Imagine this black swan scenario: The national debt reaches $30 trillion by mid-next year. Congress keeps up its lust for deficit spending. It reaches $32 trillion by the 2022 midterms, and another great recession hits.
No worries – Congress will just double down, and let the next generations’ future ride. Oh, we already spent that? Okay, the then the future of the generation after that.
Eventually, we reach a point where US payments (minimum payments) toward national debt exceed that of our spending on national defense.
“That’s absolutely unsustainable,” said Wyoming Senator-elect Cynthia Lummis recently on the “What Bitcoin Did” podcast.
She framed the aforementioned black swan scenario amid rising interest rates, which is sure to happen, given that they’re close to zero. If that weren’t scary enough, after nine years in the House, Lummis knows that Congress has “no strategy, no plan for the United States to retire its debt.”
It’s like watching the minimum payment on your credit card rise month-over-month – you expect that to happen when you spend more, but rising interest rates ensure that you could spend the same and still end up paying more.
Bitcoin goes to Washington
Ok, enough doom and gloom. This Wyoming Senator-elect is not just banging pots and yelling the “world’s about to end!” She has a solution – Bitcoin.
Lummis understands Bitcoin in a way that escapes most people, and certainly most members of Congress.
“[Bitcoin] has stability, is a store of value, is a finite resource … scarcity creates value, and the integrity of Bitcoin has withstood the last decade or more.”
Responsible fiscal spending was a hallmark of Lummis’ 2020 campaign. Part of her plan is to bring back the days of balanced budgets.
The other, more ambitious part of the plan is to educate Congress about the merits of Bitcoin – before it’s too late.
“I would ask the other Senators to spend some time with me and people who have expertise about Bitcoin. I think it will increase their comfort level with Bitcoin, it’ll increase their comfort level [by] allowing it to develop unabated by government restrictions.”
If we don’t allow Bitcoin to develop, and we don’t embrace it, she argues, a black swan event could trigger a massive economic calamity. The US is in a highly over-leveraged position.
For that reason, she wants to set up a “backstop.”
“We need an alternative path just in case we fail. I see that alternative path as Bitcoin.”
Lord help her
Because she’s the first Senator ever elected on a platform that embraces cryptocurrency, it’s easy to understand why that is. But what’s hard to understand is why Congress’ thinking is backwards on the subject.
Some 40 bills regarding cryptocurrency have been introduced in Congress in 2020. Eleven of those passed in the House, but only two have become law. Most crypto legislation is geared toward exploring how cryptocurrency is being used by terrorists, the underworld, and sex traffickers. While understanding these transactions is important, it goes to show that Congress is more reactive than proactive, and is certainly far from embracing Bitcoin.
Batting for Bitcoin before bills
To make matters more difficult, Lummis has been faced with opposition from the Trump administration, who, much like Congress, has been more concerned about how enemies of the US could use blockchain technology and cryptocurrency for laundering money.
Lummis lashed out at the Trump administration with a series of tweets on Dec 18.
America is in a battle for competitiveness with China and Russia for the future of finance. Without broad consensus, a rule would be a step backward at the moment our country is beginning to realize the transformative effects of digital assets and financial technology. (4/8)
— Cynthia Lummis (@CynthiaMLummis) December 18, 2020
To Lummis and other cryptocurrency supporters, it seems obvious, since Bitcoin, it seems, makes dollars, and therefore makes sense.
After all, Bitcoin just reached a record high of $28,365.85 on Dec. 26.
But anyone who’s been paying attention for a bit longer also saw a sharp rise in 2017 get cut short by regulators. That resulted in a sharp decline. Now, it’s rising like a phoenix from the ashes.
Bring on the naysayers
As one might expect, however, extreme fluctuations will bring about critics. And they’re not just befuddled members of Congress. They’re actual economists.
On the same day Bitcoin reached a record high, Bloomberg reported that David Rosenberg, Chief economist and strategist of Rosenberg Research & Associates, said, “You speak to most people that are asking me to put money in Bitcoin, they can’t even tell you who the person was that developed it or even how it’s actually mined. It’s just a classic, follow-the-herd, extremely crowded trade. It’s in a massive bubble.”
Turning a new leaf
This sort of attitude toward cryptocurrency certainly prevails in Congress at the moment, but there are some signs that a spring thaw could be just around the corner from a long winter thought freeze.
The Digital Department of Commerce, a blockchain Political Action Committee (PAC), donated Bitcoin to the campaigns of all 535 members of Congress in an effort to show them the benefits first hand.
The other sign of a thaw is a US Senator that advocates for this technology getting elected.
“[Bitcoin should] take its rightful place as a store of value that’s available to everyone in the world,” Lummis said. “It’s existence actually provides a stabilizing mechanism for worldwide exchange of goods and service as well as a great store of value … If we reach the point that we have overspent so much and the black swan event occurs … There is a backstop available to every government in the world, and that backstop is Bitcoin.”
Lummis, Biden, and Bitcoin
Lummis may be hard pressed to find allies.
Fortunately, the Republican Senator may find one, of all places, in the incoming Biden administration.
In November Biden tapped crypto advocate Gary Gensler as part of his transition team.
Will cryptocurrency have a place in Biden’s agenda?
There’s no clear answer to that question at the moment, but Senator Lummis sure hopes so.