Stablecoins: The US Dollar's Unexpected Lifeline
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Stablecoins: Private Digital Dollars Backed by Public Debt
A stablecoin is essentially a digital version of the US dollar — a token that can be held or sent like cryptocurrency but is always worth one dollar. People want them for the same reasons they use dollars: stability, trust, and global acceptance. The difference is in the delivery mechanism. Stablecoins move instantly across borders, settle within seconds, and are available to anyone with a smartphone, even where access to US banking is limited or unreliable. For entrepreneurs in emerging markets, freelancers paid from abroad, or families sending remittances home, they are simply a faster, cheaper, and more open form of the dollar.

Beyond these practical uses, stablecoins also serve as the bridge between traditional money and the wider digital-asset world. They provide the stable, dollar-based liquidity that keeps crypto markets functioning and allow assets such as Bitcoin to act as investments or collateral without needing the legacy banking system.

Unlike traditional bank deposits, which are lent out and only partly backed by cash, stablecoins are fully backed: for every token issued, there is a matching dollar or US Treasury bill (a short-term government bond) held in reserve. This distinction is critical. Fractional-reserve banking allows two parties to believe they own the same money at once — the depositor and the borrower — and that illusion holds only as long as confidence does. When confidence falters, banks face runs and rely on central-bank rescues. Stablecoins avoid that fragility by design: the backing funds are never re-lent, and redemption is immediate and transparent.

When a user sends dollars to a stablecoin company such as Circle (USDC), Tether (USDT), or PayPal USD, the company buys US Treasuries or holds cash of equal value. Those assets generate interest income for the issuer while the token circulates freely online.

When the token is redeemed, the company sells Treasuries to return cash to the user.

The GENIUS Act formalizes this model. It requires issuers to hold reserves in “safe, liquid assets” — cash or short-term Treasuries — verified by independent audits and publicly disclosed. Issuers are also barred from implying any government guarantee or central-bank insurance.

The effect: every dollar of stablecoin demand becomes a new dollar of Treasury demand. The world’s rising appetite for digital dollars now means the largest issuers collectively hold more than $150 billion in US Treasury bills (roughly 2–3 percent of all outstanding short-term Treasuries)— an amount comparable to the holdings of a major foreign creditor. And that figure is growing rapidly. At current interest rates, those holdings generate billions in income for issuers and provide steady, price-insensitive demand for US government debt.

In practice, the world’s thirst for digital dollars is now financing a significant and growing share of America’s deficits — voluntarily, profitably, and without any direction from the Federal Reserve.

I am highly suspicious of STABLECOIN and other cryptos.
I like Silver.

Well, everyone was paying attention to the budget vote this happened.

THE WORLD’S MOST IMPORTANT NUMBER JUST COLLAPSED

November 6, 2025: SOFR crashed to 3.92%. The lowest level in two years. The benchmark that controls $397 trillion in global contracts just signaled something catastrophic.

This is not a rate cut. This is a liquidity flood.

THE NUMBER THAT MOVES EVERYTHING:

SOFR replaced LIBOR in 2023 as the foundation beneath derivatives, corporate loans, adjustable mortgages, and securities worth more than 15 times global GDP. When SOFR moves, $397 trillion in financial contracts reprice simultaneously.

It just fell from 4.22% on October 31 to 3.92% in six days. A 30 basis point nosedive that saves borrowers $50 billion annually but screams one word: panic!!

WHAT THE FED IS NOT SAYING:

The Federal Reserve cut rates 150 basis points year to date. Excess reserves are flooding repo markets. Overnight borrowing costs for the entire financial system collapsed to levels not seen since September 2023, when recession fears first surfaced.

Translation: The Fed sees something breaking and is throwing liquidity at it before the fractures become visible.

THE MECHANISM OF CONTAGION:

Lower SOFR slashes bank funding costs by 10 to 30 basis points immediately. Corporate loan rates drop 15 basis points. Adjustable rate mortgages reset 20 basis points lower, cutting monthly payments by $200 average.

Credit expands 2 to 5 percent. Lending accelerates. Asset prices inflate.

But here is what they are not telling you: sub-4% SOFR has preceded every major asset bubble since 2008. Cheap money does not fix broken growth. It masks it.

THE GLOBAL SPILLOVER:

Cheaper dollar funding triggers $10 billion plus in emerging market carry trade inflows. Currency volatility spikes. Foreign central banks hoard dollars. The cycle that destroyed Argentina, Turkey, and Sri Lanka restarts.

WHAT HAPPENS NEXT:

If Q4 GDP misses expectations or inflation spikes above 3.5%, SOFR reverses violently. Repo market seizures return. The 2019 overnight funding crisis replays at scale.

If the Fed holds course, credit bubbles inflate until something pops. Corporate debt. Commercial real estate. Equity multiples at 25x earnings.

THE TRUTH BURIED IN THE DATA:

SOFR is not just a rate. It is the early warning system for systemic stress. When the world’s most important number collapses this fast, it means central banks are terrified.

They are easing into a recession they cannot admit is coming.

Hold duration. Hedge via SOFR futures. Watch repo volumes like a seismograph.

The tremors started. The quake is next.

GLP
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