Curiously, bitcoin’s success has brought out new prophets of doom (few below 60 years of age though), and the digital asset’s price only fuels their predictions: Nobel Prize-winning economist wants it outlawed, a legendary investment guru says it’s a plague, and a Federal Reserve Governor worries financial stability itself might be at risk.
Indignant, hands falling to the table in a plunk, Nobel Laureate Joseph Stiglitz attempted to set the Bloomberg London anchoress straight. She asked, “If bitcoin were to be regulated, could it be viable?”
Stammering, Mr. Stiglitz answered, “One of the main functions of government is to create currency. And bitcoin is successful,” he half-smiled, “only because of its potential for circumvention, lack of oversight.”
Joseph Stiglitz is what anyone would call well-pedigreed. The man has awards and positions of distinction in his field: beyond his Nobel Prize, he’s earned a Bates Medal, was chief economist at the World Bank, was once chair of the President’s Council of Economic Advisors, and is presently a professor at Columbia.
The 74 year old Keynesian continued, “So it seems to me [bitcoin] ought to be outlawed. It doesn’t serve any socially useful function. We ought to just go back to what we always have had.”
His right hand began to wave at the screen, “This is just a bubble … It’s a bubble that is going to give a lot of people a lot of exciting times as it rides up and then goes down.”
Another interviewer compared the digital asset to tulips, asking Professor Stiglitz to chime-in. “Precisely,” he nodded. “The value of a bitcoin today is expectations of what the bitcoin will be tomorrow. [The government] could close it down at any moment, and then it collapses,” he warned.
ederal Reserve Governor Worries about Financial Stability
“While these digital currencies may not pose major concerns at their current levels of use, more serious financial stability issues may result if they achieve wide-scale usage,” Federal Reserve Governor Randal Quarles, 60, said.
Bitcoin's Price Rockets, Bringing Out New Prophets of Doom: Nobel Economist, Vanguard Founder, Fed Governor
He further explained bitcoin’s volatility and “the resulting price risk and potential liquidity and credit risk pose a large challenge for the system.”
Just this week rumors circulated the Fed might itself be looking to produce a crypto coin. Mr. Quarles seemed skeptical.
“I believe the financial industry is increasingly recognizing that we should separate the concept of digital currencies from the innovative new technologies that they have employed to transfer assets,” Quarles said.
What are your thoughts on this new round of bitcoin doom prophets? Tell me in the comments below!