On June 17th, Treasury Secretary Scott tweeted.
A recent reporting project that Stablecoins could grow into a $3.7 trillion market by the end of the decade. That scenario is more likely due to the passing of genius acts.
The thriving stubcoin ecosystem drives demand from the private sector of the US Treasury, which supports stablecoins. This new demand will help curb government lower borrowing costs and national debt. It could also hire millions of new users. It uses the world to a dollar-based digital asset economy.
Besent creates two ECON 101 errors in this tweet. Firstly, as my old GMU professor, Professor Larry White, pointed out, the increased demand for the Treasury bill would increase the balance of these invoice exchanges in the market. In other words, it increases the requested amount of US government debt and does not lower it.
Second, when interest rates drop, so does the government’s borrowing costs. That is the law of demand. As subject costs decrease, the amount of demand increases. People will want to hold more debts, and the government will want to issue more debts. So, if Besent is right that Stablcoins will become a “thriving” market, then there is no incentive for government debt, not Les.
Now, from what I have insisted, Secretary Benst read my econlog post for about a year.
Those who make secrets of spending and budgets are not facing the full cost of their decision. No, no voters (in fact, costs are increasing across all taxpayers). ConstentingWe’re what James Buchanan and Richard Wagner call “democracy in the deficit.”
In this case, the supply of the Ministry of Finance bill is unrelated to the price level of the Ministry of Finance bill. Supply is completely inelastic (for those who draw along the graph of supply and demand at home). However, in this case, the Treasury Secretary is still incorrect in his assessment. If the amount of borrowing is unrelated to price, the increase in demand will be interest, but it will not affect the amount of debt issued. It was still wrong to argue that federal debt was being restrained.
It is theoretically possible that the demand curve of the Ministry of Finance bill is tilted upwards (although it is not certain why the financial bill is Giffen Good), but it is unlikely from experience.
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*Unsatisfactory Thos: Bond prices and interest rates (also known as bond yields) move in the opposite direction. As prices rise, interest rates drop. When prices drop, interest rates rise. The price of a bond is what you pay for the bond. Interest rates (yields) are paid to holders of bonds above Matury’s price.