Topic: Why well-distinguished economists are negative on bitcoin (Read 353 times)

Mainstream economists, especially the 'top' ones, have been misleading the public for centuries.

Mainstream economists praised the gold standard while central banks wanted it, and attacked gold when central banks didn't want the public to trust it.

As a group, they totally 'failed' to predict the major financial busts like the Great Depression and the Great Recession.

With all their training, they can't seem to spot that the root of economic evil comes from the distortions of the values of money, debt, and other financial assets, driven by state power used to benefit the top politicians and bankers.  Both the general and specific narratives are right under their nose, but they don't see them -- or don't want to see them.  I have pointed this out in forums full of serious economists.  All I get is silence and a few up-votes.

If you're a 'top' economist and have any negative impact on the public's trust in the money and financial systems, you won't get invited to policy councils or be recommended for awards.  By its very nature, the system will only promote those economists who give their personal ambition top priority.

Steven Horwitz, an economist of the Austrian School has aptly summarized why most economists criticize Bitcoin.


I guess the most important objective of microeconomics is inflation, achieving price stability through monetary policy for economic growth and then one day there is a new currency, Bitcoin, programmable money, no central authority, inelastic/deflationary, a whole new economic model.

Bitcoin has gone through multiple bubble phases and like Andreas Antonopoulos said Bitcoin grows by bubbles, a new technology, there is lot of speculation. As far as volatility, Bitcoin isn't designed to achieve perfect price stability.

Basically, it's a new economic system, somewhat exact opposite of the traditional one so it's impossible to predict how Bitcoin will evolve or its implications and the statements made by these well-known economists are based on their understanding of the existing economic model.

Can we really blame them? Economist even if they are not well-know are saying the same thing, and that is Bitcoin is a "bubble" and one day it will be over for it. Even in my school, my friends who are under the program of Economics are saying the same line of words when the topic is about Bitcoin. This is how they are thought and it is hard for them to accept something that they have still yet to tackle. Also big figures such as Warren Buffet are staying away from cryptocurrency as you can watch his interview you will see the problem BTC has over a true investor like him. These people especially the economists want to place their money on safe bets, the ones that will show fundamental figures that will determine whether it is safe or not, they don't want to rely on good or bad news as there is no assurance that it will help them determine where will the market go.

Look, when you just learn about the great opportunities "for the masses about an alternative to state control of money", it is one thing. And it is a completely different thing when you start actually investing your "hard-earned" money in these "opportunities". It is no more about learning, it is about earning. Or losing, which is the case for the people who bought bitcoins anywhere above 10k and didn't sell at a profit when there was a possibility. Indeed, if you have an insight into the future and this future is bright for you, no matter what side of the trade you are on, you may not care what the current price is. But this is not the case for 99% of those who had been imprudent to consider themselves real traders. All they care for now is price and price alone. In simple terms, they don't really give a single fuck about those great "opportunities", even if they persuade themselves they think otherwise.

Sometimes it is all about the popularity and sometimes it is al about the hatred that has arise because of the greatness of something. Or many times it could both the things altogether in the schrodinger box.

My belief is that these people just talk about it that way because they are not willing to make the changes to the economy which they study currently. I mean in the past it is something that made them what they are today but in the future they wont be capable of mastering that because economy is getting changed freely due to the crypto currency use. This is the reason most big people go negative about it.

All respected economists cannot be experts in the field of cryptocurrency. They became experts in Fiat Economics but it's a completely different kind of economy. Only people with non-standard thinking can change the world. Most often they are considered idiots because they go against the rules. For me the most is the value of the opinion of "idiots".

I understand it'll be pretty painful for all those people who bought near that 12k- 19k run. I believe i myself did buy some fractions but then there is no point being  gloomy. Sure there is no guarantee that they'll ever approach breakeven but there is a chance they will.

We have all been screwed left, right and center by the traders, the alt-coin peddlers, not to miss the governments, hackers and the dishonest exchange operators..lol..Regardless, I still see this as a huge learning opportunity for the masses about an alternative to state control of money. This is not over by any chance.

I study a little bit of economics, imo the problem with bitcoin (and other cryptocurrency) is that it doesn't have "fundamental value"
https://www.sciencedirect.com/science/article/pii/S0165176515000890

It can be understand if mentioned six nobel laureates think that way since bitcoin cannot be valued using traditional method, but I think crypto can be valued using network strength in the form of active full nodes and hash rates, and also with frequency of transactions. However, to get nominal value from that factors is difficult.

I'm optimistic about the future of cryptocurrency though

Well I believe they don't love BTC because it failed adopt-price graph. flying from $6k to $20k in a short time was definitely bubble thing also it could go higher on that time if bigger exchanges accepted new registrations. $10k was a psychologic line and after breaking all news channels wrote about price change and new FOMOers came. By the time with more adoption I'm sure economists will change their mind when they see the real adoption, real technology and advantages of BTC from money. The only thing people talking about BTC is it's price only not technology

Whenever there is an innovative technology solution to our current problems this so-called traditional economist and other personalities tend to conclude that this will happen blah3x they have the habit of branding such things that it will not go well, bubble, no future and so on like they know the very future of the technology and its destiny, I've read so much people say negative thoughts about other things in the past yet the present has different and revolutionary result or conclusion they are just eating their words.

You can't talk about that in the affirmative. And I'm really doubtful it is an unfortunate minority. I'd rather say it is an unfortunate majority who bought at prices above $12,000. And many of them have already fixed losses and left for good. But even if they didn't, they are not guaranteed to ever come close to a breakeven. In other words, what I wrote is fully applicable so far. Things like "everything that bitcoin stands for" are wishful thinking basically. But market evidently doesn't care about that.

People losing money has nothing to do with their far-sightedness or understanding of bitcoin or crypto in general. Being seasoned investors, What they do know is that common people cannot handle markets well with their well of emotions.
People who got burned in the market are the ones who invested during the ATH in the months approaching December. All the while they were being warned not to invest more than you can afford to lose. They got greedy, FOMOed or were enticed by the wild fluctuations and desire to earn money. I am sure that the next time around people will be much more cautious in investing in bitcoin or any of the other cryptos out there.

This is all still an experiment on a peer-to-peer economy. The part highlighted above is pretty much non applicable for the majority of people. It is only an unfortunate minority who had to face this. You can't just forget everything that bitcoin stands for and take the side of the likes of Dimon and Buffett because people lost money to their greed.

No one is experts in the crypto currency field because it is a new technology,so the traditional economists are not good at predicting when it comes to crypto currencies.Or some of the economists may be the bitcoin haters so they want to dump the bitcoin by spreading the wrong news.Whatever the people say but bitcoin proves us it is worth to invest on it by its growth percentage over the years so it is now you have to make decision whether invest or not.

They may in fact see crypto as an attack on their own well-being, or they may be just envious like Jamie Dimon (whose daughter was able to earn handsomely through crypto), or whatever personal reasons they could have, I don't really know. Basically, they have just been warning common people to stay away from investments in crypto since it was a sure way to lose money as it has turned out to be. Besides, Buffett has been asked the same question since 2014 if I'm not mistaken, and that might have been quite an ordeal for him to answer it again and again.

If your premises is correct then the economists shouldn't just be deriding something that is just a blip on their macroeconomic radars?? Why then People like Jamie Dimon, Warren Buffett feel the need to comment negatively on them??  Why exactly do you have High Networth investors raising queries to investment managers around the world?? Isn't that because crytpo is a new, currently quite wild class of investment/ money??

They don't find it palatable that people are just raising money out of thin air by burning electricity while they have been doing the same for a long time themselves.

Of course they see crypto as an attack and that's where these reactions come from.

I think you are mistaken in your premises. Crypto is not an attack on traditional economics because it can't compete with fiat at the global scale. Perhaps, that's the reason why you don't understand the logic behind their words and have a spite against them. If you start with an unbiased view, you may see that they have a good deal of substance behind their point of view. As far as I am acquainted with the views of people like Buffett, they consider crypto and Bitcoin in particular as mostly a speculative bubble. And let's remain honest here, so far the reality proves their words.

Absolutely right. It'd be so much better if we can see some real academic studies on the positive and negative effects of bitcoin on world economy rather than these off the cuff remarks.

I am sure there are people out there doing exactly this. Can we talk about those things here? Last i looked, there were a few articles on the nakamotoinstitute website. What are the other serious attempts to study it?

Let's see what they are all saying one at a time:

1. Paul Krugman: 2008 Noble Nobel Laureate:
"So is Bitcoin a giant bubble that will end in grief? Yes. But it’s a bubble wrapped in techno-mysticism inside a cocoon of libertarian ideology."

So if you don't understand how cryptography ensures security of the private keys or how mining ensures protection against double-spend, It becomes mysticism. This is an outright baseless and dishonest statement. People who are familiar with the system and are actually studying it don't find anything mystical about it.
For calling this mysticism, can he explain what exactly goes on behind all the "Financial Engineering" of bringing out derivatives and then using the invested money to generate bonuses for traders and bankers??

2. Eugene Fama: Noble Nobel Memorial Prize 2013
"if it doesn’t have a stable value it’s probably not going to survive as a unit of account."

Jumping the gun again. You cannot know what you don't know. How does he know that the value cannot stabilize? If there is enough consensus on using bitcoin the way it is meant to be, it can stabilize as much as any of the other 'settlement methods' that had been in vogue through centuries.

3.Robert Shiller: Noble Nobel Prize 2013
"It’s such a wonderful story. If it were only true.”

Reverse psychology for those who get easily floundered. Yes it's a wonderful story and it's true. Yes you have to be smart and fast to understand it. Not old and smug about your scholarship.

4.Joseph Stiglitz: Nobel Memorial Prize, 2001
"We have a good medium of exchange called the dollar. We can trade in that. Why do people want Bitcoin? For secrecy."

Yes we have the dollar. Before that it was bullion. We can trade in yuan, ruble as much as we can trade in dollar. People want bitcoin because you cannot simply generate more of it to write-off bad debts coming out of financial mismanagement. You cannot simply give bonuses to all the people who cause mayhem in investment banks by bail-outs and pass the burden on to the working class. Of course they want a system that can be held more accountable than this. If bitcoin is that system, then yes, people want it.

And Secrecy. Yes why not?? Did we have any less drug and guns trade even without bitcoin?

5. Bengt Holmström: Nobel Memorial Prize 2016
"That’s an example of where you think you’re doing something good, you’re creating a lot of safety, but the consequences are actually potentially catastrophic [...] The bigger the calamity, the more safety there was initially,”

This is the only response which i find worthy of discussion. He says that centralized cryptocurrencies would be bad in the event of a crisis.  If the money rushes back to the central bank in the event of a crisis (as the central bank would be seen as the one dependable intermediary), what is wrong with it.
He says it'll see the central bank become an intermediary. Well, isn't that exactly what happens after the crisis anyways. All the central banks become the sole source of bail-out funds. Only with bitcoin, that wouldn't be an unlimited supply.

The problem is that the idea of bitcoin challenges the control that Central banks exercise through monetary and fiscal policy. It is not an easy thing to change and much research is still needed to determine how a financial system with a settlement currency like bitcoin will look like. These people are intellectually intimidated by bitcoin and simply want to brush this aside. These reactions are something we shouldn't really heed much.

You sort of answered your own point of discussion, really. Bitcoin (I won't say crypto) was and is an attack on the established order of all things money. So it's hardly a surprise that banks and by extension traditional economists, must feel defensive and critical of Bitcoin. I'd seen movements and slideshows they've shown in some universities from 2013 even painting Bitcoin with all the different shades of black.

They're forced to study how money works in unis, and even when faced by growing evidence that their systems aren't just flawed, but false, they need that validation or they're all out of jobs. Just my sweeping generalisation. Economists and their fixation on rational theory.

If you're an economist then surely you would be absolutely beyond fascinated at being there to witness the birth of a brand new economic system, even more so if you're an economic academic.

Even if you hate it or have severe doubts, it can't be ignored and should be studied intensely. I would expect a vocal hater to demonstrate greater knowledge than a supporter if they're to be taken seriously, yet what comes out of their gobs is far less informed than some dark web LSD seller who's permanently high on their own supply.

Anyone with any sense would sensibly voice some scepticism but sit back and watch it play out with great interest.