William Cline, a senior fellow at the Peterson Institute for International Economics, dismissed using bitcoin to address the U.S. debt in response to a caller question on C-Span’s Washington Journal on Monday.
Cline talked about information released by the Treasury Department about which foreign countries own the largest amounts of $6 trillion of U.S. Treasury debt. The report showed that the U.S. owed Saudi Arabia $117 billion.
The caller asked if the U.S. has considered using bitcoin to hold some of the national debt, or investing in bitcoin, “because it is certainly a trusted concept where there is absolute trust between the parties.”
Cline began his response by explaining that bitcoin is a computer-based currency that uses encryption algorithms. “Basically, it’s creating artificial money that’s sort of a secret money,” he said. “I don’t think it has any relevance to U.S. assets. It makes no sense at all to hold U.S. assets in bitcoin. But maybe 10 years from now I’ll be persuaded that maybe that’s not such a bad idea. I don’t think it makes any sense now, though.”
The C-Span host, Pedro Echevarria, asked Cline why foreign countries would be interested in purchasing U.S. debt. Cline replied that foreign countries need foreign exchange reserves in case they face a crisis like Korea had in 1998. He said they need safe assets in dollars which are in U.S. Treasury bonds. He said the U.S. has always made it a goal not to default on its debt.
The Peterson Institute for International Economics is a Washington, D.C.-based private, nonprofit, nonpartisan research institution devoted to the rigorous and intellectually open study of international economic policy.
The TV program was part of C-SPAN’s “Your Money” series. Each Monday morning the last hour of “Washington Journal” is devoted to a federal program, focusing on its mission, participants and cost.
Some cryptocurrency advocates have pointed to bitcoin as a way to make government more responsible with the national debt.
Ellery Davies, the co-chair of The Cryptocurrency Standards Association, noted on the quora.com question-and-answer forum that if the government adopted bitcoin, it would no longer be able to “water down citizen wealth” by running the printing press, nor borrow against unborn generations. Instead, the government will have to collect every dollar that they spend—or convince bond holders that they can repay their debts.
The idea of separating a government from its own monetary policy seems radical, Davies noted. “But that’s only because we have not previously encountered a technology that placed government accountability and transparency on par with the private sector requirements to keep records and balance the books.”
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