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Is Bitcoin a Dangerous Economic Threat? Researchers at the Minneapolis Fed propose heavy taxes or outright bans as solutions

The recent research from the Federal Reserve Bank of Minneapolis has stirred things up, suggesting that Bitcoin could be a thorn in the side of the government’s fiscal policy. The researchers propose a bold solution: impose a hefty tax on Bitcoin or ban it completely.

According to them, Bitcoin creates serious challenges for governments, especially when it comes to maintaining a ‘permanent primary deficit’ – a situation in which government expenditure always exceeds revenue, without taking into account interest payments on debt.

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In their article, the researchers argue that Bitcoin, as a decentralized digital currency, competes with government-issued securities, making it more difficult for governments to manage their finances.

“A legal ban on Bitcoin could restore the unique implementation of permanent primary deficits, and so could a tax on Bitcoin,” they argue. That’s a mouthful, but essentially they’re saying that Bitcoin’s existence forces governments to face the fiscal realities they’d rather avoid. It’s like dragging a leaky boat while the waves keep crashing.

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As of 2024, the US primary deficit will be $1.8 trillion and the national debt a whopping $35.7 trillion. The researchers suggest that this shortage could be sustained indefinitely – as long as something like Bitcoin doesn’t upset the balance. The article describes Bitcoin as ‘useless pieces of paper’ as it is not supported by any real sources.

Although government bonds are not tangible, they do influence nominal interest rates, which governments can control through monetary policy. Conversely, Bitcoin is like an unruly guest at a carefully planned dinner party, throwing the entire event out of balance.

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“If there are laws against private sector bubble assets, it is easy for the government to design policies that uniquely implement a permanent primary deficit,” the researchers continue, noting that if Bitcoin is not kept in check, it will could destroy the delicate balance of the budget deficit. financing. They suggest that a high enough tax could be sufficient without resorting to an outright ban.

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