PANews reported on December 6 that according to Jinshi, former New York Fed President Bill Dudley said that since Trump won the US presidential election, the price of Bitcoin has risen by more than 40%, partly because people hope that he will support the establishment of a government reserve of this cryptocurrency. He supported the idea during the campaign, and legislators who support cryptocurrency have also proposed ways to achieve this goal. It is hard to imagine what good this will do for most Americans.
But what are the benefits of building a Bitcoin reserve for the government or for people who don’t hold Bitcoin? There are none. There is no exit strategy, so the purpose is to drive up inflation rather than create value for the government — which would be forced to hold a volatile token that generates no income. To fund the purchases, the Treasury would either have to borrow (thus raising the cost of debt servicing) or the Fed would have to create money (thus increasing inflation). The latter would be little different from the Fed monetizing U.S. government debt (as would proposed congressional legislation directing the Fed to use the government’s gold reserves).
