In his latest New York Times op-ed entitled "The Antisocial Network" (http://www.nytimes.com/2013/04/15/opinion/krugman-the-antisocial-network.html?_r=0), Paul Krugman derides bitcoin, a new means for paying for online transactions, and gold. Krugman writes:
"The similarity to goldbug rhetoric isn’t a coincidence, since goldbugs and bitcoin enthusiasts — bitbugs? — tend to share both libertarian politics and the belief that governments are vastly abusing their power to print money. At the same time, it’s very peculiar, since bitcoins are in a sense the ultimate fiat currency, with a value conjured out of thin air. Gold’s value comes in part because it has nonmonetary uses, such as filling teeth and making jewelry; paper currencies have value because they’re backed by the power of the state, which defines them as legal tender and accepts them as payment for taxes. Bitcoins, however, derive their value, if any, purely from self-fulfilling prophecy, the belief that other people will accept them as payment."
Thus far, Krugman and I are in agreement, but then the professor goes on to say:
"The practical misconception here — and it’s a big one — is the notion that we live in an era of wildly irresponsible money printing, with runaway inflation just around the corner. It’s true that the Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis. I know, government officials are not to be trusted and all that, but the truth is that Ben Bernanke’s promises that his actions wouldn’t be inflationary have been vindicated year after year, while goldbugs’ dire warnings of inflation keep not coming true."
I'm no goldbug and certainly have no use for bitcoin; however, I shudder over what will happen when the Federal Reserve ultimately raises interest rates. Will US stock markets collapse? Will it suddenly dawn upon America that massive federal debt, now over $16.8 trillion, is unsustainable and will never be returned, unless, perhaps, it is returned in bitcoin? And yes, I foresee runaway inflation sometime down the road.
Which is why I am so carefully tending my garden planted with broccoli, tomatoes, cucumbers and melons, which perhaps will one day be worth their weight in gold. Yes, I am exaggerating, but bad times are certainly ahead.
No comments:
Post a Comment