We’ve been talking recently about the recapitalization of the United States.
There’s an old saying that if you want to know what’s going on, you have to follow the money. And the money is suggesting that institutional capital—large entities like pension funds, endowments, and insurance companies—are betting on significant policy changes.
My read is that we’re going to see a sincere effort to recapitalize the American economy. This will require a significant restructuring of America’s financial and economic framework on three levels:
- Government Debt and Fiscal Health
- Economic Revitalization
- US Dollar Stability
Last week we touched on how Bitcoin fits into the picture. We noted that there’s strong support within the Trump administration for creating a Strategic Bitcoin Reserve for the country. That plan entails purchasing 200,000 bitcoins a year for five years.
As we discussed, this signals that Bitcoin will become a prime source of collateral within the dollar-based financial system. But there’s a lot more to that story than meets the eye…
Trump appointed a man named Howard Lutnick to serve as Secretary of Commerce in the next administration. I don’t think Lutnick has much name recognition, but he’s the CEO of investment firm Cantor Fitzgerald.
Cantor Fitzgerald provides institutional clients with a range of financial services. And the firm also happens to be one of the 24 primary dealers within the Federal Reserve System (the Fed).
This is quite a privileged position to be in. The primary dealers bid on US Treasuries at auction and receive direct access to the Fed’s cheap financing through the discount window and repurchase (repo) agreements.
All that’s to say that Lutnick is a true insider. He’s attuned to the plumbing that underlies the dollar-based financial system. And here’s where this story gets interesting…
Earlier this year Cantor Fitzgerald invested $600 million into a company called Tether. Cantor now owns roughly 5% of the company.
Tether issues the US dollar stablecoin of the same name. Tether’s ticker is USDT.
USDT is a cryptocurrency that functions similar to Bitcoin… except it’s pegged 1-to-1 with the US dollar. That means one USDT always equals approximately $1.00.
Maintaining this peg is rather simple. Users buy USDT with dollars. When they do, Tether takes those dollars and invests them in various assets, including US Treasuries, Bitcoin, and gold. This creates an asset reserve that backs each USDT issued.
Shortly after Cantor’s investment in Tether, a rumor began to spread throughout financial circles that Cantor was also developing a fund to loan US dollars against Bitcoin collateral – with Tether serving as a critical piece of that infrastructure.
And now we can see the plan starting to form…
Led by Cantor Fitzgerald, we’re going to see the legacy financial system start to lend dollars against Bitcoin… in just the same way that they lend money against other hard assets like real estate.
That means the US government will be able to borrow money against its Strategic Bitcoin Reserve – giving it a second financing source in addition to issuing Treasuries. The net effect of this is that the US dollar will be backed by Bitcoin to a certain extent. Bitcoin will be monetized.
This will also drive demand for USDT as it’s the middle layer between legacy dollars and Bitcoin. As capital flows into USDT, Tether will invest it in reserve assets – further backstopping the dollar. And with a primary dealer in Cantor now backing the company, we can expect Tether to invest heavily in US Treasuries as well.
The more I think about it, the more I realize that it’s a rather brilliant plan.
The US government is going to buy one million bitcoins over the next five years to create its strategic reserve. Meanwhile, the legacy financial system is creating the infrastructure necessary to lend against Bitcoin as collateral. This means that the Strategic Bitcoin Reserve will back the dollar to a certain extent.
At the same time, other institutions and individuals will use these bitcoin-backed loans to unlock the value they hold in Bitcoin – allowing their bitcoins to serve as a personal reserve asset.
This will drive increased capital into Tether, which will then buy US Treasuries. This will support the federal government’s finances – reducing the need for foreign investment.
The bottom line here is that the America First plan is coming together.
It’s not the Ron Paul plan that so many of us advocated for a decade ago… but it will shore up the US government’s finances, stabilize the dollar, and revitalize the American economy at the same time.
That is, if the DOGE team does in fact cut spending and downsize the government as well. That has to happen to make it all work. There’s still no such thing as a free lunch.
So the plan is falling in place. Now they just have to execute it. If they do, we’re going to witness something I considered impossible at this time last year – the recapitalization of America.
-Joe Withrow
P.S. We’re refining some of our investment strategies to adjust to the new reality we find ourselves in. If the dollar does stabilize per the plan we discussed today, that opens the door to a three-pronged approach to investing that can systematically grow our income while making us bulletproof financially at the same time.
I’m still working on the finer details, but I’m very excited about how it’s coming together. I’ll lay out these new strategies for you in a webinar after the first of the year – probably in January.