are clearly a very hot topic lately. If you combine stablecoins—or the interest-free USD stablecoins issued by U.S. banks in the market—with the SLR exemption, they essentially become like Tether. They are not allowed to pay any fees to those who invest in these stablecoins and use them for transfers, and then they can invest all that money in U.S. Treasury bonds without any capital requirements. This is essentially unlimited profit. So I expect that if this exemption passes—and I think it will—you will see U.S. banks consistently striving to issue “orange stablecoins” (referring to stablecoins associated with Bitcoin or a bank supporting Bitcoin), as this is a way for them to generate significant net interest income.
This is a post by Trump on Truth Social regarding Fannie Mae and Freddie Mac.
Basically, these were organizations that issued mortgages before the 2008 financial crisis. They were once highly profitable. What happens when you release Fannie Mae and Freddie Mac? Essentially, you free them from government receivership. This deal has been under discussion for nearly two years. If you bought them at $1, these companies might now be trading at $11 in the market. However, by freeing them from receivership, they are allowed to use their equity capital to issue more debt with implicit government guarantees and leverage it 33 times. Then they can purchase up to $5 trillion in mortgages. If you allow these two organizations to resume normal operations, that would be $5 trillion in liquidity entering the market.
Simple calculation
Where did I get the idea that Bitcoin could reach $1 million?
If we consider “quantitative easing for the poor”—banks providing more loans to the real economy—I estimate that up to $3 trillion in bank credit could be generated between now and 2028. The key statistic to watch is the “Other Deposits and Liabilities” item on the Federal Reserve's weekly balance sheet, where we will see this unfold.
If banks are allowed to purchase Treasury bonds, it is estimated that 900 billion dollars in foreign demand could disappear. This must be offset by commercial banks, which can now purchase these Treasury bonds with unlimited leverage.
Finally, let's release Fannie Mae and Freddie Mac to inject 5 trillion dollars of liquidity into the market.
This would bring the total amount of money printed from now until 2028 to nearly 9 trillion dollars.Let’s put this into context. During the COVID-19 pandemic, the total stimulus packages and aid provided to the financial sector in the US amounted to approximately $4 trillion. From the low point in March 2020 to November 2021, Bitcoin rose by approximately 10 times, reaching $70,000.
Remember, prices are determined by the margin. What matters is the marginal price, not the entire stock. Therefore, if Bitcoin on trading platforms decreases due to ETF demand, and we print twice as much money from now until 2028 as during the COVID-19 pandemic, then Bitcoin reaching $1 million becomes quite achievable.
