Liberal Economist Paul Krugman Calls BitCoin a “Stupid Currency”
The Atlantic Wire referred to them as “a more obscure subset of society: the reclusive cyber geeks of the Bitcoin world, who are letting their outrage be known.”
Why the outrage?
Liberal leaning economist Paul Krugman had this to say about BitCoin, the cyber currency that has soared in comparison to the dollar:
What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin.
Bear in mind that dollar prices have been relatively stable over the past few years – yes, some deflation in 2008-2009, then some inflation as commodity prices rebounded, but overall consumer prices are only slightly higher than they were three years ago. What that means is that if you measure prices in Bitcoins, they have plunged; the Bitcoin economy has in effect experienced massive deflation.
And because of that, there has been an incentive to hoard the virtual currency rather than spending it. The actual value of transactions in Bitcoins has fallen rather than rising. In effect, real gross Bitcoin product has fallen sharply.
So to the extent that the experiment tells us anything about monetary regimes, it reinforces the case against anything like a new gold standard – because it shows just how vulnerable such a standard would be to money-hoarding, deflation, and depression.
BitCoin and other similar cyber currencies are being explored as the new monetary solution for a struggling online gambling sector. At least one online sportsbook and financial wagering firm, Digibookie.com, has already adopted the new currency.
- Aaron Goldstein, Gambling911.com
