Paul Krugman on Legal Tender, Currencies, and BTC

[legiteum]

https://paulkrugman.substack.com/p/the-dollars-special-status-sources

This is a great article about how to properly look at the role of currencies, including the USD and (by implication) Bitcoin.

Krugman says the same thing that I've said here many times: that the USD is never going to go away as a unit of measurement. And all Bitcoin amounts to is another means to move around USD-denominated value. Nobody says, "please give me 0.029827 of Bitcoin", rather they ask for some amount of USD in Bitcoin.

Indeed, the idea that "Bitcoin will replace the USD" is... idiotic. That idea simply makes no sense--it's like saying TCP/IP is going to replace the USD.

Definitely worth reading if you are interested in the long-term role of Bitcoin in the world, and how it fit in to human value transfer.

[Don Pedro Dinero]

Krugman says the same thing that I've said here many times: that the USD is never going to go away as a unit of measurement.

Given Krugman’s track record with predictions, he’s not exactly someone you can rely on. Even though he’s a Nobel laureate, he’s got a whole host of failed predictions under his belt. I had a quick Google search and the first thing that came up was the AI result:

Paul Krugman, a Nobel laureate economist and New York Times columnist, has a record of notable failed predictions, often stemming from pessimistic political forecasting or underestimating technological growth. Major errors include predicting that the internet’s economic impact would be no greater than the fax machine's by 2005, forecasting a permanent global recession if Donald Trump was elected in 2016, and admitting error on his early, transitory view of inflation in 2021.

Key Failed Predictions and Incorrect Forecasts:

Internet Impact (1998): Krugman famously predicted in 1998 that "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".

Trump Election Recession (2016): After Trump's 2016 victory, he wrote, "we are very probably looking at a global recession, with no end in sight". Instead, the U.S. economy experienced a pre-pandemic boom.

Inflation Transitory (2021): Krugman admitted he was wrong regarding his initial assessment that the post-COVID inflation spike would be transitory, admitting his error in a New York Times feature.

2008 Dollar Crash: Following the 2008 housing bust, he predicted a significant fall in the value of the dollar, which did not occur.

Bitcoin/Crypto: He has been a long-term critic and skeptic of Bitcoin, often predicting its failure, which has been described as a continuous wrong prediction by critics.

Euro Survival: He wrongly predicted the failure of the Euro currency.

Obama Stimulus Growth: He predicted that the Obama-era economic stimulus would create 4% growth, while the actual result was 1.7%.

Contextual Observations:

Admitting Error: Unlike many pundits, Krugman has occasionally acknowledged his mistakes, such as his incorrect inflation projection, stating in a CNN interview that it is important to admit when he is wrong.

Political Focus: Many of his more notable miss-predictions are linked to his analysis of political outcomes (such as the 2016 election), which some critics argue often override his economic modeling.

Market Analysis: He has often predicted stock market crashes (such as in 2016) that did not align with actual market performance.

[legiteum]

Given Krugman’s track record with predictions, he’s not exactly someone you can rely on. [...]

I don't pay much attention to his predictions, I just read his economic theory, which is solid.

And this article is just an explainer about what currency is in the economic context. It's hardly controversial.

[arzuo]

It is true that many people think in terms of dollars and this perception is not likely to change anytime soon.

However, Bitcoin does not seem fundamentally dollar-based, nor do I see any logical reason for it to be.
It can be used as a unit of value and to facilitate transactions by being pegged to the dollar, where it can be quickly converted back to fiat currency and dollars as soon as the transaction is completed!

So, Bitcoin is not just a means of money transfer, but it is on a different level, where there is neutrality, security, freedom and financial transparency!

[Lida93]

What other legal tender currency should be used in valuing the worth of bitcoin price if not the current dominant currency at this epoch, which is the USD. The Euro or any other currency could have being used if it were to be the most dominant currency so I see no sense making up a controversial argument on this. Common sense makes it obvious but at any period when the dollar loses it's position as explained in the article, it's definitely gonna lose being used in valuing bitcoin price, for a certain.

[m2017]

Krugman says the same thing that I've said here many times: that the USD is never going to go away as a unit of measurement. And all Bitcoin amounts to is another means to move around USD-denominated value. Nobody says, "please give me 0.029827 of Bitcoin", rather they ask for some amount of USD in Bitcoin.

USD may not disappear from the global market, but it may cease to be used as a benchmark and a currency used globally in trade transactions. For example, if China's economy overtakes the US, why shouldn't the yuan become the reserve currency?

I fully accept that the bitcoin (given its current and possible future value of $1 mln.) could be used for international settlements, but in the equivalent of the same dollars. That is, they might say, "give me $1 mln.", but they'll pay that amount in bitcoin (13.88BTC).

Indeed, the idea that "Bitcoin will replace the USD" is... idiotic. That idea simply makes no sense--it's like saying TCP/IP is going to replace the USD.

Idiotic? We'll see who's truly idiotic when international settlements between countries start using bitcoin. Or when Iran starts charging oil carriers in bitcoin instead of USD.

Definitely worth reading if you are interested in the long-term role of Bitcoin in the world, and how it fit in to human value transfer.

Regarding this, there are doubts between people, but on the scale of groups of people (countries), it seems probable (to a greater extent).