It’s a hilarious definition of “fix” but the basic argument is that when you mandate stablecoins to hold treasuries and they start seeing actual adoption, you create demand/sink for a couple extra trillion dollars of treasury bonds.

Eg if Australian locals suddenly switch transacting cocaine at scale in Tether instead of AUD, the US government can borrow more money by providing that collateral to Tether.

Edit: Izzy Kaminska recently had a, as always, solid and less snarky summary at https://www.financialsense.com/blog/21379/redollarization-an...

In this scenario, what happens when there’s a run on a stablecoin?

The bonds are sold en masse, and the value of those bonds will be hit, driving up gov borrowing costs (plus they just lost a source of demand), meaning the stablecoin “bank” could be bankrupt, right?

With stable coins you’re really trusting a private company to invest your money in a way that is robust to a drop in confidence. Isn’t this high risk? If a coin gets large enough, is it a threat to government solvency?

First, Cocaine prices are way too expensive in Australia

Second, Tether is not a regulated stablecoin in United States.

Thank you for providing an actual answer! I don't know what to think of it--it seems naïve to say the least. But it is at least a self-consistent answer that helps me better understand what people mean when they say stuff like that.