December 29, 2013
Dr. Krugman fears that Bitcoin was created to further a “libertarian agenda,” undermining central banks and their power.
Well, he’s actually pretty right. It wasn’t created to further a libertarian agenda per se, but it certainly was created to challenge the central banks of the world. A pretty lofty and worthwhile goal as far as I am concerned. What’s crazy is that Bitcoin actually is challenging central banks to some degree.
Paul Krugman and technology don’t mix very well. For instance in 1998 the esteemed economist had this to say about the Internet;
”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.”
Actually Paul Krugman and economics don’t mix very well. But he gets to write a column in the New York Times every week so people listen to what he says. (Including me.) Even if he is consistently wrong or non-committal on important points where he should be clear.
If Bitcoin succeeds, great. The world will be better for it. If it fails another version will come along quickly. We’ve passed the point of turning back with virtual currencies. They will be a part of economic life going forward.
What Krugman fears is that these alternative currencies will undermine not only the central banks, but more importantly for him, the “state.” He fears that people will opt out of the dollar. That the ability of the Federal Reserve to print will be limited by the unwashed masses who simply want their money to be worth something. God forbid. This in turn puts Krugman’s dream of a statist coercive “utopia” at risk.
I prefer gold and silver, but in a marketplace I say let new entrants make their case. Bitcoin makes a compelling case. Very compelling. So compelling that statists like Paul Krugman are fretting. Which is of course wonderful.
The jury’s out on Bitcoin, but if Krugman doesn’t like it there is a good chance that it will do well.