Monday, January 1, 2018

Krugman Takes Another Roundhouse Swing at Bitcoin (While Protecting Janet Yellen)

In a "world is coming to an end" column Paul "The Mountain Climber" Krugman says Bitcoin should be among the big worries.

He writes:
Sooner or later, something will go wrong, and we’re very poorly placed to respond when it does. But I can’t tell you what that something will be, or when it will happen... what if Bitcoin actually starts to have some systemic importance before everyone realizes it’s nonsense?
Krugman is correct there is a lot that could go wrong with the economy and it mostly has to do with money printing by Janet Yellen at the Fed. But Krugman protects the gray-haired, green money printing lady in his column:
The key point is that while the major advanced economies are currently doing more or less OK, they’re doing so thanks to very low interest rates by historical standards. That’s not a critique of central bankers.
Of course, it is a   critique of central bankers. Krugman just doesn't have the guts to take a well-deserved shot at Yellen.

Instead, he puts focus on Bitcoin.

Bitcoin is not going to go reach systemic importance as he suggests. In fact, it is very possible that Bitcoin has peaked and is in the early phases of buying exhaustion, that is, not enough new buying coming in to keep the price advancing.

Bitcoin is going to be a problem for those who bought at high prices. They may never see Bitcoin at those prices ever again but that is all.

The monetary policies of the Fed that Krugman is protecting is going to cause the problem.



  1. What if Krugman is setting up a narrative for a crash of the general bubble caused by QE and so on? Blaming a general crash on bitcoin and the like would probably serve a variety of purposes for those Krugman serves.

  2. So even Krugie thinks interest rates are still historically very low. But I thought the Fed has "raised" rates thus proving all those Austrian-lites wrong...

  3. Peter Thiel's "Founders Fund" just plopped more money into Bitcoin, apparently it made a killing in Bitcoin in 2017...but now the fund seems to be providing price support. Is it to protect their position or for philanthropic reasons? After making such a killing it would seem an opportune time to liquidate their hundreds of millions in earnings- assuming they can actually cash out. I don't know if any exchange can handle such a cash out.

    Even Doug Casey seems to have put some money into it, but at the same time he says Bitcoin is in a bubble.

    I find it all interesting, especially because we can assume to some degree that both people have an understanding of the US financial system, the dollar, etc.

    I wonder where the line between money making and philosophical/philanthropic move making lies for both of them.

  4. Because 772 billion in market capitalization isn't already systemic or important. Bitcoin is one part of a much wider movement. Bitcoin will continue to gain in value over the long term as new features are implemented. Bitcoin is the reserve cryptocurrency that all other cryptocurrencies are traded against. All most all new coins are priced in terms of bitcoins, not dollars. Robert needs to actually learn about crypto before commenting on it.