Why I don't listen to Paul Krugman, or anyone that says the Internet is a Bubble

[mskryxz]

Today, December 28 Paul Krugman posts an article stating how he doesn't believe in Bitcoin and is probably nothing but a Bubble:

http://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil/?smid=tw-NytimesKrugman&seid=auto&_r=0

In another comment from Reddit, they show another article that shows his prediction of the Internet is nothing more than a bubble and will be no more popular than a fax machine:

http://marginalrevolution.com/marginalrevolution/2010/12/paul-krugmans-predictions.html

If too lazy to click on the links, here is what Paul predicted on the internet:

* Productivity will drop sharply this year. Nineteen ninety-seven, which was a very good year for worker productivity, has led many pundits to conclude that the great technology-led boom has begun. They are wrong. Last year will prove to have been a blip, just like 1992.

* Inflation will be back. Wages are rising at almost 5 percent annually, and the underlying growth of productivity is probably only 1.5 percent or less. Sooner or later, companies will have to start raising prices. In 1999 inflation will probably be more than 3 percent; with only moderate bad luck–say, a drop in the dollar–it could easily top 4 percent. Sell bonds!

* Within two or three years, the current mood of American triumphalism–our belief that we have pulled economically and technologically ahead of the rest of the world–will evaporate. All it will take is a few technological setbacks or a mild recession here while Europe or Japan recovers a bit.

* The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law"–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.

* As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly.

* Sometime in the next 20 years, maybe sooner, there will be another '70s-style raw-material crunch: a disruption of oil supplies, a sharp run-up in agricultural prices, or both. And suddenly people will remember that we are still living in the material world and that natural resources matter.

Because of this, I will probably go all in on Bitcoin. I will do the opposite of what the media and pros say.

By doing this, I have netted unimaginable returns so far whether be it Stocks or Bitcoin. The media and other "professionals" told me to stay away from Bitcoin, guess what I invested a bunch in April of 2013 when it crashed at 60 and didn't sell. I'm probably gonna invest more since 2014 seems more promising then the news we had in 2013.

[gnode]

Agreed +100

Similar take on Alan Greenspan, back in 1996 stock market was "irrational exurberance" so if you listened and got out you were screwed out of 5 years of huge gains.

Even if bitcoin is a bubble, it has just started. I think the bitcoin bubble will burst in another 5 years.

[mskryxz]

Here's a reply I stole from Reddit on why Bitcoin isn't Evil

"South African here, Yes bitcoins are a godsend, our corrupt goverment does any means possible to take money from us, bitcoins kinda negating that for the most part which has saved "me" alot of money & with it's growth, given me alot of money. anyone that says its "evil" clearly has had a sheltered life without much financial troubles."

Think outside of your 1st world problems. Bitcoin saves these 3rd world folks from corruption and gives a chance for them to grow wealth at insane rates despite most of their citizens not even having access to the stock market, let alone a bank account.

[justusranvier]

Think outside of your 1st world problems. Bitcoin saves these 3rd world folks from corruption and gives a chance for them to grow wealth at insane rates despite most of their citizens not even having access to the stock market, let alone a bank account.

Few things piss me off more than first world self indulgent armchair academics spew mindless drivel about how deflation and early adopters make Bitcoin a bad deal for the poor.

I want them to go somewhere in the world that experiences actual poverty and tell those people that monetary inflation is good for them to their faces.

Go visit Greece and talk to the people living in towns where every house still has rebar sticking out the top, because the average person can't afford the property taxes on "completed" homes, so leave their houses unfinished for decades to qualify as "under construction".

Talk to some Peruvians who are effectively forbidden by "progressive" labor laws from working at a single job for more than 90 days. Those laws require lavish benefits for permanent employees, you see, and since only governments and well-connected business can afford most of the population is relegated to temp work. In order to get in an extra "fuck you" to the regular Peruvian, the banks there won't give you an account unless you're rich or have a salaried position.

Maybe when these people have some actual experiences in the real world, outside their ivory tower intellectual circle jerks, maybe when they've been a house guest in a home whose master bedroom had a dirt floor, maybe then they can say something meaningful about poverty then.

[cr1776]

Think outside of your 1st world problems. Bitcoin saves these 3rd world folks from corruption and gives a chance for them to grow wealth at insane rates despite most of their citizens not even having access to the stock market, let alone a bank account.

Few things piss me off more than first world self indulgent armchair academics spew mindless drivel about how deflation and early adopters make Bitcoin a bad deal for the poor.

I want them to go somewhere in the world that experiences actual poverty and tell those people that monetary inflation is good for them to their faces.

Go visit Greece and talk to the people living in towns where every house still has rebar sticking out the top, because the average person can't afford the property taxes on "completed" homes, so leave their houses unfinished for decades to qualify as "under construction".

Talk to some Peruvians who are effectively forbidden by "progressive" labor laws from working at a single job for more than 90 days. Those laws require lavish benefits for permanent employees, you see, and since only governments and well-connected business can afford most of the population is relegated to temp work. In order to get in an extra "fuck you" to the regular Peruvian, the banks there won't give you an account unless you're rich or have a salaried position.

Maybe when these people have some actual experiences in the real world, outside their ivory tower intellectual circle jerks, maybe when they've been a house guest in a home whose master bedroom had a dirt floor, maybe then they can say something meaningful about poverty then.

Great post. Bitcoin is pro-freedom and those ivory tower types know their lives and positions depend on control.

[beetcoin]

conservatives hate him, independents hate him.. he's like a left wing extremist, and that's not really a big base to work with.

[dynodog]

Krugman is against anything that might force discipline for the FED and the US gov.  his stance has always been "PRINT MORE...PRINT MORE."  The FED has been printing $85BILLION PER MONTH.  (Even though his theory of printing was to help average americans - or so he says - the reality is that it has only helped the very rich and banks:  ferrari and lamborghini sales at all time highs - ultra high end real estate prices exploding - banks making more profits than ever).  Krugman cannot, on one hand, be a proponent of printing in perpetuity, and, on the other hand, be supportive of a currency or commodity which is limited in nature where people can move their wealth.  That is why he is also so against gold. 
Krugman....what about other countries who regularly debase their currencies (avg life of a currency is very short)?  Why can't they put their wealth in bitcoin?
Why can't people transfer money to their families in other countries without having to give a huge percentage of that money to the western unions of the world?  What about micro payments?  Krugman is so worried about bitcoin threatening the US dollar which is being debased in part bc of Krugman type theories and recommendations.  How crushing for him if the dollar ends up getting crushed - many people will literally blame him and his ideas.  That is why we get the incredible hyperbole of describing bitcoin as EVIL - simply amazing.

[Peter R]

That is why we get the incredible hyperbole of describing bitcoin as EVIL - simply amazing.

I have been thinking about this all day, as it just seems so bizarre.  A Nobel laureate describes a new innovative technology as "evil" without giving really any explanation.  And I thought the quote from Stross that he included was almost Orwellian:

BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions.

1.  His choice of the words "designed as a weapon intended to damage central banking" instead of the truth (it's a new technology that, if widely adopted, could make central banking less relevant) ascribes motives, ideology, and political leanings to bitcoin, and thus also to bitcoin supporters, that aren't necessarily there.  Refer here for more discussion on this point: https://bitcointalk.org/index.php?topic=389565.0

2.  He actually refers to the government monitoring its citizens financial transactions as though this is a good thing.  This blows me away after the Snowden leaks revealed the extent of government "monitoring" and the public blowback that has caused.   

3.  Perhaps the adoption of bitcoin would motivate governments to streamline their antiquated tax systems, but is this not a good thing?  How many pages of tax code do we have?  What % of GDP goes to adhering to a complex web of rules and regulations?  But he writes "damage a states ability to collect tax" like he wants people to associate bitcoin = anarchy, again something that is not true. 

[cbeast]

You all hate Krugman and list your mostly Libertarian views. Just remember, you don't control Bitcoin development any more than anyone else. Bitcoin has the potential to become a very powerful protocol for supporting fiat currencies. The "free market" Libertarians often reference will then decide how Bitcoin will adapt and become adopted. It will centralize to some degree as major miners act as transaction clearinghouses. It will centralize with layered protocol servers. The one great thing Bitcoin has is an unstoppable blockchain that will give cryptocurrency users a choice in how they will adopt them. Bitcoin has the potential to act as a great reformer rather than destroyer of centralized banking. You can have all the best of both Keynesian and Libertarian worlds.

[beetcoin]

i just hate krugman because he is a shill and a troll. not sure if i'd call myself a libertarian too.

[Peter R]

You all hate Krugman and list your mostly Libertarian views. Just remember, you don't control Bitcoin development any more than anyone else. Bitcoin has the potential to become a very powerful protocol for supporting fiat currencies. The "free market" Libertarians often reference will then decide how Bitcoin will adapt and become adopted. It will centralize to some degree as major miners act as transaction clearinghouses. It will centralize with layered protocol servers. The one great thing Bitcoin has is an unstoppable blockchain that will give cryptocurrency users a choice in how they will adopt them. Bitcoin has the potential to act as a great reformer rather than destroyer of centralized banking. You can have all the best of both Keynesian and Libertarian worlds.

I actually like Paul Krugman; I think he is sometimes funny and I enjoy reading his posts (although I probably disagree more often than agree).  

But this "Bitcoin is Evil" post really seemed odd to me.  In addition to calling bitcoin "evil" without providing support, it was like he was trying to artificially separate people into two camps: pro-bitcoin = libertarian & anarchistic, anti-bitocin = it's good that we monitor our citizens, it's good that it's easy to collect taxes.  See my post above or https://bitcointalk.org/index.php?topic=389565.0 for more details.  

I think bitcoin and government could work out very nicely together, like you alluded to cbeast.  For example, imagine how we could streamline VAT collection and accounting.  The government could give a coffee shop a small discount on the VAT rate if the merchant chose to accept retail payments to a BIP32-encoded address chain that the tax authorities could monitor.  The coffee shop's payment system would automatically deduct the VAT and remit it to the tax authorities in real time.  If the merchant's suppliers were set-up in a similar way, then the coffee shop would receive its input tax credits instantly as well.  If everyone was using such a system, it would completely eliminate VAT accounting since the process would be automatic and auditable in the blockchain.  No end-of-the-year paperwork!

This doesn't invade privacy either: the coffee shop owner can still have private addresses that he can do with as he likes.  

[beetcoin]

he seems to be the kim kardashian of economists. he is a provocateur who says things just to get people riled up.

[Topazan]

I both disagree with and dislike Krugman.  He goes out of his way to be obnoxious and patronizing.  Many of his columns are purely straw man and/or ad hominem arguments.  Half the time he doesn't even name the person who allegedly said the ridiculous thing he's refuting, and when he does it's almost never an economist.  He goes out of his way to avoid venues where those he disagrees with can respond to his straw man attacks.

[Sir Lagsalot]

Krugman is a bad joke. His big plan to fix the economy is limitless government spending on a fake alien invasion.

[beetcoin]

yeah, uh, this guy is a crackpot. seems like he's a troll who goes under the guise of an economist.. seems like anything he says is to draw a reaction from people.

[Hawker]

Today, December 28 Paul Krugman posts an article stating how he doesn't believe in Bitcoin and is probably nothing but a Bubble:

...snip...

Actually if you read his article that isn't what he says.  

So let’s talk both about whether BitCoin is a bubble and whether it’s a good thing — in part to make sure that we don’t confuse these questions with each other.

Krugman is a mainstream economist.  All mainstream economists hate the idea of deflation so all mainstream economists will say that Bitcoin is evil.  Whether or not you agree with them, Bitcoin isn't going away and economists are not going away either.  

So relax and prepare to be reading stories like this for the rest of your life.  Is it worth getting excited over every single one of them?

[Elwar]

Keynesians/socialists do not understand progress. Their ideal world would have all innovators and people who bring the economy forward just stop and allow the workers to just keep doing what they are currently doing and share the wealth instead of the wealth going toward moving forward.

They pray that new technology fails to achieve their goal of everyone living in a stagnant world so that their economics can finally work.

[Lethn]

Oh dear, Cbeast doesn't understand how open source coding works does he? It just so happens that I've been thinking about copying a lot of the earlier versions of Bitcoin to my hard drive to redistribute over Bittorrent in the event of a takeover just in case any loyalists or the Bitcoin foundation get any ideas about trying to take over the network with force.

[bassclef]

he seems to be the kim kardashian of economists. he is a provocateur who says things just to get people riled up.

He's a Nobel Prize winning economist with a posh NYT column who needs to tow the establishment line. It's probably difficult for him being intelligent, yet so limited in his writings and viewpoints.

[Soros Shorts]

Keynesians/socialists do not understand progress. Their ideal world would have all innovators and people who bring the economy forward just stop and allow the workers to just keep doing what they are currently doing and share the wealth instead of the wealth going toward moving forward.

They pray that new technology fails to achieve their goal of everyone living in a stagnant world so that their economics can finally work.

It does seem that way. It is almost as though they don't realize that innovators constantly creating wealth out of thin air are what's keeping the current inflationary system from collapsing under its own weight.