Paul Krugman chimes in on Bitcoin

[Elwar]

Over the past few months a number of people have asked what I think of Bitcoin, an attempt to create a sort of private cybercurrency. Now Alexander Kowalski at Bloomberg News directs me to this Jim Surowiecki article on Bitcoin, which is very interesting.

My first reaction to Bitcoin was to say, what’s new? We have lots of ways of making payments electronically; in fact, a lot of the conventional monetary system is already virtual, relying on digital accounting rather than green pieces of paper. But it turns out that there is a difference: Bitcoin, rather than fixing the value of the virtual currency in terms of those green pieces of paper, fixes the total quantity of cybercurrency instead, and lets its dollar value float. In effect, Bitcoin has created its own private gold standard world, in which the money supply is fixed rather than subject to increase via the printing press.

So how’s it going? The dollar value of that cybercurrency has fluctuated sharply, but overall it has soared. So buying into Bitcoin has, at least so far, been a good investment.

Continued...

http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters

[1714163395]

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[the founder]

Paul normally is a good author.. but in this case it wasn't "everyone go into bitcoins"  ...  so far it's been a good investment if you put 1000 bucks into it in 2010 when it was a penny ...  and cashed out when it was 35 ...  

We have a long way to go ... more software.. more options.. more trading.. we need to widen the reach other than the people on this forum or on the IRC room... 

[proudhon]

Paul normally is a good author.. but in this case it wasn't "everyone go into bitcoins"  ...  so far it's been a good investment if you put 1000 bucks into it in 2010 when it was a penny ...  and cashed out when it was 35 ...  

We have a long way to go ... more software.. more options.. more trading.. we need to widen the reach other than the people on this forum or on the IRC room... 

I agree.  I'm really excited about the conference coming up this weekend in NYC.  It'll be nice to see somebody from bitcoin interacting with non-bitcoin related enterprises.  Hopefully bridges are built.

[elux]

I'm curious as to his outlook on regulation for Bitcoin.

Awesome to have Krugman with his Nobel clout discussing Bitcoin.

Will this appear in his New York Times column, or only on his NYT blog?
Either way, this should bring visibility in a very big way compared to other mentions.

Let's hope more big names pick up the ball and challenge his viewpoint.

Deflation of the value of Electronics as brought on by Moore's law could be brought up as a counter argument.

[Bitcoin_Silver_Supply]

For Krugman, he likely sees Bitcoin as a means of launching the next alien invasion to save the economy:

http://blog.acton.org/archives/25518-krugman-aliens-worth-more-to-economy-than-men-and-women-video.html

Quite the economist... That said, I agree, he is a loud voice among investors for some bizarre reason.

[Bitcoin_Silver_Supply]

Just read the rest of the article as well as another; the headline isn't so positive.

Paul Krugman Explains Why Bitcoin Is A Stupid Currency:

http://www.businessinsider.com/paul-krugman-on-bitcoin-2011-9#ixzz1XI9uT8aB

[andrewbadr]

1. "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."

Bitcoin *is* facilitating transactions. The Bitcoin economy is growing, slowly. There are a lot of people, including funded startups, working on making it useful in more cases. It's far, far too early to say that Bitcoin isn't facilitating enough transactions.

2. Bitcoin hoarding is not due to the fixed total supply, but due to the expectation that the Bitcoin economy will grow. If there was built-in inflation at 3% and the economy was growing at 20%, hoarding would still happen.

3. No matter how much hoarding is happening, there will be some exchange rate from Bitcoins to dollars. The existence of a traded exchange rate is proof that some people think Bitcoins are not undervalued. These people will be willing to spend their Bitcoins.

4. The claim that Bitcoin is worthless because of guaranteed deflation is self-contradicting.

5. Volatility is bad for a currency, but this is an addressable problem. Bitcoin-priced marketplace The Silk Road offers its sellers currency-hedged escrow.

[the founder]

2. Bitcoin hoarding is not due to the fixed total supply, but due to the expectation that the Bitcoin economy will grow. If there was built-in inflation at 3% and the economy was growing at 20%, hoarding would still happen.

I wish that was happening,  what we have is inflation at 50% and growth at 1%

[ampirebus]

he is saying bitcoin is more as a commodity than a currency and it is failing as a currency in terms of transactions between peers, he could have been much more harsh... i agree in what he said. as of right now bitcoin is an investment vehicle speculated on rather than an alternative currency

[elux]

The Atlantic Wire - Bitcoin Cyber Geeks Outraged at Paul Krugman:

http://www.theatlanticwire.com/business/2011/09/paul-krugman-incites-bitcoin-cyber-geek-infighting/42188/

Yay, drama. 

[JBDive]

I'm curious as to his outlook on regulation for Bitcoin.

Awesome to have Krugman with his Nobel clout discussing Bitcoin.

Will this appear in his New York Times column, or only on his NYT blog?
Either way, this should bring visibility in a very big way compared to other mentions.

Let's hope more big names pick up the ball and challenge his viewpoint.

Deflation of the value of Electronics as brought on by Moore's law could be brought up as a counter argument.

Krugman is an idiot, Nobel or not. His latest scheme to float the US economy is to borrow more money so we can hire more public workers so those few thousand or even 100 thousand will then have cash to go out and buy things. This in turn generates more demand which makes factories hire more people and thus you end up with a rebound.

What's wrong with that whole concept other than it has already been tried?

First off the small number of direct hires through Federal or State spending is a drop in the bucket as seen by the first stimulus which tried this. Even 100,000 new hires won't do anything when you have millions unemployed. Second let's say those folks do go out and buy new products just how much demand can so few cause? Next many of these jobs he wants to create are construction labor jobs, not skilled $150k/year jobs and of those labor jobs just how many road crews are made up of mainly illegals who send most of their earnings back to South America. Lastly that "demand" all that spending created was in factories based in China, now here. Case in point the California San Francisco-Oakland Bay Bridge which is MADE IN CHINA, shipped to the US and then much of it shipped back to China for inferior steel and welds but paid for by your tax dollars and so called stimulus money that was to put American back to work!

I would also add that this whole concept of getting Americans to buy more stuff so it generates more demand which generates jobs is BULL CRAP! Most of everything is made overseas, Americans buying more crap from S.E. Asia doesn't create jobs in the US, ok sure some more bull smocks at $7/hr maybe, but instead just drains away more dollars from the US.  Dollars leaving the US without more dollars coming back in is what is with the economy in this country, ask Greece.

[ampirebus]

if you start off a 5 paragraph diatrive where your thesis is "nobel laureate x is an idiot" you're probably gonna seem like a tinfoil hat afterwards... thats what i get out of that post.

[Mt.Fun]

if you start off a 5 paragraph diatrive where your thesis is "nobel laureate x is an idiot" you're probably gonna seem like a tinfoil hat afterwards... thats what i get out of that post.

nobel laureate? he's a human being buddy. something you obviously don't know anything about being.

[Mt.Fun]

Krugman is the absolute worst. Ever since I had to write a college paper about one of his articles in freshman year lit class he has incessantly bothered me. every article he writes is manipulative garbage. full of logical fallacies and intellectual bullying. a sophist if there ever was one.

[Bitcoin Oz]

Paul Krugman wants to start a fake alien invasion to stimulate the economy.

That is all.

[JBDive]

if you start off a 5 paragraph diatrive where your thesis is "nobel laureate x is an idiot" you're probably gonna seem like a tinfoil hat afterwards... thats what i get out of that post.

Correct the logic then. How does spending billions to employ workers in China do anything to boost the economy here?

Second off the so called "nobel laureate" list has a number of names on it that in no way impress me. They may not be idiots but certainly having won a Nobel gives them no claim to intelligence. Obama, Al Gore, Theodore Roosevelt, Jimmy Carter, George Marshall, any number of authors that had no business winning, some Chemist who if didn't outright steal their ideas sure did some heavy borrowing without giving credit, etc, etc, etc...

As to Krugman let's not forget that many feel his award was politically based as his work is not exactly stellar or break through and probably stands in direct contrast to Milton Friedman, another "nobel laureate" in economics.

[JBDive]

Krugman is the absolute worst. Ever since I had to write a college paper about one of his articles in freshman year lit class he has incessantly bothered me. every article he writes is manipulative garbage. full of logical fallacies and intellectual bullying. a sophist if there ever was one.

I would have probably quit the class. I can't stand to hear him speak on anything and can rarely get past the first paragraph of anything he writes and yes I do try to listen to him as well as read what BS he has put down this week.

[elux]

Paul Krugman wants to start a fake alien invasion to stimulate the economy.

Oh my. Did it not occur to you that he was making a joke to drive home a point? 

[Mt.Fun]

Krugman is the absolute worst. Ever since I had to write a college paper about one of his articles in freshman year lit class he has incessantly bothered me. every article he writes is manipulative garbage. full of logical fallacies and intellectual bullying. a sophist if there ever was one.

I would have probably quit the class. I can't stand to hear him speak on anything and can rarely get past the first paragraph of anything he writes and yes I do try to listen to him as well as read what BS he has put down this week.

Alas, it was my first experience with Krugman so I was taken totally by surprise. Rest assured, though, I was one of the few who wrote scathing indictments of the flaws in the man's prose. I called him duplicitous.

[Mt.Fun]

Krugman is the absolute worst. Ever since I had to write a college paper about one of his articles in freshman year lit class he has incessantly bothered me. every article he writes is manipulative garbage. full of logical fallacies and intellectual bullying. a sophist if there ever was one.

I would have probably quit the class. I can't stand to hear him speak on anything and can rarely get past the first paragraph of anything he writes and yes I do try to listen to him as well as read what BS he has put down this week.

Alas, it was my first experience with Krugman so I was taken totally by surprise. Rest assured, though, I was one of the few who wrote scathing indictments of the flaws in the man's prose. I called him duplicitous.

Krugman's a bum face it dude.