How Bitcoin Can Fix Social Security

Introduction to the Problem

The Social Security Trust Fund currently holds approximately $2.7 trillion in U.S. Treasuries. Given the persistent concerns about Social Security’s long-term solvency, the conventional approach involves proposals for tax increases or raising the retirement age. However, we propose a radical solution that not only sustains Social Security but also promotes a non-inflationary, asset-backed system that benefits future generations: a pivot from Treasuries to Bitcoin.

Converting Treasuries to Bitcoin

The proposal involves the Social Security Trust Fund liquidating its Treasury holdings and acquiring Bitcoin. Such a move would fundamentally shift Social Security’s asset base from debt-backed securities to a non-inflationary, finite asset class. This shift could catalyze a significant upward revaluation of Bitcoin, especially as quantitative easing (QE) would likely be required to absorb the Treasury selloff.

1. Initial Impact on Bitcoin Valuation: If the Trust Fund transitions its entire Treasury reserve into Bitcoin, the resulting demand surge would likely drive Bitcoin prices to unprecedented levels. With the Trust Fund potentially holding around 25% of all Bitcoin, a price of $20 million per Bitcoin could drive the Trust Fund’s valuation over $100 trillion, establishing a large surplus well above the current $23 trillion unfunded liability forecasted for the next 75 years.

2. Sustaining Social Security with Bitcoin: With this surplus, Social Security could be fully funded, eliminating the need for further tax increases or retirement age adjustments. The Trust Fund’s continued use of payroll tax collections to purchase additional Bitcoin would create further price support, ensuring asset stability.

Overcoming the Liquidity Challenge

One issue remains: how will Social Security continue to fund benefits without selling its Bitcoin holdings, which could destabilize the market?

1. Bitcoin as a Reserve Asset: The government could classify Bitcoin as a reserve asset, allowing the Social Security Trust Fund to use its Bitcoin as collateral at the Federal Reserve. This collateralization would provide cash flow for benefits without needing to sell the Bitcoin, preserving the Trust Fund's value.

2. A Win-Win for the Federal Reserve: Unlike Treasuries, Bitcoin requires no interest payments or principal repayment. The Fed can simply hold Bitcoin indefinitely on its balance sheet, aligning with a “HODL” philosophy and preserving the value of Social Security’s primary asset.

A New Financial Model for Social Security

This proposal offers a sustainable, non-inflationary approach to Social Security. By moving away from Treasuries and embracing Bitcoin as a reserve asset, the U.S. government could not only secure Social Security’s future but also build a more resilient financial system. After stabilizing Social Security, this model could serve as a template for addressing other areas of economic imbalance, leveraging Bitcoin’s scarcity and stability for lasting financial reform.