🚨 THE DOLLAR NEEDS A NEW BONFIRE OF THE BILLS 🚨
Blockworks explores the historical roots and modern consequences of how governments maintain trust in fiat money—highlighting the U.S. Federal Reserve’s shift from post-pandemic liquidity tightening to the likely return of money printing.
🔑 Key Points
🔹️ In colonial America, “bills of credit” (early paper money) were issued because coins were scarce—but their value had to be proven to the public.
🔹️ To preserve credibility, governments staged public “bonfires” where tax-collected bills were literally burned, showing restraint and scarcity management.
🔹️ According to historian Dror Goldberg, the burning was a public spectacle meant to convince citizens to "cherish" the paper money the government printed in arbitrary amounts.
🔹️ Today’s monetary policy “bonfire” happens quietly: since the pandemic, the Fed has “burned” (i.e. reduced) $2.4 trillion in excess reserves by letting bonds mature, shrinking the supply of dollars.
🔹️ Fed Chair Jerome Powell just announced an end to this “run-off” of reserves, signaling that the Fed thinks $6.6 trillion in bank reserves is now the minimum “ample” level—and hinting that more money printing may soon follow.
🔹️ Unlike the past, these monetary moves are not flashy or public—instead of burning physical bills, the Fed creates or destroys reserves via balance sheet adjustments and manages public trust mainly through policy statements.
🔹️ Even as the Fed shrinks reserves, the federal government has simultaneously added $6 trillion in new debt, reigniting public anxiety about the strength of fiat money.
🔎 Why It Matters
🔹️ The shift exposes a fundamental change: what was once a dramatic, transparent fiscal act of burning money is now a technical, opaque monetary operation managed behind closed doors.
🔹️ Amid rising debt and less overt signals of fiscal responsibility, public trust in the value and scarcity of the U.S. dollar is again being questioned.
🔹️ Blockworks frames this as a wake-up call: while the Fed quietly maneuvers, the need for credible signals about money’s value is as urgent as it was when colonial America gathered around bonfires to witness responsible government stewardship.
The Fed’s shift from “burning” money to preparing for new money creation highlights the enduring challenge of maintaining faith in fiat currency—a lesson as old as the first American “bills of credit.”
https://blockworks.co/news/bonfire-of-the-bills