The U.S. is approving stablecoins for a strategic reason: they require reserves, which must be U.S. treasuries. This policy creates a massive, new, non-traditional buyer for government debt, helping to finance enormous and growing fiscal deficits with a structural source of demand.

Luckey argues that US foreign policy is shifting away from direct military intervention. The new, more effective strategy is to arm allies, turning them into "prickly porcupines" that are difficult to attack. This approach maintains US influence and economic benefits while avoiding the political and human cost of deploying troops.

By creating a regulatory framework that requires private stablecoins to be backed 1-to-1 by U.S. Treasuries, the government can prop up demand for its ever-increasing debt. This strategy is less about embracing financial innovation and more about extending the U.S. dollar's lifespan as the global reserve currency.

To extend the solvency of U.S. debt, create a one-to-one stablecoin backed by treasuries. This would grant global citizens, particularly in countries with unstable currencies, a direct way to save in a dollar-denominated asset. This new demand could lengthen the runway for U.S. fiscal policy.

Framing Bitcoin as a store of value ("digital capital") and stablecoins (backed by US Treasuries) as the transactional currency is a brilliant political strategy. It reassures the US government by creating new, global demand for its debt, thus avoiding an antagonistic relationship.

The "military backs the dollar" thesis is being challenged by Russia's performance against NATO, the disruption of naval power by cheap Houthi drones, and China's chokehold on rare earths. This erosion of credible power projection directly weakens the dollar's foundation of global dominance.

In a novel attempt to delay a debt crisis, policymakers are pushing for regulations that would force stablecoin issuers to back their digital dollars one-to-one with U.S. Treasuries. This cleverly creates a new, captive international market for government debt, helping to prop up the system.

Libra's failure was not technical. The U.S. government intentionally blocked it, recognizing stablecoins as a way to extend the dollar's global dominance. It refused to let a private company control this new financial power, especially with a multi-currency basket.

A nation’s currency becomes dominant long after its economic and military power is established. Similarly, it retains that status due to network effects long after other metrics of power have begun to decline. The dollar's persistence is an example of this lagging effect.