Lately, the SEC has been telling Congress to "act quickly" in regulating stablecoins. Here is my take on why they are so concerned.

A little less than two years ago, the repo markets started going bankrupt each night. As far as I understand, those are the markets that nations use to access the USD reserve currency. That revealed that the repo markets were undercapitalized and they restarted QE. But countries started getting around the issue by just buying stablecoins and converting them to dollars. Why would the US care? Their dollar is still the world's reserve currency and the stablecoins create demand for it. But they are adamant about regulating them now and they seem to want them gone all together. I read that Tether has stopped adding new funds.

My opinion about their reasoning on this is global control. Iran would be a great example. When they can only sell oil in dollars, and the dollar is controlled by the US, then the US essentially controls Iran. That is the real purpose of having a reserve currency. It isn't about finance, it is about control. If Iran does not obey the US, they will be cut off from the SWIFT system. Any country that wants to use dollars will be controlled by the US in the same way.

Stablecoins changed all that. It bypasses SWIFT all together. It allows nations to have access to dollars even if the US doesn't want them to. It doesn't add or remove and dollars from the system. But it does provide access to dollars unconditionally. That takes away the power that the dollar gives the US government over the world.

Here is one of the more recent stories, but there are quite a few more.

SEC Chair Hints Some Stablecoins Are Securities
https://www.coindesk.com/sec-chair-hints-some-stablecoins-are-securities

Back in the mid-1990s, a feminist and Women's Studies professor wrote a book about what she saw as the destruction of feminism as the movement became less and less about protecting and enhancing the lives of women and more about what she referred to as the "Sexual Harassment Industry". She called it Heterophobia, and she was immediately ostracized from the feminist world after she wrote it.

https://www.alibris.com/Heterophobia-Sexual-Harassment-and-the-Future-of-Feminism-Daphne-Patai/book/8317332

The bitcoin logo (on the OP's account) seems to have the exact same colors as the Super Straight logo. Coincidence?

Regardless of the truth or falsity of it, governments will certainly exploit it to start issuing DUVs and pull people over for nothing more than to "check on their wellbeing". Never let a great crisis go to waste, right? The crises they exploit don't have to be true. They only have to be believed. Truth is whatever you can convince people of. Welcome to PostModernism.

They'll also probably try to outlaw driving all together, in order to further centralize the transportation system. Transportation is one of the last remaining frontiers of hyper-centralization. There is lots of evidence they are already trying to outlaw driving, and stories about "vaccidents" would be a great weapon to add to their arsenal. Everything is about centralized control of the human species.

It seems to be the direction the law in Russia is headed.
https://www.rt.com/russia/489336-russia-law-prisons-cryptocurrencies/

Others are suggesting some countries could make it illegal to invest in gold.
https://www.marketwatch.com/story/stashing-some-gold-heres-why-that-could-soon-be-illegal-according-to-one-notable-hedge-fund-bear-2020-05-20

It is collapsing right now. The debt problem is not only national but corporate. That seems to be where the real problem is. American corporations are deep in debt and don't have a way to pay it. There is a bond crisis going on right now that is suspiciously underreported by most media as the virus and lockdown are dominating the news. But corporate bonds that used to be considered investment grade are dropping down to junk status. Much of the QE we are seeing is going toward propping up the failing bond market. So the premise of the original post, that people saving money might be harming the economy, is a red herring. Individual citizens, most of whom might be holding onto a couple thousand dollars cash at the most, are not harming the economy. They are helping it. The notion that individual's holding cash could harm the economy comes from the fear of the inevitable. They want to lock down the money in bank accounts so they don't have to print more. But when the fear of printing more money leads to lockdowns of cash in addition to lockdowns of people, it is not a good sign for the future of the economy. When this does spin out of control, it will be because of corporate bailouts, not because of individuals holding cash. The bond crisis is in the trillions of dollars and growing.

What can be said of an economic system that becomes more volatile when its citizens become more frugal and financially responsible?

I think the US is in the process of making cash illegal by using a few different excuses. It is precisely the hoarding of cash that makes them nervous. They want to know where the money is at all times. They want access to it. They want to know who spent how much on what.

There is very little true economics left going on in the US. It's all politics now.

Very good question. First, I'd like to make it clear that I didn't mention bitcoin in my original message. But I don't think you can compare a fiat reserve currency to a cryptocurrency. They operate in different ways. For example, the US dollar is controlled by the Fed. A central bank is an economic institution that serves political purposes. Human beings are behind the decisions that affect the value, liquidity, etc. of the US dollar. Bitcoin doesn't have those problems. It does have rules in place, like the recent halving, but there are no surprise rate hikes or cuts, no sudden unlimited QE that has to happen in order to prop up markets. When foreign nations decide to use something as a reserve currency, they need more than just someone's word that it will hold value, because they know the human beings who are controlling it probably aren't completely honest, and they don't really know these people are competent either. Human decisions are not predictable, and a currency, especially a global one, needs to have predictability. Central banks have essentially turned currencies into commodities. If you remove the question of human decision making so that the whole world could know ahead of time how the US dollar would behave moving into the future, nobody would care very much if it is backed by anything.

Your question brings up some other valid questions of course. What backs gold? What backs all those stablecoins that claim to be backed by the US dollar? If the dollar isn't technically backed by anything, how could it back a stablecoin? Perhaps the dollar is partially backed by the demand created by those stablecoins. Will bitcoin ever be a reserve currency? If the US goes through what the Weimar Republic went through, what would the world trade in? If you think "it can't happen here", remember that it couldn't happen there either, until it did.

I think those are the big questions as this topic relates to bitcoin. A reserve currency needs global trust, but more importantly the world needs to trust what is behind a reserve currency. It isn't the dollar that people don't trust; it is the Fed. Bitcoin isn't inherently more trustworthy. The reason it seems more trustworthy is because it doesn't have a central bank.

I agree that it comes down to oil settlements. At a minimum, a reserve currency needs to
1. be stable and of relatively high value
2. have enough supply for the entire world
3. have enough liquidity for the entire world

Right now, the US dollar doesn't have enough of any of these things.
1. It hasn't been backed by anything real since 1971. People say the dollar is backed in oil sales, but commodity sales are not legitimate backing for any currency. Backing is like collateral for debt. In fact, one of the reasons the US dropped the gold standard is because lending nations knew the US did not have enough gold to cover its debts after the Vietnam War. Using the dollar to settle oil deals creates ongoing demand for it, but it does not provide real collateral. So the idea to back the dollar in oil sales was never legitimate, especially now that we've seen negative oil prices for the first time. On a side note, I bet the US never does pay the majority of its debt. Several years ago, when Christine LaGarde was still with the IMF, she made a comment (in reference to Greece) to the effect that most of this debt is never going to be repaid. I'm not sure how they intend to settle the massive amounts of sovereign debt out there right now, but I sure hope it doesn't involve the use of militaries.
2. There is a huge supply of dollars, but there are still dollar shortages internationally, right now at least. Smaller currencies are collapsing and need dollars to get them through this period. If nations aren't able to acquire the numbers of dollars they need, they will begin to lose faith in it and try to find something else. If enough of them start trying to find an alternative to the dollar, they will eventually succeed.
3. The current liquidity problems have been going on since about 2007 (maybe a little earlier). If you look at the Fed's Total Assets chart, you'll see that it did not return to normal after the Recession officially ended, and lately it appears to be spinning out of control. Quantitative Easing, in the amounts needed, would diminish the value of the dollar. Too much more liquidity would lead to less stability. I like the Weimar Republic photo in the comment I responded to because it appears to be the path the US is taking, possibly on track for one century later, almost to the day.

Then why is the dollar still the reserve currency? Because there is no alternative. The high demand is keeping it stable for the time being, like a self-fulfilling prophecy. No other nation or entity has a currency that could take the dollar's place. In my personal opinion, the world does not have any real reserve currency right now at all, and they are simply using the dollar as a default for lack of anything more suitable. Interest rates may go negative, or even if they stay where they are, the incentive for nations to use the dollar is already diminishing.

The biggest problem for the US is that it is trying to run a global currency and a domestic currency with both the global and domestic economies hanging from thin threads. And while all of that is going on, it is now subsidizing a collapsed bond market. All the so-called Fallen Angels that have been downgraded to junk are valued in the trillions of dollars. The dollar is also political power as it is used to enforce sanctions. So there is the political facet of the whole thing too. All of this is too much for a central bank to manage. It isn't possible to juggle all of that with the few tools the Fed has. I think the US domestic economy will be the thing that goes into freefall as they try to prop up the others.