The Nobel Prize-winning economist and New York Times columnist has criticized the cryptocurrency industry for many reasons over the years. These included factors such as criminal use, complicating transactions, hunting vulnerable people, and the pyramid scheme. Here are the details…
Nobel Prize-winning economist criticized the crypto money industry in 12 articles
The Nobel Prize-winning economist described cryptocurrencies as meaningless, wasteful and almost worthless. Paul Krugman also described crypto mostly as a tool for criminals. It largely dismissed it as a Ponzi scheme. Paul Krugman has repeatedly criticized Bitcoin and other cryptocurrencies. He noted that cryptos are useless, wasteful, niche, and simply no store of value due to hype and speculation. Here are Krugman’s 12 best quotes about crypto over the past decade:
- People think it is smart, even cutting-edge, to create some kind of cryptocurrency, the creation of which would require wasting real resources, as Adam Smith considered silly and outdated in 1776.
- To be successful, money must be both a medium of exchange and a reasonably stable store of value. It remains completely unclear why Bitcoin should be a stable store of value.
- The interest in cryptocurrencies seems very strange because it is going in the opposite direction of the long-term trend. Instead of nearly frictionless transactions, we have high costs of doing business because transferring a Bitcoin or other cryptocurrency requires providing a complete history of past transactions. Instead of money created at the click of a mouse, we have money that must be created through resource-intensive calculations.
- Cryptocurrencies are irreversible, not dependent on reality. Their values depend entirely on self-fulfilling expectations. This means that total collapse is a real possibility. If speculators suddenly thought that BTC had no value, Bitcoins would become worthless.
- There could be a potential trade-off where Bitcoin (though probably not other cryptocurrencies) remains in use mainly for black market transactions and tax evasion. But this balance, if any, will be difficult to achieve from here. If the dream of a blocked future dies, disappointment will likely collapse everything.
- Crypto has been effectively marketed. It manages to look both futuristic and appealing to old-school goldfinch fears that the government will inflate your savings. Investors are worried about missing out on big past earnings. Thus, it became a cryptocurrency. A large asset class, even if no one can clearly explain for what legitimate purpose it is.
- I see disturbing parallels with the subprime crisis of the 2000s. No, crypto is not threatening the financial system, the numbers are not big enough to do so. But there is growing evidence that crypto risks are falling disproportionately. There are people who don’t know what they’re getting into and are in a poor position to deal with the downside.
- Bitcoin plays into a self-sufficient individualism fantasy of protecting your family and managing your own money independently from governments or banks.
- Cryptocurrencies play almost no role in economic transactions other than speculation in the crypto markets. If your answer is “give it time”, Bitcoin has had its time since 2009. This makes it obsolete by technology standards.
- If, like me, you believe that crypto is largely a Ponzi scheme, this may be the moment when the scheme exhausts new users.
- Jim Chanos described crypto as a “predatory junkyard.” Well, I wouldn’t go that far. Actually, on second thought, I’d go.
- The way I see it, crypto has evolved into a kind of postmodern pyramid scheme. The industry has lured investors with its combination of techno-babble and libertarianism. He used this to buy some of his cash flow. For a while, the field actually became too large to be regulated, even as the risks increased.
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