search
Homeweb3.0Bitcoin's Existence Complicates Government Efforts to Control Fiscal Outcomes, Argue Researchers
Bitcoin's Existence Complicates Government Efforts to Control Fiscal Outcomes, Argue ResearchersOct 21, 2024 pm 07:06 PM
bitcoin Taxation Government Deficits Minneapolis Fed Research Paper

Amol Amol and Erzo Luttmer, both associated with the University of Minnesota and the Federal Reserve Bank of Minneapolis, published a working paper on October 17 titled “Unique Implementation of Permanent Primary Deficits?

Bitcoin's Existence Complicates Government Efforts to Control Fiscal Outcomes, Argue Researchers

Economists from the University of Minnesota and the Federal Reserve Bank of Minneapolis have a new working paper out on the challenges of government fiscal policy in an economy with Bitcoin. The paper is titled “Unique Implementation of Permanent Primary Deficits?,” and it was written by Amol Amol and Erzo Luttmer.

A permanent primary deficit occurs when a government consistently spends more than it earns from its regular income (like taxes), not including the interest it has to pay on its existing debt. In other words, the government’s expenditures are higher than its revenues, creating a gap that needs to be financed. This deficit is called “primary” because it only looks at the core operations of the government, excluding the cost of servicing its debt (interest payments).

Economists generally view a permanent primary deficit as sustainable only if the government can keep borrowing at affordable rates or if its economy grows fast enough to keep debt manageable. However, if left unchecked, it could lead to rising debt levels, inflation, or a loss of confidence in the government’s ability to repay its obligations.

Amol and Luttmer argue in the paper that governments can maintain permanent primary deficits under specific conditions in an economy where markets are incomplete and consumers are highly risk-averse. According to their analysis, the government can achieve this by issuing nominal debt and employing continuous Markov strategies, which rely on current economic conditions and prices.

The researchers explain that these strategies allow the government to finance a deficit while keeping the price of government debt stable. They assert that, through careful management of the relationship between government spending and debt issuance, the government can avoid being forced into a balanced budget. The paper emphasizes that such fiscal policies are designed to maintain an equilibrium where the price of government debt remains positive, allowing the government to continue financing its deficit without facing financial constraints.

However, Amol and Luttmer highlight that the presence of Bitcoin, which they refer to as a “useless piece of paper” with no intrinsic value, complicates this strategy. The authors state that despite being unrelated to real economic resources, Bitcoin can still trade at a positive price, which introduces multiple possible economic equilibria. Amol and Luttmer argue that this leads to what they describe as a “balanced budget trap,” where the government is forced to balance its budget despite its goal of running a permanent primary deficit.

The paper suggests that governments could counter this disruption by taxing Bitcoin or outright prohibiting its use, as Amol and Luttmer argue. They propose that imposing a tax on Bitcoin equal to its market value could prevent alternative equilibria from forming. They say such measures would restore the government’s ability to implement continuous fiscal deficits without the interference caused by Bitcoin.

The authors further stress the broader implications of this issue, noting that the existence of assets like Bitcoin complicates government efforts to control fiscal outcomes. They explain that Bitcoin allows for an alternative method of wealth storage that operates independently of government fiscal policies. They argue that this independence undermines the government’s ability to ensure fiscal stability when attempting to maintain permanent deficits.

The above is the detailed content of Bitcoin's Existence Complicates Government Efforts to Control Fiscal Outcomes, Argue Researchers. For more information, please follow other related articles on the PHP Chinese website!

Statement
The content of this article is voluntarily contributed by netizens, and the copyright belongs to the original author. This site does not assume corresponding legal responsibility. If you find any content suspected of plagiarism or infringement, please contact admin@php.cn
Senators Lummis and Scott Promise Pro-Bitcoin Legislation if Republicans Win the Majority in the Upcoming ElectionsSenators Lummis and Scott Promise Pro-Bitcoin Legislation if Republicans Win the Majority in the Upcoming ElectionsJul 27, 2024 pm 12:58 PM

Senator Cynthia Lummis took the stage to speak at the Bitcoin 2024 conference along with Senator Tim Scott, on Friday, discussing cryptocurrency and their vision for its role in the U.S. financial system.

Bitcoin (BTC) Exchange Netflow Has Just Taken to Positive Values, Here's What It MeansBitcoin (BTC) Exchange Netflow Has Just Taken to Positive Values, Here's What It MeansJul 27, 2024 am 12:07 AM

On-chain data shows the Binance exchange has received large net Bitcoin inflows during the past day, indicating that BTC's decline may extend further.

Hackers recover $3 million in bitcoin from software wallet locked for over a decadeHackers recover $3 million in bitcoin from software wallet locked for over a decadeJun 14, 2024 am 09:57 AM

JoeGrand-anethicalhackerandYouTuberwhoiswidelyknownforhisprojectsinvolvingcryptowallets,hassuccessfullyrecoveredalife-changingamountofbitcoin,presentlyvaluednorthof$3millionfromasoftwarewalletthathasbeenlockedformo

Bitcoin (BTC) – America’s Key To Economic Supremacy?Bitcoin (BTC) – America’s Key To Economic Supremacy?Jul 26, 2024 pm 09:15 PM

In the ongoing global economic and geopolitical rivalry, the United States may have a powerful new weapon – Bitcoin (BTC). That is the argument made by Sam Lyman

US Stock Market Peak Warning May Also Impact Bitcoin (BTC) MarketUS Stock Market Peak Warning May Also Impact Bitcoin (BTC) MarketJul 27, 2024 am 06:35 AM

Financial experts are warning of an impending peak in US stocks. This may also lead Bitcoin to rise. According to Arthur Budaghyan, an analyst at BCA Research, the US stock market

Bitcoin Holders Can Now Purchase European Union Citizenship, Combining Cryptocurrency and Immigration PolicyBitcoin Holders Can Now Purchase European Union Citizenship, Combining Cryptocurrency and Immigration PolicyJul 25, 2024 pm 02:53 PM

Powered by the Unbound Fund, this initiative uses Bitcoin as a key to open up Portuguese citizenship via the country's golden visa program.

Bitcoin vs. Gold vs. S&P 500: Which Is the Best Investment in the Current Market?Bitcoin vs. Gold vs. S&P 500: Which Is the Best Investment in the Current Market?Jul 27, 2024 am 07:11 AM

Cryptocurrencies, commodities, and stocks are among the most popular risk assets for investment and trade, also leading finance indicators.

Bitcoin (BTC) Witnesses “Rare” Buy Signal, Could Enjoy a Massive Rally to $130,000Bitcoin (BTC) Witnesses “Rare” Buy Signal, Could Enjoy a Massive Rally to $130,000Jul 26, 2024 am 11:26 AM

Crypto analyst Mikybull Crypto has revealed the return of a technical indicator that represents a buy signal for Bitcoin. Based on his predictions, the

Hot AI Tools

Undresser.AI Undress

Undresser.AI Undress

AI-powered app for creating realistic nude photos

AI Clothes Remover

AI Clothes Remover

Online AI tool for removing clothes from photos.

Undress AI Tool

Undress AI Tool

Undress images for free

Clothoff.io

Clothoff.io

AI clothes remover

AI Hentai Generator

AI Hentai Generator

Generate AI Hentai for free.

Hot Article

R.E.P.O. Energy Crystals Explained and What They Do (Yellow Crystal)
2 weeks agoBy尊渡假赌尊渡假赌尊渡假赌
Repo: How To Revive Teammates
4 weeks agoBy尊渡假赌尊渡假赌尊渡假赌
Hello Kitty Island Adventure: How To Get Giant Seeds
4 weeks agoBy尊渡假赌尊渡假赌尊渡假赌

Hot Tools

DVWA

DVWA

Damn Vulnerable Web App (DVWA) is a PHP/MySQL web application that is very vulnerable. Its main goals are to be an aid for security professionals to test their skills and tools in a legal environment, to help web developers better understand the process of securing web applications, and to help teachers/students teach/learn in a classroom environment Web application security. The goal of DVWA is to practice some of the most common web vulnerabilities through a simple and straightforward interface, with varying degrees of difficulty. Please note that this software

SublimeText3 Mac version

SublimeText3 Mac version

God-level code editing software (SublimeText3)

PhpStorm Mac version

PhpStorm Mac version

The latest (2018.2.1) professional PHP integrated development tool

Safe Exam Browser

Safe Exam Browser

Safe Exam Browser is a secure browser environment for taking online exams securely. This software turns any computer into a secure workstation. It controls access to any utility and prevents students from using unauthorized resources.

Zend Studio 13.0.1

Zend Studio 13.0.1

Powerful PHP integrated development environment