Can Trump Shrink the National Debt with USD Devaluation, Gold Revaluation, and Stable Coin?

 Here’s a plain‑English way to think about the “trifecta” idea — USD devaluation, gold revaluation, and government-issued stablecoins — and how, in theory, they could be used to shrink or “reset” the burden of the $36T federal debt.

Important upfront note: This is speculative. There is no official plan. Parts of this would face legal, political, and market‑confidence constraints. I’ll explain the mechanics simply, then the limits.

How each lever works on its own

1) Devaluing the dollar (inflation/FX)

- What it is: Let prices rise faster than interest costs for a while (or allow the dollar to fall versus other currencies). That makes old, fixed‑amount debt cheaper to repay in “today’s” dollars because each dollar is worth less.

- Why it reduces the burden: If you owe a fixed $36T and the general price level rises 20%, the real (inflation‑adjusted) value of that debt falls by roughly 20% over time, as long as interest costs don’t fully catch up right away.

- The catch:

  - Creditors and markets demand higher interest rates if they expect inflation, which can raise future interest costs.

  - Some US debt is short‑term or inflation‑linked (TIPS), which adjusts, blunting the effect.

  - Devaluation doesn’t change the sticker $36T — it shrinks its real weight relative to incomes, taxes, and GDP.

2) Revaluing US gold (Fort Knox)

- What it is: The US holds about 261.5 million troy ounces of gold. On the federal books it’s still carried at about $42 per ounce (a relic of the old gold standard). Market gold is around thousands per ounce today.

- What revaluation does: If the US “marks” its gold to a much higher official price (say $2,400–$10,000/oz), the Treasury can record a very large accounting gain. The Federal Reserve could then credit the Treasury with newly created dollars against that higher‑valued gold (via gold certificates), which Treasury can use to retire some outstanding debt.

- Simple numbers:

  - At $2,400/oz: ~261.5M oz × $2,400 ≈ $628B of value (vs. ~11B book value). Roughly $600B+ of “room.”

  - At $5,000/oz: ≈ $1.31T.

  - At $10,000/oz: ≈ $2.62T.

- The catch:

  - Even at $10,000/oz, you retire only a slice of $36T.

  - It’s effectively money creation backed by a higher gold price — helpful once, not a recurring fix.

  - It risks signalling financial stress if done abruptly or at a very high reprice.

3) Government stablecoins (or a CBDC‑like dollar token)

- What they are: Official digital dollars issued by (or tightly tied to) the US, circulating on crypto rails. They can be structured to be:

  - Backed by Treasuries or reserves,

  - Direct liabilities of the government or the Fed, or

  - A regulated public‑private design.

- How they could help debt:

  - Demand channel: If a US stablecoin becomes globally dominant for payments/savings, it creates steady demand for dollar assets (mainly Treasuries) that back it. That demand can lower Treasury yields and funding costs.

  - Liability swap: The government could offer a token that replaces some interest‑bearing debt with a low/zero‑interest digital liability (think of it as cheaper funding, similar to how physical cash is a zero‑interest liability).

  - Seigniorage: The spread the issuer earns on the reserves backing stablecoins (e.g., T‑bill interest) could be captured by the government and used to retire debt over time.

- The catch:

  - You’re mostly reshuffling liabilities (who you owe and at what rate), not eliminating principal.

  - Scale matters: it would take very large adoption to materially change debt dynamics.

  - Design choices (interest‑bearing vs non‑interest; Treasury‑ vs bank‑ vs Fed‑issued) have big implications for banks and the Fed.

How the “trifecta” could work together (a hypothetical playbook)

Step 1: Revalue gold to create one‑off fiscal space

- Treasury and the Fed reprice official gold from $42/oz toward market (or above).

- The Fed credits Treasury’s account (against gold certificates) by, say, $1–2.5T depending on the chosen price.

- Treasury uses those credits to buy back and retire an equivalent amount of outstanding Treasuries. Nominal debt falls by that amount.

Step 2: Launch a US government stablecoin to reduce ongoing funding costs

- Issue a widely usable, safe, government‑backed dollar stablecoin.

- Back it primarily with short‑dated Treasuries.

- As global users adopt it, the government captures:

  - Lower borrowing costs (more demand for Treasuries),

  - Seigniorage from the reserves,

  - The option to keep the token non‑interest‑bearing or very low interest, which is cheaper than selling regular bonds.

- Over time, use that seigniorage and cheaper funding to slow debt growth and fund buybacks.

Step 3: Allow moderate inflation/FX devaluation to erode the real burden

- Keep inflation moderately above interest costs for a period, raising nominal GDP faster than debt.

- As wages, profits, and tax receipts rise with nominal GDP, the debt‑to‑GDP ratio falls, and the real weight of fixed‑rate debt declines.

- Combine with primary‑budget discipline to lock in the gains.

What this can and cannot achieve

- What it can do:

  - One‑off reduction: Gold revaluation could retire perhaps $0.6–$2.6T depending on the chosen price.

  - Ongoing relief: Stablecoin architecture could lower funding costs and yield seigniorage that cumulatively helps.

  - Real‑term relief: A period of controlled inflation reduces the real burden and improves debt‑to‑GDP optics.

- What it cannot do (without side effects):

  - Magically erase $36T. Even aggressive gold revaluation addresses only a fraction.

  - Avoid trade‑offs. Devaluation risks higher rates and inflation expectations; abrupt gold moves risk confidence; a government stablecoin could disrupt banks and the Fed’s toolkit.

  - Replace fiscal choices. Long‑run debt dynamics depend on spending, revenues, growth, and interest costs.

Bottom line

- In theory: The trio works like this — use gold revaluation for a one‑time chunk of cash to retire some debt; use a government stablecoin to make funding cheaper and capture seigniorage; and let moderate inflation shrink the real weight of what remains.

- In practice: It reduces the burden more than the headline number, but it doesn’t painlessly “reset” $36T. The effectiveness hinges on design details, credibility, and market reaction.