Donald Trump is a newly minted crypto mogul with a side-gig as president. (Photo: WLF)
A few short years ago, Donald Trump was no fan of crypto. He said it wasn’t real money. Today, he brags he’s the crypto president. What changed?
Simply put, Trump has figured out an angle to use cryptocurrency to enrich himself beyond the wealth of the Ottoman Pashas.
The big payoff will come if Trump and his coterie of tech billionaires and oligarchs are able to pull off an unprecedented assault on the dollar. The intent would be to replace the government-controlled world monetary system with a privatized system based on cryptocurrency.
Trump, of course, isn’t smart enough to pull it off on his own. Remember, he thought crypto wasn’t real. But tech billionaires like Elon Musk, Vivek Ramaswamy, Peter Thiel and others have the wherewithal and the savvy to hatch such a plan.
Thiel is at the forefront of the anti-democracy movement, and his hand-picked pol, President-elect JD Vance, is the cat’s paw, who will become its figurehead. Trump is already viewed as a transitory lame duck.
Musk, and tech-bros like David Sacks, Palantir co-founder Joe Lonsdale, his advisor Jacob Heberg, Sequoia Capital’s Doug Leone and blogger Curtis Yarvin are part of the inner circle, according to an eye-opening article by former Clinton Secretary of Labor Robert Reich.
Yarvin, the movement’s philosophical godfather, proclaims that democratic governments are inefficient and wasteful; the country would be better served by sovereign joint-stock corporations whose major “shareholders” select an executive with total power, who serves at their pleasure. Yarvin refers to the city-state of Singapore as an example of a successful authoritarian regime, Reich writes.
While the tech bros appear to be content staying in the shadows, Musk has literally leaped to the forefront as the public face of the movement.
Trump cashes in
Donald Trump is featured on his crypto site. Isn’t this hucksterism beneath the presidency?
Musk has argued that a free-thinking “Republic” could only exist under a decision-making council of “high-status males” – women or “low T men” would not be welcome. Musk outlined his theory in 2021 on 4chan.
The proposal suggests that the only people able to think freely are “high testosterone alpha males” and “aneurotypical people,” and that these “high status males” should run a “Republic” that is “only for those who are free to think.”
Sounds like there’s no room for non-college-educated white males, Trump’s base. It would be international in scope with no national boundaries. Nations, including the United States, would be reduced to vassal states beholden to the central authority through control of the money supply.
The move would enrich its architects beyond their wildest imaginations and give the cryptocurrency industry a long-sought safety net and central role in the world financial system, underwritten by U.S. taxpayers to the tune of trillions of dollars.
It may sound like dystopian science fiction, but the outlines of the plan are already taking shape. The fact that it’s still in a nascent stage requires filling in some blanks. But enough circumstantial evidence exists to suggest something big may be going down.
This may explain why Trump, who doesn’t like sharing the limelight, seems joined at the hip with Musk, who at times appears to be calling the shots as a virtual co-president. Trump is clearly just along for the ride, and he’s more than an industry advocate in the scheme.
He’s a player.
He reportedly owns a crypto wallet with coins worth $14.7 million, according to crypto analysts Arkham Intelligence. On Sept. 16, he announced the launch of World Liberty Financial, (WLF) a decentralized finance (DeFi) crypto platform.
Sons Eric and Donald Trump Jr. signed on as “advisers.” Barron Trump, 18, is also involved reportedly as the project’s “DeFi visionary.” Trump has the title “Chief Crypto Advocate,” but none have active roles in running the site — or any liability.
Trump’s long-time friend, Steve Witkoff, a real estate developer, is listed as head of “Institutional Investment,” according to CoinDesk.
The Dough Boys
Chase Herro, who describes himself as an Internet ‘Dirtbag’ is running World Liberty Financial (Photo: ScreenCap)
Witkoff, the billionaire founder of the Witkoff Group, has been appointed as the Trump administration’s Special Envoy to the Middle East. He has deep ties to the Abu Dhabi government, and the kingdom’s deep pockets — it bailed him out of a failing real estate project. He is also deeply involved in crypto. He reportedly helped set up the cryptocurrency company and sons Alex and Zach are also co-founders, according to The New York Times.
World Liberty appears to be a mirror site of a defunct crypto platform called Dough Finance. In July, Dough, a Decentralized finance (DeFi) protocol like Liberty Financial, lost $2.1 million in digital assets after hackers launched a flash loan attack, and it has since closed.
You’d think a serious breach and financial collapse would be career ending, but low-flying former Dough executives have resurfaced at Trump’s platform. Zachary Folkman, Chase Herro, Octavian Lojnita, and “0xboga” are handling WLF’s day-to-day operations. Herro calls himself the “Dirtbag of the Internet.” He’s dabbled in weed (was busted for it), weight-loss miracles and “colon cleanses.” He once called Bitcoin a “scam against the dollar.”
“You can literally sell shit in a can, wrapped in piss, covered in human skin, for a billion dollars if the story’s right, because people will buy it,” Herro said about crypto in a 2018 YouTube video. “I’m not going to question the right and wrong of all that.”
The platform will issue a so-called governance token (crypto’s version of voting shares) called WLFI. About 63% of the token would be sold to the public; 20% goes into the “the team’s” pockets. The token will be nontransferable and will not earn yield—two factors that would seem to make it an unattractive investment opportunity, according to Fortune magazine.
While users can’t sell their tokens, they can borrow them, lend against them and invest in other cryptocurrencies like a traditional bank. In fact it’s being sold as tool for financial independence, particularly for those who are underserved by traditional banking. That would be Trump.
The president-elect has no love of banks. Nearly all U.S. institutions refuse to lend him money because of his tarnished string of six bankruptcies and a dozen failed businesses. His only source of recent financing was $225 million loan from Gregory Garrabrants, a GOP donor and CEO of online Axos Bank.
Garrabrants approved the loans after the president-elect’s main lender cut ties and bailed on him. At the time, he was on the verge of foreclosure on Trump Tower. Axos also offers financial services to less reputable businesses — drawing scrutiny from Congress as well as lawsuits accusing it of side-stepping state laws against usury.
Selling Presidential Influence
Anthony Scaramucci has criticized Trump’s crypto play as a money making scam. (Photo: Gage Skidmore)
Now it seems, Trump will have his own bank. The Ethereum-based WLF token went on sale the same day as the launch. The Trump family is starting out with 22.5 billion ”WLFI” tokens, currently valued at $337.5 million, or 1.5 cents per token. The family’s sweetheart deal includes hefty fees, as much as 75% of net revenue, according to a 13-page pamphlet outlining the operation, titled the “World Liberty Gold Paper.”
Investor reaction was tepid at best, especially after the site crashed during its debut. WLF had projected raising $300 million at a $1.5 billion valuation in its initial sale. But only $12.9 million in tokens were sold, according to tracking firms. So far, sales are only open to accredited investers with $1 million or more in investible assets, not Trump’s MAGA horde, which allows it to skirt federal regulations.
Anthony Scaramucci, founder of SkyBridge Capital, a global alternative investment firm, and for a brief period Trump’s White House spokesman, became an early critic.
“I’m not investing in that and you should not invest in that,” he said in an interview with crypto magazine CoinDesk. “It’s another scam.
“There’s greatness in our industry, then there’s nonsense like this. They don’t know how transactional he is, and how dangerous he is,” he added ominously.
To Scaramucci, Trump’s motive is clear. “Money,” he said. “He thinks this will make him money. It’s a transparent scam and you should avoid it at all costs.”
Critics see it as a way for foreign governments to curry favor with the Trump administration by heavily using its services. The site has already drawn in Chinese-born crypto mogul Justin Sun, who has taken a lead position by investing $30 million in the project.
Critics see other red flags as well. “It could be one of the first times that a former [and now current] United States president is willing to endorse a project explicitly aimed at disrupting the country’s financial system,” according to Protos, an independent crypto web publication.
Trump attacks the dollar
A month after WLF’s launch, reports circulated that Trump is considering more ambitious plans to launch his own “stablecoin.” Pegged to the dollar’s value, stablecoins are designed to replace the dollar. PayPal, Coinbase, and online brokerage Robinhood have all launched or are developing their own stablecoins.
The top U.S.-based stablecoin issuer, Circle currently holds $34.59 billion worth of dollar-denominated assets at regulated American financial institutions to back $34.37 billion of its stablecoin, USDC, currently in circulation, according to online crypto publication Decrypt, which broke the Trump stablecoin story.
As president, Trump would face legal, ethical and conflict of interest complications, not least of which for undermining the nation’s currency; but the payoff would be massive profits.
Tether, which owns the market-leading stablecoin, USDT, reported a record $5.2 billion in profit in the first half of 2024. It’s stable coin is backed by $81 billion in Treasury bills, pegged at 1-to-1 and held 100 percent in reserve, according to a company statement.
Meanwhile, Trump’s social media company is reportedly close to buying a majority stake in Bakkt, a cryptocurrency trading venue, similar to Bittrex, Coinbase and Binance. Intercontinental Exchange, which also owns the New York Stock Exchange, founded it and holds 55 percent stake in the company.
Wells Fargo and Starbucks are it’s biggest customers. Trump Media and Technology Group will keep a 53% stake, firmly in Trump’s grasp.
Bakkt earns money from commissions for payments and purchases and sales of cryptocurrency. Under Intercontinental, it plays by the book. The platform does not lend funds under custody. All customer crypto is kept in separate trusts, all assets are fully backed and it adheres to New York State Department of Financial Services regulations (NYSDS).
Bakkt had total third quarter (2024) revenues of $328.4 million driven by gains in gross crypto services and its coin, Bakkt Crypto, according to a financial statement. Significantly, company still posted a $27.4 million operating loss, despite a 60 percent year-over-year revenue increase, aided by Trump’s election.
The company reflects many of the problems facing the crypto industry. It has no backstop from a central bank, like traditional federally chartered banks. As such, major institutional investors are steering clear of it. Investors are also spooked by the murkiness surrounding the industry. Shares in the publicly traded company fell more than 80 percent last year, before pulling out of the dive with a 1 for 25 reverse split, according to Seeking Alpha.
Trump has a penchant for buying distressed properties, which helped him get a foothold in the Atlantic City casino business back in the 1980s. He failed spectacularly. All three of his eventual properties and his umbrella corporation ended in bankruptcy.
This time, however, Trump can bring much more to the table — presidential influence — something he used during his first term to enrich himself by as much as $1.5 billion, according to media reports.
Money: From Wence It Came
Modern U.S. currency; going by the wayside? (U.S. Treasury)
In the long run, however, the WLF and Trump’s other crypto dabblings are small change. The big play will come aginst the world monetary system. The idea of converting it to cryptocurrency may sound farfetched. But it’s a lot simpler than it seems, and a project is already underway at Harvard examining the prospect. To understand how the scheme will work requires a brief primer on how the nation’s currency — the dollar — has evolved.
In the 1600s, England first introduced modern paper money, bank notes redeemable for silver, the so-called “pound sterling.” In 1785, in an effort to severe ties with England, the Continental Congress created the dollar as the nation’s official currency.
Up until 1934, individual banks issue their own currency backed by U.S. bonds. A year later, during the depth of the Great Depression, a reform known as “The Emergency Banking Act,” forced all Americans to convert their gold coins, bullion, and gold certificates — — so-called “hard currency” — into paper dollars, which were consolidated into one currency.
Paper dollars were still redeemable on demand for silver dollars and became known as “silver certificates.” Gold was solely used to determine the value of currencies between nations — the so-called “gold standard.”
But the U.S. began moving away from hard currency in the 1960s when it stopped exchanging silver dollars for paper silver certificates. The bills were withdrawn and replaced with what we now have today, “Federal Reserve Notes.”
President Richard Nixon took the final step in 1971 when he uncoupled the dollar from the gold standard. The decision was monumental, and still highly controversial.
Today, paper, or “fiat currency,” is the sole medium of exchange for goods and services. The dollar derives its value solely from a pledge by the government to honor the “full faith and credit” of the United States.
That means the value of the dollar is backed by two things: the government’s ability to generate revenues (via debt or taxes), and its authority to compel all financial transactions to be in dollars. Investors count on the government to stand by its pledge, and the Federal Reserve has been charged with seeing that it does.
In 1913, the Federal Reserve Act created 12 regional federal banks, each headed by a governor, to regulate banking and the money supply. The act gave the Fed two central missions — to promote full employment and fight inflation — that is, to protect the value of money. The Fed could sell or buy debt and set interest rates to regulate the dollar’s value to keep the country from ever going bankrupt and running out of money.
While the president appoints governors and Congress conducts oversight, the Fed, for policy making purposes, is independent. That way, it avoids conflicts of interest and outside political interference that might affect its policy decisions. Every president since the Fed was created has respected its independence, except one — Donald Trump.
Seizing the Fed
Donald Trump nominates Jerome Powell to the Fed in 2017. They’re at war now. (Photo: White House.)
A significant piece of evidence in the broader scheme is Trump’s already stated plan to control U.S. monetary policy and financial markets by directly controlling key U.S. financial regulatory agencies. The only stumbling block right now is the independent Federal Reserve. But Trump is already angling to seize it.
In December 2018, Trump went to war over interest rates with Fed Chairman Jerome Powell, whom he’d appointed, according to The New York Times.
When the Fed raised rates in 2018, Trump mulled firing Powell, telling advisers that the Fed chair was trying to sabotage his presidency.
For two years, he attacked Powell for not moving fast enough to pump up the economy in the face of the looming pandemic recession. Trump called Fed officials “boneheads,” and accused Powell of having “no ‘guts’, no sense, no vision!”
In all, he criticized the Fed in more than 100 Tweets, including a blistering March 2020 post, in which Trump demanded action.
“The Federal Reserve must FINALLY lower the Fed Rate to something comparable to their competitor Central Banks. Jay Powell and group are putting us at a decided economic & physiological disadvantage. Should never have been this way. Also, STIMULATE!”
The same month, Trump asserted publicly that he had the power to remove or demote the Fed chairman.
As the pandemic lockdown took hold, the Fed finally took significant steps to prop up the Trump economy. It cut interest rates to near zero, bought bonds and mortgages to increase the money supply and increased loans to consumers, banks and businesses. It was a display of the Fed’s power to correct and prop up the economy.
While Trump praised the bank for finally acting, his bitterness at the institution’s independence spilled over into the 2024 presidential election. Trump repeatedly threatened to fire Powell, and said the president should control monetary policy — precisely what the Fed was created to ward against.
Now that Trump has been elected, he’s renewed his threats. The Fed Chairman has countered, claiming the president does not have the power, and has vowed to stay on until his term ends in 2026, creating a potential showdown.
Of course, firing or demoting the Fed chairman would have severe consequences. It would breach the long-standing independence of the central bank, seriously impact world markets, demolish the separation of powers, and confirm Trump’s worst authoritarian impulses.
If he chooses that course, it will be a clear sign that the play for the world’s currency is on. Without the Fed under his thumb, Trump would be hard pressed to pull off his crypto caper.
Bending a knee to crypto
A Bitcoin ATM. Is this the future of U.S. currency? (Photo: Martin E. Walder)
The scheme also relies on a compliant U.S. Treasury Department. Trump appears to have paved the way for that by naming as Treasury Secretary Scott Bessent, a prominent pro-crypto hedge fund manager.
At first, Bessent caused howls among Trump’s MAGA supporters because he’d previously worked for MAGA supervillain George Soros’ investment fund. But Bessent is an outspoken advocate of Trump, blockchain and digital assets.
“Crypto is about freedom and the crypto economy is here to stay. Crypto is bringing in young people, people who have not participated in markets,” he proclaimed in a Fox Business interview earlier this year.
Bessent has invested in blockchain startups and decentralized finance (DeFi) initiatives through his hedge fund, Key Square Group. Among other things, he’ll face a glaring conflict of interest as Treasury Secretary that must be resolved, or maybe not.
The Securities and Exchange Commission (SEC), also an independent agency, is the other impediment to Trump’s crypto plans. Biden’s SEC Chairman, Gary Gensler, who Trump has also threatened to fire, has strictly regulated the industry.
He carried out more than 100 regulatory enforcement actions against crypto firms during his tenure. Until recently, he staunchly opposed allowing the creation of mainstream investments like crypto-backed Exchange Traded Funds (ETFs)
Under current law, the president does not have the power to fire the SEC Chairman, either. But Gensler is taking himself out of the game. He announced his resignation after Trump won the election, even though his terms runs until 2026.
Trump has already asked the crypto industry to recommend a pro-crypto replacement. Former SEC commissioner Paul Atkins, and former acting US comptroller of the currency Brian Brooks have been identified in media reports as industry favorites. Both are advidly pro-crypto.
“The rules will be written by people who love your industry, not hate your industry,” Trump promised at an industry conference.
Money Matters
Then Chairman Ben Bernanke showed the power of the Fed during the 2008-09 financial crisis. (Photo: Federal Reserve)
With the government’s financial watchdogs securely leashed — save, perhaps, the yet-to-be-determined fate of the Fed — the scheme is ready to be set in motion, and it will begin with an attack to knock the dollar off its perch as the world’s principal reserve currency.
Since the end of World War II, the greenback has been the most widely used currency for international trade. That was set in stone in 1944 by a conclave of World War II allied governments in the Bretten Woods Agreement. Foreign countries hold dollars in the form of interest-bearing treasury bills and their currencies are pegged to the value of the dollar. As of Jan. 2024, those securities amounted to more than $8 trillion, according to the Federal Reserve and Treasury Department.
The stability of the world economic system is tied solely to the U.S. government’s pledge to stand behind the dollar no matter what. If foreign governments and others holding U.S. debt lose faith, it could trigger a financial run unseen in history as investors and governments unloaded their treasury securities.
If that ends up happening, the U.S. government would be obligated to buy those notes to prop up the value of the dollar, which means U.S. taxpayers would be on the hook for multi-trillions of dollars in redemptions. The alternative would be a default. Hyperinflation would follow, reducing the value of the dollar to pennies and collapsing the world economic system.
Even with government regulation of the financial system, world financial crises have happened. The most recent, the 2008-09 financial crisis, was triggered by the subprime mortgage market. The mortgages had been bundled into securities and widely sold. When subprime borrowers started defaulting, the market collapsed and the securities fell as well, freezing the world economic system.
Then Fed Chairman Ben Bernanke showed the true power of the Fed to head off a financial crisis. The Fed flooded the market with dollars, cut interest rates and made direct loans to banks to restore liquidity. Most investors were made whole.
Where did the central bank get the money? It simply printed it. The Fed spent $2.5 trillion ($3.47 trillion in 2023 dollars) to buy government debt and troubled private assets from banks. This was the largest liquidity injection into the credit market, and the largest monetary policy action in world history. The public debt rose from 35 percent GDP in 2007 to 77 percent of GDP by 2016.
The crisis demonstrated a fundamental premise of the monetary system. As long as principally the U.S. government can call on the nation’s vast resources to stand behind the dollar, such crises are manageable.
But the world changed in Jan. 2009. “Cryptocurrency” — specifically Bitcoin — emerged.
Bitcoin bites
The rise — and fall — of 17th century Tulip Mania. (HCM Wealth Advisors)
An anonymous group of programmers released software so the public could buy and sell the currency in what became known as the blockchain. Crypto coins became a new store of value, just like the dollar — with a significant difference.
Crypto has no intrinsic value of its own. It isn’t backed by gold, silver, a central government’s credit or anything else of value. The crypto market is only propped up by the next dollar coming in the door and the promise — expressed or implied — of fantastic returns.
Investors get into the crypto market through “crypto-mining,” a verification process that underpins the crypto economy. To convert cryptocurrency to dollars, investors must go through centralized exchanges like Coinbase, Binance, Gemini or Kraken. Once a market price is set, the exchange will pay out traditional cash.
Not surprisingly, the first Bitcoin sold in 2009 for a tiny fraction ($0.00099) of a dollar. But the crypto market has since exploded into a $3.49 trillion mania not seen since the 17th century speculative bubble in Tulip bulbs. A $1,000 Bitcoin investment in 2009 would be worth $99 billion, today.
Crypto’s allure so far has been its potential to generate huge paper fortunes. In a study of the market, British investment migration consultancy Henley & Partners found that 172,300 investors each held more than $1 million in crypto assets this year, 95 percent more than in 2023.
The number of Bitcoin multi-millionaires more than doubled to 85,400. They also identified 325 investors with $100 million or more in crypto assets — a 79 percent increase — and 28 crypto billionaires, a rise of 27 percent. An estimated, 52 million Americans now hold digital assets. But with an estimated 420 million investors in the market around the world, the overwhelming majority are suckers.
Bitcoin has also triggered an avalanche of imitators. As of March 2024, 13,217 cryptocurrencies had been “minted.” Scores have fallen by the wayside and are considered “dead,” leaving around 8,985 active cryptocurrencies. The top 20 cryptocurrencies make up 90 percent of the market.
The explosion in cryptocurrencies underlines the fact that crypto is purely speculative. Almost anybody can launch a crypto coin that’s only worth what people are willing to pay for it. It’s pure play on supply and demand — and irrational exuberance. There is no reason to buy cryptocurrency except for the expectation that it will go up and up in value. In other words, the crypto market has all the hallmarks of a giant Ponzi scheme.
Ponzi power
Charles Ponzi, circa 1920, inventor of the Ponzi Scheme. (Archive Photo)
A Ponzi scheme can maintain the illusion of a sustainable business if investors continue to contribute new funds, maintain faith in the non-existent assets they own and don’t try to cash out all at once.
Like most Ponzi schemes, the number of crypto investors needs to grow exponentially. Current investors need to keep buying crypto, but most importantly hold their assets indefinitely to sustain the market. When that source of new investors or recurring investment reaches the point of exhaustion, Ponzi schemes typically collapse of their own weight. That’s the inevitable fate that awaits the crypto industry.
For decades, Bernie Madoff ran one of the most successful Ponzi schemes in history. It was a pure play on supply and demand, just like crypto. Nobody really knew what his system was, but he enticed investors with the promise of steady, market-topping gains year-after-year, and delivered by using fake accounting. As long as he attracted fresh capital and kept redemptions low — a crypto mantra as well — he could maintain the scheme and cover withdrawals with new investments.
He traded off his own, highly regarded reputation on Wall Street to keep regulators at bay and never got too greedy. He could have gone on bamboozling investors indefinitely. But the 2008 subprime mortgage crisis touched-off a tidal wave of redemptions he could not cover. Madoff was exposed and forced to admit he’d been engaging in fraud, but not before taking in $65 billion in assets from thousands of investors.
The red flags that signaled Madoff’s Ponzi scheme are all present with cryptocurrency — an expectation of high returns, unregistered investments, unlicensed sellers, secretive strategies, lack of transparency and difficulty cashing out.
Crypto crashes
Crypto swindler Sam Bankman-Fried (Photo: Cointelegraph)
The fragility of the crypto system was demonstrated by the spectacular 2022 crash of FTX, then the third largest crypto exchange in the nation.
Investors lost faith in FTX after reports surfaced that an affiliated trading firm, Alameda Research, owned by FTX CEO Sam Bankman-Fried, was capitalized by its own ginned up tokens, FTT, and other coins fabricated by the firm, rather than cash or more established coins.
That triggered a run by customers, causing a liquidity crisis and ultimately bankruptcy. Investigators discovered that Bankman-Fried and other executives had misappropriated $8 billion in customer deposits. The scandal rocked the industry. Bitcoin plunged to $16,000 as investors panicked.
Biden’s Treasury Secretary Janet Yellen, who has been wary of cryptocurrency, took the lead in a study of the market and found widespread comingling of customer assets, lack of transparency, and conflicts of interest.
“Spillovers from the events in crypto markets have been limited, but a recent report by the Financial Stability Oversight Council, which Treasury chairs, warned that further interconnections of the traditional financial system and crypto markets could raise broader financial stability concerns.”
Yet, a commingling of crypto with the traditional financial system is precisely what the industry wants — and needs to stave off collapse — and where the Trump administration seems to be heading.
Trump goes all in
It’s hard to tell when Trump became a crypto acolyte, but a June meeting at Mar a Lago in Palm Beach may have been a key moment in his metamorphosis. He sat down in a four-hour private meeting with a dozen crypto executives and the biggest U.S. miners — Riot Platforms, Marathon Digital Holdings, Terawulf, CleanSpark and Core Scientific.
Afterward, Trump began making crypto a campaign issue.
Actually, Democratic presidential candidate Kamala Harris also viewed cryptocurrency favorably and was open to establishing some sort of regulatory framework. But Trump doubled down on disinformation and lies.
“Biden’s hatred of Bitcoin only helps China, Russia, and the Radical Communist Left. We want all the remaining Bitcoin to be MADE IN THE USA!!! It will help us be ENERGY DOMINANT!!!” Trump posted on Truth Social in one of his recurring bombasts.
Crypto interests were also on his mind when he crowed about electricity at a crypto convention in Nashville. “We will be creating so much electricity that you’ll be saying, ‘Please, please, President, we don’t want any more electricity. We can’t stand it!’” he railed.
After Musk joined his campaign, Trump became the first presidential candidate to accept crypto contributions, a groundbreaking move. The crypto industry poured tens of millions of dollars into the 2024 presidential race.
High-profile figures like Cameron and Tyler Winklevoss, the twin co-founders of the Gemini crypto exchange and soured Facebook investors, contributed $1.6 million in Bitcoin to Trump. Kraken co-founder Jesse Powell donated $845,000 in Ether, another crypto coin.
Crypto industry Political Action Committees (PACs) also poured $131 million into Congressional races. The investment paid off. An industry group boasted that 274 pro-crypto candidates had been elected to the House and 20 to the Senate this cycle.
Digital asset markets surged on election night. Bitcoin hit a record over $75,000, as Trump’s victory began to look likely. Crypto-linked stocks like Coinbase and MicroStrategy moved higher, as well, in after-hours trading on election day, according to CNBC.
Two days after the election, Bitcoin jumped to more than $94,000 for the first time, more than doubling in value this year. It’s risen about 40% in the two weeks since Trump was elected.
“Crypto is a political force,” Kristin Smith, chief executive of the 98-member Blockchain Association told CNN.
“As a result of this past election, we’ll have the most pro-crypto Congress that has ever been elected but also the most pro-crypto administration that’s ever been in power.”
Manipulation, volatility, corruption
Still, crypto investors are skittish. In July, a series of crypto auctions in Germany, and a separate sale of cryptocurrencies held by the bankrupt, scandal-ridden Japanese exchange, Mt Gox, wiped out more than $170 billion in market capitalization in one day. Bitcoin’s price skidded to $55,000, from $74,000 five months earlier.
When Trump takes office in January, he will get his hands on a U.S. Treasury horde of 207,189 Bitcoins, worth $5 billion. All of it comes from enforcement actions against shady crypto operators. Previously, the U.S. Marshall’s Service regularly auctioned Bitcoin and other cryptocurrencies, in some cases, also upsetting the delicate pricing of crypto assets.
But Trump used the issue to showcase his allegiance to the industry. He promised to prop up crypto prices by keeping the government’s holdings off the market indefinitely, despite the nation’s budget woes.
“For too long, our government has violated the cardinal rule that every Bitcoiner knows by heart: Never sell your Bitcoin,” Trump declared during one rally.
That cynical piece of advice is just what a Ponzi schemer needs to hear. For the crypto market to advance, it needs to keep investors roped in for the long-term.
Anything that triggers panic selling could cause the entire house of cards to collapse because nothing underpins the investment, and no government is obligated to come to the industry’s or investors’ rescue. Fortunately, the world has experienced no severe financial shocks since 2008-09 meltdown. The pandemic proved to have mixed effects on the crypto market.
In Congress, plenty of bipartisan concern still exists among lawmakers worried about crypto’s penchant for fraud, and market manipulation — with good reason.
Because crypto currency operates outside the world monetary system in an unregulated “blockchain,” it’s highly subject to manipulation, volatility and corruption. Industry losses to phishing attacks and private key compromises hit $1.19 billion in the first half of 2024, according to blockchain security company CertiK.
At least $24.2 billion worth of crypto was sent to illicit wallet addresses last year, including addresses identified as sanctioned or linked to terrorist financing and scams, according to an analysis by crypto researchers Chainalysis.
The industry is trying to remedy that by lobbying Congress to embrace its ultimate goal, a regulatory framework to integrate crypto into the mainstream of the U.S. and world financial system.
Inside Musk’s Head
Trump embraces that goal as well, and Musk has taken it upon himself to crack the whip to see that it happens. He has publicly threatened to finance a primary challenger against any Congressional Republican who doesn’t toe the line on the Trump agenda.
Such coercion clearly crosses a line and undermines the Constitutional separation of powers, but the goal is clear — to turn Congress into a rubber stamp.
Trump obviously knows next to nothing about crypto and doesn’t appear inclined to learn its intricacies. The business is complex with a jargon all its own. At the unveiling of World Liberty Financial, he only spoke briefly and in broad generalities.
But Musk and others surrounding him are well versed on the subject and present a clear and present danger to the world financial system — and taxpayers.
No one questions that Musk is a bold entrepreneur willing to take gigantic risks on such things as electric cars, space exploration and artificial intelligence. But he may leave his lasting mark on the world — or scar depending on how things work out — through crypto.
Before his plunge into cars and spaceships, Musk’s main claim to fame was co-founding PayPal in 1998. The hugely successful online payments system has since grown to 300 million users. Those who track his career say his involvement with electronic money transfers led to his eventual infatuation with crypto currency. He wasn’t an easy convert.
In a telling 2014 interview, he was ambivalent about Bitcoin. He said didn’t own any and thought it had no value except as a conduit between legal and illegal transactions. “You have to have a legal-to-illegal bridge” because “some things maybe shouldn’t be illegal,” he said to chuckles at a conference.
But comments in the interview beyond those provide some critical insight into his thinking. One thread that ties together his thoughts on Tesla, SpaceX and other projects is a haunting fear of economic and social collapse.
“Eventually, there is a certainty of a catastrophic outcome. If we don’t take corrective action the probability of a collapse will increase over time,” he told journalist Walter Isaacson at Vanity Fair’s New Establishment Summit. “The longer it takes to make that transition the greater the probability of something like that happening.”
“What’s the fundamental good that Tesla can achieve? It would be to accelerate the advent of electric cars by at least a decade,” he said, reflecting his fears about climate change.
He saw Mars as “life insurance,” a way to ensure the “light of consciousness as we know it propagates into the future.”
Paypal is a reflection of his philosophy about innovation. He got involved because it was a way to move money more efficiently. “I tend to look at things from a physics standpoint. The best way to accomplish something and pursue it is to determine if it’s far from optimum,” then “creating a way to rearrange it in a more efficient way… combining ideas from different industries.”
He envisioned Paypal evolving into a full-service financial institution, with all services in one place, integrated, easy to use [and] care about consumer.”
“It sounds a bit strange, but to convert the financial system from a series of heterogeneous, insecure databases to one database, or a few databases. Money is just a number in a database.. it’s primarily an information mechanism for labor allocation [and] current databases are not very efficient.”
The Reluctant Crypto Warrior
Within three years, Musk became the center of speculation that he was the mysterious, anonymous creator of Bitcoin. He had to repeatedly deny it. By 2019, Musk’s attitude about crypto was changing. He said in an ArkInvest podcast interview “Bitcoin’s structure” was “quite brilliant.”
It was not a good use of Tesla resources to get involved in crypto, but he saw crypto “as a far better way to transfer value than pieces of paper,” and noted it “bypasses currency controls.”
A year after that, Tesla announced the purchase of $1.5 billion in Bitcoin and a plan to accept the cryptocurrency as payment for cars. Musk’s comments, in part, were credited with helping Bitcoin run up in price to a record at that time of $58,000.
But Musk was far from immersed in the crypto universe. In 2021, he pulled back and stopped accepting cryptocurrency because he claimed the computational energy required posed a threat to the climate. The move caused crypto to temporarily crash.
For most of the time since then, Musk has focused on DOGE, a cryptocurrency that he teased on Twitter and touted during a “Saturday Night Live” appearance. The price see-sawed whenever he mentioned it, causing investors to finally sue him for $287 million. The suit ultimately failed.
At the same time, industry buzz was starting to focus on using Bitcoin to replace the dollar as a world currency. The idea was to create a “new economic paradigms using Bitcoin at the center of things,” according to one advocate.
But the plan fell short because the general consensus held that Bitcoin was too unstable and too limited as a medium of exchange. Essentially, not that many people owned it and too few companies accepted it as a form of payment.
But the idea continued to gain traction. In September — oddly coincident with Trump’s launch of World Liberty Financial — Harvard students and alumni announced a project to tackle global debt through a decentralized finance (DeFi) crypto solution using a Bitcoin stablecoin.
Debt: Problem, or Pretext?
Ironically, the effort is called “The New Bretton Woods Project” (NBW) after the 1944 meeting of allied powers in World War II. The original Bretton Woods agreement also established the World Bank and the International Monetary Fund. Both have been instrumental in rebuilding and integrating the world economy since World War II, and both are at the center of right-wing conspiracies warning about a totalitarian, one-world government.
Indeed, hype surrounding the NBW project sounds eerily Orwellian. The goal is all about “disrupting the status quo” and “offering a bold new path… in the in the face of one of the greatest challenges of our time… not just a step, but a leap toward a decentralized, stable secure economic future,” according to the news release.
Global debt is mounting, and it’s a moving target. It has snowballed under both Democratic and Republican presidents from $5 trillion in 2000 to $11 trillion (2008), $19 trillion (2016), and $26 trillion in 2020. The year-end 2024 projection is $35 trillion, and it’s growing by roughly $1 trillion every three months. Every American taxpayer would owe $264,090 to pay it off.
Musk, who talks often about his fear of social and economic collapse, is among those who are suddenly sounding an alarm. “If we don’t cut government spending, something really bad is going to happen,” he said in a telling interview with The Wall Street Journal.
“Our spending is so far in excess of revenue; it’s insane. You could zero out all the billionaires in the country, and this still wouldn’t solve the deficit.”
Some experts say the trajectory of deficit spending is unsustainable, but there is no consensus among economists. Musk’s alarmist view is shared by Republicans and others who compare the federal budget to a household budget that needs to be balanced. But economists say they are nothing like each other.
For one, the United States can’t run out of money because it prints its own currency. The deficit also represents money that the government is pouring into the economy without taking it back through taxes. That means its actually a stimulous, flowing into the pockets of households and businesses.
Deconstructing U.S. Debt
“Over the arc of U.S. history, the U.S. government typically spends on an annual basis more dollars into the economy than it taxes away from us. And so it’s adding dollars, and over time, the national debt is just a measure of how many dollars have been added, said Stephanie Kelton, a professor of economics and public policy at Stony Brook University, in an NPR interview.
“The federal government is the issuer of the currency, and the rest of us are users of the U.S. dollar,” Kelton explained. “The federal government has to spend it before the rest of us can get it and either have it available to buy goods and services in the economy, to pay taxes, to buy government bonds or to save.”
In fact, a large portion of the national debt is held by the government itself. Social Security, including the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, held $2.71 trillion as of December 2022. The Military Retirement Fund held $1.36 trillion.
Other holders of national debt are the Office of Personnel Management Retirement, Medicare (which includes the Federal Supplementary Medical Insurance Trust Fund) and money set aside for cash-on-hand to fund federal government operations, according to the Treasury Department.
The public holds $24.53 trillion of the national debt, as of January 2023. Foreign and international investors held over $7.4 trillion as a currency reserve because of the dollar’s role in international trade. State and local governments held $1.55 trillion and mutual funds had $2.84 trillion.
Insurance companies, U.S. savings bonds, private pension funds, individuals, government-sponsored enterprises, broker-dealers, banks, bank personal trusts and estates, corporate and non-corporate businesses, and other investors all hold public debt.
The interest they collect is an important and safe revenue stream. That’s why balancing the federal budget could do just as much harm as good. Without budget deficits, US Treasury bonds, which help grease the wheels of international trade, would be unnecessary.
President Bill Clinton’s administration was the last to generate surpluses — $69.2 billion in fiscal 1998, $76.9 billion in fiscal 1999, and $46 billion for fiscal year 2000 — by pushing through higher taxes on corporations and the rich along with some modest budget cuts.
As such, the big threat to the economy is not debt, because the government can always print money to cover it. A crisis would erupt if the government had no debt, or decided to stop paying interest on the debt, yet Trump seem to be okay with it.
Default: The Real Crisis
Republicans in Congress have periodically refused to raise the debt ceiling, and threatened outright default on U.S. obligations. Trump, who called himself the “king of debt,” has been through six bankruptcies and talks about it as if it’s just another business strategy. It became an issue in his 2016 campaign.
When Trump campaigned for office, he treated the nation like a distressed asset. “If [the US] were a corporation, it would be bankrupt,” he said. “This country is essentially a bankrupt country.”
Asked during an interview how he would negotiate a U.S. debt default, Trump’s first response was: “You go back and you say, ‘guess what, the economy crashed, I’m going to give you half.’”
Trump again raised the specter of bankrupting the U.S. economy in a 2016 CNBC interview. “I would borrow, knowing that if the economy crashed, you could make a deal,” he said.
That’s clearly how Trump ran his real estate companies. His creditors were often stuck accepting pennies on the dollar.
But a government default would be cataclysmic; risk-free federal bonds would become as risky as junk bonds requiring soaring interest rates to sell them. What’s more, the dollar would become worthless. Savings would evaporate, and liquidity would vanish. Business and foreign investment would collapse and state, local and foreign governments that borrow dollars would be crushed, triggering hyperinflation.
Trump showed his ignorance about the U.S. financial system in a 2018 CNN interview about Puerto Rico’s debt crisis. “They’re never going to pay that debt off, they have to cut it way down, and the United States is going to be in that position very soon because they have too much debt,” he told CNN’s Wolf Blitzer. As it turns out, Puerto Rico was prohibited from filing under the then-existing bankruptcy code.
Musk apparently is far less nonchalant about debt. Since being elevated to unofficial budget watchdog through the “Department of Government Efficiency” he’s harped repeatedly about its dangers.
“America is rapidly moving towards bankruptcy,” he declared. If it happened, it would be “super fast” and call for significant restraint on federal spending.
In an October town hall rally for his American PAC, he warned that “Americans will suffer hardship” if Trump is elected and suggested again that severe budget cuts were in the offing. “It’s got to be done. And if it’s not done, we’ll just go bankrupt.”
The True Measure of Debt
But going bankrupt would be a political decision, not an economic one. The true measure of the nation’s fiscal health is the debt-to-GDP ratio and the interest-payment-to-GDP ratio, according to economists.
After World War II, the debt-to-GDP ratio was 112 percent. The U.S. dug its way out by growing GDP. If you home mortgage equals 30 percent of your gross income and your income doubles, you mortgage now represents 15 percent of your gross income and so on.
in Jun 2024, the national debt was 122.3 percent of GDP. The U.S. debt-to-GDP ratio for 2022 was 110.39 percent, an 8.5 percent decline from 118.89 percent in 2021, which was a 5.84 percent decline from the 2020 rate of 124.73 percent. That includes the government’s multi-trillion dollar stimulus following the pandemic.
In short, the debt-to-GDP ratio is far from crisis levels. In fact, eight countries have higher ratios. Japan is No. 1, with a 216 percent debt-to-GDP ratio, and its economy is healthy Nominal Japanese GDP growth averaged 3.5 percent in 2022 and 2023, more than double the growth rate from 2013 to 2019.
More significantly, the U.S. interest-payment-to GDP ratio is only 1.4 percent, and it’s closer to 1 percent if the 88 billion the Federal Reserve refunded to the Treasury last year is taken into account. By 2031, based on current spending and economic growth projections, the interest burden on debt will be 2.4 percent of GDP, according to the Congressional Budget Office.
In contrast, the interest burden was over 3 percent for most of the 1990s when President Clinton balanced the budget. “It’s a bit hard to see how an interest burden of 2.4 percent of GDP can be crushing if burdens of more than 3 percent of GDP were not a big problem,” says Dean Baker, co-founder of the Center for Economic and Policy Research.
That hardly adds up to a budget crisis. Musk, like Trump, appears to be profoundly ignorant of the how the federal budget works and the role it plays in international finance, or quite possible there’s another scenario.
The Stalking Horse of the Apocalypse
They could be using the national debt as a stalking horse to justify draconian cuts in social services, or more ominously, to defund the dollar and replace it with cryptocurrency. Given Trump’s newfound obsession with crypto, all the effort he’s made to cash in with his own crypto play, and the enormous pressure on Congress from the crypto lobby, it could easily be both.
Musk actively supports integrating crypto into the economy. Although he hasn’t made a full disclosure of his holdings, he reportedly owns Bitcoin, Ethereum and Dogecoin. In 2021, it was widely reported he owned $1.5 billion in Bitcoin through Tesla.
He has sold off much of that holding since then at a loss, but Tesla still owns Bitcoins, valued at $512 million, according to a quarterly company report. That makes Musk and the company’s founders the fourth largest Bitcoin holder. Microstrategy Inc., Marathon Digital Holdings and Riot Platform, Inc. are the top three respectively and Coinbase Global, follows in fifth place.
Musk, never one to shy away from enormous risk, appears to be positioning himself for a major crypto play. In October, Tesla moved nearly all of its 11,500 Bitcoin, then worth an estimated $760 million, into unknown wallets, according to blockchain analytics firm Arkham Intelligence. New accounting standards set to go into effect this December requiring digital assets like Bitcoin to be marked at fair value, could be the reason.
Or it could be something else. At an industry gathering in Nashville, Trump declared: “If crypto is going to define the future, I want it to be mined, minted and made in the USA.” Actually, cryptocurrency’s supposed strength is the fact that it is decentralized and international.
Whatever the case, Trump is ready to give the crypto industry anything it wants. But the one thing the industry needs is legitimacy — and that means backing by the “full faith and credit” of the United States.
“What the election showed was that the industry is willing to make massive spends to bend politicians in favor of an insecure product that has demonstrated no meaningful economic purpose,” Robert Weissman, co-president of Public Citizen, a public interest group, said in a statement.
Weissman hit the nail on the head. The hype, the rising value and the inflows of cash since the election still haven’t changed the basic fact that crypto is a crap-shoot more akin to a Ponzi scheme. Without any underlying asset value and a skyrocketing price, crypto is one financial crisis away from investor panic and collapse just like the great Dutch Tulip Mania and Bernie Madoff.
Crypto: The Fall and Rise
At least the Dutch still had their bulbs, which also lacked intrinsic value. When crypto crashes, as it inevitably will, billions of dollars will be vaporized as investors rush to cash out and put their money in safer investments. The good news for now is the government won’t be on the hook to bail out crypto investors like it bailed out banks and investors during the 2008-09 financial crisis.
But the sheer scale of the collapse could create monumental pressure on the government to step in. Trump could obligate the Fed and Treasury with the stroke of a pen as President Nixon did in 1971 when he declared the dollar a “fiat currency” by executive order without Congress.
Trump could similarly declare crypto a fiat currency. Then, Treasury and the Fed would be compelled to stabilize the market by buying a mountain of coins. Taxpayers would be left holding the bag on trillions of dollars in debt. Trump would essentially be giving U.S. citizens the shaft just like investors in his bankrupt properties.
Of course, if Trump declared crypto a fiat currency, the dollar would immediately become redundant. In that case, Trump and a rubber stamp Congress would not be acting without precedent. They could enact a law similar to the Great Depression’s “Emergency Banking Act.” All Americans would be forced to redeem their paper dollars for a crypto stablecoin at some set rate, likely at pennies on the dollar.
Albeit that move would be an extreme one, but one step back, a growing movement of conservative groups like the Heritage Foundation, the infamous creator of Project 2025, and the Foreign Policy Research Institute are advocating for the creation of a a US Central Bank Digital Currency, based on stablecoin. That would effectively accomplish the same thing.
Oddly, Senate Republicans led by Sen. Ted Cruz (R-TX) oppose the move, claiming the federal government could weaponize the technology to spy on Americans’ financial activity and potentially restrict access to their money.
Stablecoins are typically pegged to the dollar and backed by assets such as US Treasury securities and corporate bonds to provide stability. But research by the University of Chicago’s Booth Business School, suggests otherwise. Stablecoins are vulnerable to panic runs that could force a rapid liquidation of assets and create a financial crisis.
A central bank digital currency may be one way for the government to fend off the privatization and loss of control of the U.S dollar. At the very least, it would shore up U.S. control of internatonal trade by supplanting other stablecoins and crypto.
Ironcally, Trump initially opposed the idea, although it’s unknown where he stands now. Since he has a personal financial interest in his own stablecoin, he likely still opposes it, despite the obvious conflict of interest. The Biden administration stop short of endorsing it, but urged further serious study of the idea.
Any moves along these lines would beg several questions: Who controls the currency? Who controls the ability to buy and sell? And, who values it? This is where Musk’s council of “special talents” would step in.
Dollar Armageddon
Trump has already proposed a half-step to dollar Armageddon by pledging to create a national crypto stockpile or reserve. The effect of the move would be to entwine the government in crypto’s Ponzi scheme and position it to prop up the scheme with steady crypto purchases.
“This is the type of action that would cost us very little financially, but could have a profound impact on our financial health in the future,” crypto bull Anthony Pompliano wrote in a LinkedIn post. calling for the government to print $250 billion — essentially by issuing yet more debt (so much for the debt crisis) — to buy Bitcoin.
One proposed bill circulating in Congress calls for the Federal Reserve to sell gold reserves and use the proceeds to buy Bitcoin. That would be akin to selling the ultimate, last-resort store of value to buy thin air. That’s how far and how deep crypto mania has spread.
If either step were taken, those who own crypto, like Trump and Musk, and the mechanisms that facilitate it, like Trump’s World Liberty Financial, would be enriched beyond imagination as other governments set up their own reserves or even go so far as to convert their currencies to crypto, if it comes to that.
Bitcoin could hit $500,000, according to one industry forecast as other countries scramble to establish their own bitcoin reserves. Another estimate puts the price at $1 million.
Before anything happens, observers believe Congress will have to work with the Federal Reserve and Treasury to come up with a framework. If Trump is unable to unseat Powell, the Fed would be the only bulwark protecting the financial system, at least until 2026 when Powell’s term ends.
The Perfect Storm
Of course, a serious financial crisis could act as a catalyst to speed things up, and it just so happens, Trump and his cronies are ginning one up that could begin as soon as he takes office in January.
Musk and Ramaswamy are talking about ultimately cutting $2 trillion from the federal budget and more immediately firing thousands of federal workers nationwide. At the same time, Trump is proposing a crazy quilt of tariffs on China, Mexico, Canada and other nations that will sock consumers with higher prices and create inflationary pressure on the economy.
Massive government spending cuts and mass firings also plays into the plan to create a centralized government under the authority of a Caesar-type dictator. Vance virtually spelled out the plan in a 2021 podcast.
The first step, he said, is to replace “every single midlevel bureaucrat, every civil servant in the administrative state … with our people. And when the courts stop you, stand before the country, and say – as did Andrew Jackson – that “the chief justice has made his ruling. Now let him enforce it.”
On top of that, Trump’s proposed, new tax cuts on corporations, tips, overtime and social security, and new deductions for state and local taxes and interest on car loans would add almost $10 trillion to the national debt over the next 10 years. They would be tantamount to pouring gasoline on a raging fire.
During a meeting with black journalists in August, Trump also promised to “bring interest rates way down,” even to zero, a move he said would lower inflation “so people can buy bacon again, so people can buy a ham sandwich again, so that people can go to a restaurant and afford it.” Low interest rates, however, are considered inflationary because they encourage borrowing and spending, which triggers increased demand and higher prices.
In short, they’re creating a perfect storm for a serious economic downturn and perhaps a takeover of the world economic system to boot. That truly would end democracy as we know it.
They’ve already built their lifeboats, now they just need to make sure the crypto industry is on board as well. As for average Americans, Trump and his cronies appear ready to watch them go down with the ship.