The Doom Loop. (Any views expressed in the below are… | by Arthur Hayes | Apr, 2022

  1. Sell debt to domestic entities. This crowds out local business as capital is lent to the government, not productive private enterprises.
  2. The central bank can print money and purchase debt issued by the government. This is inflationary as more money is chasing the same amount of real goods.
  3. Sell debt to foreigners. This keeps domestic interest rates low without expanding the money supply, which creates inflation.
  1. China has the ability to purchase hydrocarbons in the global market for USD in the billions of dollars.
  2. However, China does not need an infinite amount of fossil fuels to meet its economic needs, nor can China store a sufficiently large amount of these commodities.
  3. China could build new power plants and run existing ones harder to generate more electricity than its economy needs by a wide margin with additional hydrocarbons it purchases with USD or EUR.
  4. Then, China could allow the Bitcoin miners to return onshore and mine Bitcoin with the cheapest cost of electricity globally due to the vast amounts of surplus energy available.
  5. In return for cheap electricity and legally enforceable and protected property rights, China could then demand a hefty tax on all Bitcoin block rewards and transaction fees earned by local miners.
  6. In this way, China sells USD and EUR for hydrocarbons, burns hydrocarbons to generate electricity, and then stores the excess electricity in the form of Bitcoin earned from mining.

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