Source: Theme speech "It's F**king Maths" by Arthur Hayes at Bitcoin 2025
The Mission of the US Treasury Secretary
The new US Treasury Secretary is Bessent, who previously worked with George Soros and helped break several different sovereign currency pegging mechanisms. He clearly understands what needs to happen economically for the United States to succeed in facing all these challenges.
[The rest of the translation follows the same professional and accurate approach, maintaining the original structure and meaning while translating to English]The second matter is the exemption of the Supplementary Leverage Ratio (SLR), which I will elaborate on later. Scott Bessent has discussed this in multiple interviews, and he recently strengthened his statements in interviews with Bloomberg and Fox News, saying he believes this ratio will be exempted this summer, just like large banks could leverage infinitely to buy government bonds during the COVID-19 pandemic.
Lastly, an increasingly attention-grabbing area is Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs), which, if allowed again, will be able to inject massive funds into the mortgage market.
Let's look at this "three-pronged approach". "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. This is how politics works worldwide. As early as 1984, the US government encountered another problem: how do we get people to buy our debt? At that 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 interest you earn from holding Treasury bonds is taxed at a specific rate, I think between 20% and 30%. But now, if you're a foreigner, you don't need to pay this tax.
So now there are discussions about canceling this exemption for several purposes. First, by essentially taxing income earned by foreigners, this can raise over a trillion dollars in ten years. Now, obviously, if you're taxed, you might not want to hold Treasury bonds. So one idea is, can we set a very low tax rate for holding long-term Treasury bonds - things Bessent finds hard to sell - while imposing high taxes on short-term Treasury bonds - these are cash-like instruments you might hold in a money market account. Everyone wants this, everyone wants a high-yield cash account. So let's punish you for holding short-term Treasury bonds, but allow you to hold long-term bonds. This is a mild form of yield curve control. How do we get foreign demand for long-term bonds? Just change the tax rate.
Now, the ultimate question is who will replace foreigners as the marginal debt holders. Obviously, this means they will print money to make up for the funds lost from foreign investors not investing in these debts.
Another thing: banks' bond-buying frenzy. Supplementary Leverage Ratio (SLR), if you remember nothing else from this talk, please remember this. This is a way banks can buy bonds with unlimited leverage. There's something called Basel III, a very complex regulation developed after the global financial crisis, which did something wise. It said, hey banks, you don't have much capital, why don't we let you have more capital? So if I hold a bond, I must invest some of my own equity capital. This makes sense. This means US banks face limitations on the amount of US Treasury bonds they can buy. Remember, Bessent needs to sell two trillion or more bonds each year, and he needs to ensure someone can buy these bonds. So if I remove this exemption, it allows commercial banks to buy Treasury bonds with unlimited leverage. When they can do this, their profits will soar because the rates they pay on commercial deposits are very low. Obviously, a smiling Jamie Dimon is very eager for this to happen. He has stated on multiple occasions that he believes the banking system needs this exemption. As I always say, Jamie Dimon gets what he wants.
Another thing, stablecoins are obviously a very hot topic recently. If you combine stablecoins or non-interest-bearing US dollar stablecoins issued by US banks in the market with SLR exemption, they basically become like Tether. They don't allow any fees to people investing in these stablecoins and using them for transfers, and then they can invest all this money into US Treasury bonds without capital requirements. This is essentially unlimited profit. So I expect that if this exemption passes - and I think it will - you will see large US banks consistently working to issue "orange stablecoins" (referring to a stablecoin related to Bitcoin or a bank supporting Bitcoin), because this is a way for them to earn massive net interest income.
This is a post by Trump on "Truth Social" about Fannie Mae and Freddie Mac.
Basically, these are organizations that issued mortgages before the 2008 financial crisis. They were once very profitable. Now, what happens when you release Fannie Mae and Freddie Mac? Basically, you liberate them from government conservatorship. This deal has been discussed for nearly two years. If you bought in at one dollar, these companies might now be trading at 11 dollars in the market. But by freeing them from conservatorship, they are allowed to use their equity capital, issue more debt with implicit government guarantees, and leverage it 33 times. Then they can purchase up to 5 trillion dollars in mortgages. If you allow these two organizations to resume normal operations, this will be 5 trillion dollars of liquidity entering the market.
Simple Calculation
Where did I get the idea that Bitcoin might reach $1 million?
If we consider "QE for the poor" - banks providing more loans to the real economy - I estimate that from now to 2028, bank credit could reach up to 3 trillion dollars. The statistic to watch is the "Other Deposits and Liabilities" item on the Fed's weekly balance sheet, where we'll see this happening.
If banks are allowed to buy Treasury bonds, an estimated 900 billion dollars of foreign demand might disappear. This must be compensated by commercial banks, which can now buy these Treasury bonds with unlimited leverage.
Finally, let's release Fannie Mae and Freddie Mac, bringing 5 trillion dollars of liquidity to the market.
This would bring our money printing close to 9 trillion dollars from now to 2028.
Let's put this in context. During the COVID-19 pandemic, the US stimulus package and all aid given to the financial sector totaled about 4 trillion dollars. From the March 2020 low to the $70,000 in November 2021, Bitcoin rose about 10 times.
Remember, price is determined by the marginal. The marginal price is important, not the entire stock.
Therefore, if Bitcoin in exchanges decreases due to ETF demand, and the money we print from now to 2028 is twice that of the COVID-19 pandemic, Bitcoin reaching $1 million is quite easy.
