The post Minneapolis Fed researchers label Bitcoin a threat, suggest heavy taxation or banning appeared on BitcoinEthereumNews.com.

The Federal Reserve Bank of Minneapolis has recommended a tax or ban on Bitcoin. In a recently published working paper, the Minneapolis Fed described this as necessary for the government to maintain a permanent primary deficit. According to the researchers, Bitcoin makes it difficult for the government to maintain a permanent primary deficit because it provides an alternative. However, banning or taxing the flagship asset will fix this problem. It said: “A legal prohibition against Bitcoin can restore unique implementation of permanent primary deficits, and so can a tax on Bitcoin.” This research abstract noted that in an economy where consumers have sufficient risk aversion, it is theoretically possible for the government to implement a permanent primary deficit. However, such implementation fails because of Bitcoin. A primary deficit is when the government spends more than it generates in revenue, excluding interests on its debts. The US had a primary deficit of $1.13 trillion in the 2024 fiscal year, far below its national debt of $35.7 trillion. By adding permanent, the researchers envision a scenario where the government plans to keep outspending its revenue annually. While this is possible, Bitcoin introduces a “balanced budget trap,” forcing the government to balance its budget. Research describes Bitcoin as a useless piece of paper Meanwhile, the paper described Bitcoin as “useless pieces of paper” because its value is not attached to tangible resources. The researchers noted that Bitcoin represents a “metaphor for a private-sector security that is in fixed supply and that is not a claim to any real resources.” Despite describing Bitcoin as useless, the paper acknowledged that government securities are not different from Bitcoin as they also represent “a claim to nothing.” This comparison does not ignore that government stocks yield dividends, as the researchers noted that the government ends up printing…

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Filed under: News - @ October 21, 2024 7:20 pm