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The Federal Reserve Bank of Minneapolis recently published a paper suggesting that governments should ban or tax bitcoin to maintain primary deficits.
in a work paper Recently released by the Minneapolis feds on October 17, governments are urged to legally ban bitcoin (btc) trading or enact a bitcoin tax if they want to keep their primary deficits permanent.
“A legal ban against bitcoin can restore the one-time implementation of permanent primary deficits, and so can a tax on bitcoin at the rate,” states the summary of the working paper titled “One-time implementation of permanent primary deficits?” by Amol Amol and Erzo GJ Luttmer.
In the 40-page document, bitcoin is labeled as a “balanced budget trap,” defined as an alternative state where the government is forced to balance its budget. This is because the Federal Reserve sees bitcoin decentralization as an obstacle to policy implementation, especially for governments that aim to maintain their permanent deficits using nominal debt.
The researchers called bitcoin an example of “private sector security” of fixed supply without “real resource claims.” Therefore, they propose that bitcoin should be banned or taxed to solve this problem.
A primary deficit occurs when a government spends more money than it has in the form of taxes and other revenues. Adding the term “permanent” to the primary deficit indicates that the government intends to continue spending more money than it has in the budget.
VanEck's head of digital asset research, Matthew Sigel, considers the working paper published on the Manhattan Federal Reserve an “attack on bitcoin.”
According to Sigel, the document indicates that governments may run permanent deficits if consumers “do not wake up and adopt new money like btc.”
He also cited a x.com/TuurDemeester/status/1847512241173582058″ target=”_blank”>mail from bitcoin analyst Tuur Demeester criticizing an October 12 research work by the European Central Bank claiming that older bitcoin holders profit from newer holders. The paper argued that bitcoin should be regulated to prevent its price from rising or banned entirely.
“(The paper) fantasizes about 'legal ban' and additional taxes on btc to ensure government debt remains 'the only risk-free security,'” Sigel wrote in an Oct. 21 article. x.com/matthew_sigel/status/1848143150088380855″ target=”_blank”>x publication.
