Trust Bonds: A Plan to Extinguish U.S. Debt
The U.S. national debt, now measured in tens of trillions, looms as an ever-growing threat—a ticking time bomb few in Washington seem inclined to defuse. Half-hearted plans to address this crisis have floundered because they lack either the boldness or the practicality to succeed.
But what if a solution existed to nominally eliminate the national debt, slash its real cost, and transition the U.S. to a sounder monetary system—all within a single presidential term?
Enter Trust Bonds, an innovative, market-driven framework designed to achieve these goals.
The Core Concept: Real Assets for Real Stability
At the heart of this plan is the creation of a new class of government bonds, redeemable in tangible assets rather than fiat currency. By offering bonds backed by gold, land, energy credits, or even Bitcoin, the U.S. can present a credible alternative to traditional Treasuries, restoring investor confidence and paving the way for a more stable monetary future. These bonds would leverage market dynamics to:
Nominally eliminate the national debt while reducing its real cost.
Transition the dollar toward asset-backed money.
Build a financial system that is transparent, self-enforcing, and resilient.
This is not just another debt-restructuring gimmick. It’s a rethinking of the relationship between money and governments.
Step 1: Asset-Backed Bonds
Trust Bonds would differ from traditional Treasuries by being redeemable in tangible assets. Several options for the asset could be explored:
Gold-Backed Bonds: Gold’s universal appeal and monetary stability make it a prime candidate. Leasing gold generates revenue, enhancing the bond’s productivity.
Land-Backed Bonds: The U.S. owns vast tracts of land that can be redeemed. Land’s tangibility and abundance make it a potentially secure choice.
Bitcoin-Backed Bonds: Bitcoin’s divisibility, liquidity, and programmability offer transparency and automation. Although not physical, Bitcoin would be redeemable.
Tax-Free Certificates: Bonds granting future tax exemptions. These provide a unique way for investors to hedge against rising taxes.
Energy-Backed Bonds: Solar or nuclear energy credits could back bonds, representing future energy consumption rights.
This variety allows the market to decide which assets are most valuable as money. While this provides useful information, the primary focus is on reducing debt and restoring fiscal discipline, not on prediction or policymaking.
Step 2: Debt Exchange Mechanism
Trust Bonds wouldn’t merely add to the debt pile. Instead, they would replace existing Treasuries through a structured exchange:
Investors could only acquire Trust Bonds by surrendering existing Treasuries (of equal or longer duration).
Since Trust Bonds are redeemable in real assets, they would trade at a premium, requiring investors to give up more nominal Treasuries for the same face value in Trust Bonds.
Example: Gold-Backed Bonds
Suppose the government offers a 10-year gold-backed Trust Bond. The bond promises to pay a fixed amount of gold at maturity. Given gold’s enduring value and its ability to hedge against inflation, investors would likely value this bond higher than a fiat-based Treasury of the same duration. To obtain $1 million in Trust Bonds, an investor might have to surrender $1.2 million in Treasuries. This premium reflects the greater security and desirability of the asset-backed bond, allowing the government to reduce its real debt obligations while keeping its nominal commitments intact.
Step 3: Automation and the Gov Black Box
Many smart thinkers have come up with schemes to eliminate debt but most fail for one of two reasons. Either they rely on price fixing schemes which are not economically sound or they rely on selfless politicians, which violates the basic premises of public choice theory.
To ensure credibility and enforceability, the Trust Bonds system would have to have some forcing mechanism to operate transparently. I propose automation and technological safeguards:
The Public Oracle: A transparent system overseeing asset exchanges, ensuring bonds are issued, serviced, and redeemed fairly.
Ex: Ms. Pricing buys a Trust Bond entitling her to a Satoshi in 10 years by tendering a 10-year Treasury. This is recorded on the Public Oracle which can utilize blockchain and smart contract technology to automatically send Ms. Pricing’s Satoshi to her wallet when the time is right. No politician can redefine what a Satoshi is, what a bond is, or reneg on the terms of the deal. The smart contract enforces the terms of the agreement without human (political) interference.
The Government Black Box: A self-enforcing safeguard against tampering. If the Trust Bond system is interfered with, the Black Box automatically releases its contents online, deterring manipulation.
Ex: Edward Snowden could leak classified documents by sending the information to a Black Box that has a public address with no information on how large the contents of the box have grown. This would force politicians to think twice about messing with the bond system since damaging information could be in the Black Box.
This combination of automation and deterrence ensures the program’s integrity, even across administrations.
Step 4: Incentivizing Real Asset Payments
To meet Trust Bond obligations, the government could incentivize taxpayers to pay using real assets. For example:
Offering tax discounts for payments in gold, Bitcoin, or energy credits.
Accepting land or other tangible assets as tax payments.
This approach creates a steady stream of real assets to back the bonds, reducing reliance on market purchases.
Step 5: Innovation Through Competition
To encourage the best implementation, the government could crowdsource solutions by:
Offering prizes tied to the percentage of debt successfully converted into Trust Bonds.
Pilot-testing the top designs with long-duration Treasuries before scaling to shorter maturities.
This competitive framework minimizes risks while fostering innovation and efficiency.
Q&A: Addressing Concerns and Objections
Q: Why not just create a Strategic Bitcoin Reserve?
A: Holding Bitcoin as a reserve asset is a passive strategy that depends on speculative price increases and would be unable to outrun government debt increases. In contrast, Trust Bonds actively monetize assets by creating a redeemable market for them while retiring paper debts, rather than waiting for fiat currencies to collapse.
Q: What about critics who argue that reserve assets are unnecessary under an irredeemable currency system?
A: While it’s true that fiat systems don’t require reserve backing, this system has proven vulnerable to inflation and massive debt accumulation. Trust Bonds offer a path to restore credibility by letting markets decide what constitutes sound money. The asset-agnostic approach (gold, Bitcoin, land, etc.) ensures flexibility and since the system is voluntary there should be no threat to the current paper system if it is the most desirable.
Q: Won’t issuing asset-backed bonds be more expensive?
A: The Trust Bonds may trade at a premium and this is used to reduce outstanding debt obligations. The market’s willingness to accept these bonds at higher nominal values demonstrates their confidence in the backing assets, making this a net positive for the government who can retire their debt at a real discount.
Q: What prevents political meddling or default?
A: The automation and self-enforcing mechanisms (Public Oracle and Black Box) ensure the system’s integrity, even across administrations. This reduces the risk of tampering or reneging on commitments.
Q: How does this benefit taxpayers?
A: By reducing the debt, taxpayers are spared future tax hikes and the siphoning of resources from the private sector to the public sector. Additionally, the system creates opportunities for individuals to monetize more of their assets through tax incentives. Sound money could also reign in government spending in general and reduce the allure of deficit spending.
A Legacy of Sound Money
Trust Bonds do more than solve the debt crisis; they set the stage for a sounder, more prosperous future. By reducing debt, transitioning to redeemable money, and leveraging market dynamics, this plan provides a credible, practical pathway to fiscal stability.
For the leader who implements this vision?
Mount Rushmore awaits.