... they would attack the market and watch people leave of their own accord. Their investment would have to be small to push the price down to nothing ($1m would be nothing, I imagine), make it less than the cost of electricity, and watch people's own fear weaken the system.
Possible? Yes.
Viable? Initially.
In order to suppress the price, the pressure must be applied continuously. With this the case, money would flow from USD to BTC. Since BTCs cannot be destroyed, buyers could pick them up at $0.01 until all currently existing ~7 million have been bought at a total market value of ~USD$70,000.
As the number of Bitcoins continue to rise, if the value were to continue being suppressed, the total market value could be kept at ~USD$210,000.
However, consider the issues currently facing the US and its currency. Debasement raises the cost of suppression.
Also, there is a maximum amount of BTCs that can be bought. They have to be subsequently mined. Unless the US is going to set up a mining farm to maintain control of all the BTCs generated, sellers will be unlikely to settle for $0.01/BTC. If the lowest price accepted per Bitcoin were to be $1,000 and a block of 50 were being sold, that's $50,000 that the US gov't would have to part with. Taking into consideration the likelihood that people will wise up to this game, the price may very well escalate much higher.
Imagine the minimum asking price at $100,000/BTC or greater. Is the US gov't going to blow $5mm every 10 minutes on this, or will that money wind up in the pockets of cronies and other criminals as they raid the treasury while the nation burns?
If you really want to take this for a spin, let's assume all 8 digits of expansion have been utilized. That comes to about 700 trillion Satoshis. If each one were to sell for $0.01, the grand total would be USD$7 TRILLION! If you buy in now at $0.01 and the suppression continues to the final conclusion, your end asset would be 100 million Bitcoins or $1,000,000 in fairly worthless USD.
In conclusion, if politicians and bankers were to truly be so stupid, I would be first in line to accept what amounts to free money. Hey, this is effectively what they're doing with the banks, only with them it's debt instead of Satoshis.
