Paul Krugman Criticizes Bitcoin, Projecting It Will “Set the Monetary System Back 300 Years”
American Economist, Paul Krugman, who’s known for actively criticizing Bitcoin, went at it again noting that its like will negatively disrupt the monetary system, with higher chances of its presence stimulating a downgrade to the growth it has achieved thus far.
Krugman normally takes to his New York Times column to voice matters related to cryptocurrencies, and this time, nothing stopped him from doing so. In particular, he seems to have shared two key reasons as to why the cryptocurrency market is doomed for failure – reintroducing friction transactions and the lack of tether.
The first argument made revolves around the notion of “frictionless transactions”, which he believes has been the key in driving traditional monetary systems up. He perceives Bitcoin has coming in between the progress, slowing down currently existing systems and going back as earlier as 300 years.
“Set against this history [of money], the enthusiasm for cryptocurrencies seems very odd […] In other words, cryptocurrency enthusiasts are effectively celebrating the use of cutting-edge technology to set the monetary system back 300 years. Why would you want to do that? What problem does it solve?”
He also added that bitcoin will neither serve as an alternative store of value, nor will it last as a medium of exchange.
The second argument he makes involves those who carry hard cash, adding that such individuals only do so to prevent taxation or to participate in illegal activities. The only gain he thinks Bitcoin potentially has is that its value is “tethered”.
Another point made to back up his case went as follows:
“Cryptocurrencies, by contrast, have no backstop, no tether to reality. Their value depends entirely on self-fulfilling expectations – which means that total collage is a real possibility.” He also noted that those who are doubtful of the giant will surely watch it become “worthless”.
Do you think Krugman’s arguments hold for Bitcoin’s possible falling? Or do you think he lacks the indispensable understanding on the technology at hand?