Death by a Thousand Cuts — How Governments Are Breaking Bitcoin
Bitcoin had one of its worst weeks ever in May of this year. The dollar value of one bitcoin dropped from US$50,000 to US$35,000 over the course of 14–21 May — a 30% crash in a matter of days.
The true believers (called HODLers) who hold onto their bitcoin through thick and thin are still around. They have been rewarded for their tenacity every time and they believe this time will be no different.‘Never fear!’ say the bitcoin supporters. Bitcoin has had many drops of that magnitude or greater in recent years and has bounced back to new highs every time. That’s true. So it’s too soon to talk about the demise of bitcoin based on one bad week of price action.
US legislation would ramp up reporting requirements
The arguments that bitcoin is a major generator of CO2 emissions because of the energy used in mining (true), that bitcoin is not a good store of value because of volatility (true), that bitcoin is not a good medium of exchange because it’s slow, clunky, and expensive to transact (true) mean nothing to the bitcoin groupies. Still, that does not mean all is well in bitcoin-land.
There’s a new threat on the horizon as described in this article. The Biden administration is working on major new tax legislation to go along with its multitrillion-dollar deficit spending plans. Part of this new legislation is an appropriation of US$80 billion for IRS tax enforcement, including the hiring of thousands of new IRS agents to conduct audits and spot tax evasion.
Buried in the specifics of that proposal is a new regulation that would require reporting to the IRS all transactions in bitcoin over US$10,000. Such regulations already exist if you withdraw or deposit cash from a bank. Cash transfers of US$10,000 or more result in a currency transaction report (CTR) being filed by the bank with the Financial Crimes Enforcement Network (FinCEN) with cross-reporting to the IRS. Cash transfers of as little as US$3,000 may also be reported in a suspicious activity report (SAR). Payment of interest by your bank results in a 1099-INT report to the IRS. The same is true of dividends (1099-DIV) and payments to independent contractors (1099-MISC), and so on.
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Taxing, regulating, and banning bitcoin around the globe
China has recently banned bitcoin payments and is looking to regulate bitcoin mining. Turkey has also banned bitcoin payments. One by one central banks and tax authorities around the world are zeroing in on bitcoin in an effort to tax it, regulate it, or ban it. This effort will take time. But the efforts of countries around the world may do more to limit the appeal of bitcoin than all the memes and narratives combined.
The pandemic virus crisis is now a mental health crisis
In chapters one and two of my new book, The New Great Depression, I explain the origins of the pandemic from a bioweapons laboratory in Wuhan, China, and how the virus spread around the world through reliance on useless policies such as lockdowns and masks.
But, in chapter five, I explore one of the least reported and potentially longest lasting legacies of the pandemic — mental health disorders. Most experts and almost all everyday citizens are unaware of how the SARS-CoV-2 virus can penetrate the neural network and brain membrane to directly impact cognition. Even more important are the long-term effects of adaptive behaviour.
Adaptive behaviours won’t go away in a hurry
For the past 15 months, the US population has been terrorised with demands for lockdowns, quarantines, social distancing, face masks, skipping holidays, and now injections with experimental gene modification treatments (which are not true vaccines). People adapt by becoming anti-social and withdrawn. Disorders such as anxiety, depression, violence, drug abuse, alcohol abuse, and suicide all climb rapidly.
The difficulty is that once behaviour adapts in this way, it’s not easy to switch back to the way things were before the pandemic. The adaptive behaviour can persist for years or even decades in the absence of some equally catastrophic event that causes a new adaptation, such as war or a natural disaster. Some people adapt more easily than others. This can lead to clashes between those who are more able to get back to normal and those who cannot, as described in this article.
‘Maskholes’ and the clashes playing out in supermarket aisles
A supermarket chain in New York decided to eliminate the indoor mask requirement for those who were vaccinated. They also said they would not ask for proof of vaccination and the no-mask policy would essentially be an honour system. This provoked a furious backlash by customers who insisted that masks were still required, and they would continue wearing their masks indefinitely.
Some claimed that any ‘scientifically literate’ person would still wear a mask even though actual science shows that masks don’t work. There was a counter-backlash from customers who were ‘done with masks’ and objected to the mask fearmongers (known derisively as ‘maskholes’).
Of course, the store management was just trying to get back to normal and got caught in a crossfire of caustic comments from both sides. Expect more of this. Fear is not easy to overcome, even as the pandemic dies out. This fear of shopping, dining out, going to theatres, etc will continue to be a drag on economic growth long after the new caseload count for the coronavirus approaches zero.
All the best,
Strategist, The Daily Reckoning Australia
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