Krugman On Bitcoin and the Gold Standard 601
twoallbeefpatties writes "Prominent Keynesian economist Paul Krugman has left a note on his blog at NYTimes about his view of Bitcoin, discussing its similarity to the gold standard and suggesting a drop in 'real gross Bitcoin product' as its users hoard the currency rather than spend it."
Fundementally flawed (Score:3, Interesting)
Bitcoin is the equivalent of a nations currency that has been printed by individuals by permission.
This fact alone is its undoing.
Your GPU's do not constitute value. Nobody will accept the fact that you are a bitcoin millionaire simply because you let a few unused computers run for a few months.
Re:Keynesian? (Score:4, Interesting)
For example Austerity has never gotten anyone out of a recession.
Wow! That is incredibly untrue. Shrinking government spending (while deregulating private activity) caused a boom in China. It has also made Germany the only stable economy in Western Europe in the recent years. Austerity itself is a loaded word. It's not that the government has to just cut the money it spends. It has to also get out of the way. For example, cutting government expenses by shifting them to the private sector, is not going to solve anything. It will only increase regulatory costs. But cutting government expenses by cutting government involvement has been beneficial in most economies in which government had previously was TOO involved in economic activity.
Re:Krugman is not an economist. (Score:3, Interesting)
the government doesn't lie about the inflation rate. It is caculated by a multitude of different organizations, both private and public.
Uh-huh. And if you calculate it the same way it was calculated thirty years ago [shadowstats.com], before the government changed the formula for some mysterious reason, you'll see that the real rate is actually much higher than the official number.
Re:Keynesian? (Score:4, Interesting)
I personally think people pick their favorite "school" based on their pre-existing views and agendas, and not on any actual merits of their philosophies.
Also, the way you put it sort of hurts the Austrians, at least in my eyes. Theory is useless without observations. Where observations are somewhat useful with the judicious use of statistics and large data sets.
Personally I think both of them are completely useless. Both of them, applied, have caused a decent amount of harm. Neither of them, applied, have seemed to do the slightest bit of good. And generally people who vocally subscribe, and show brand loyalty, to any of them are as idiotic as people who declare themselves as following one of the the two established political agendas. Its just as arbitrary. Reading debates about which of the various schools of economics is gospel leads to the conclusion that economics has more in common with religion than with science. There is no way to conclusively falsify any claim, and thus the argument never, ever, can have an actual objective conclusion.
Re:Hoarding's the point. (Score:4, Interesting)
The issue is that there are two realities of the purpose of currency.
On one hand there is the natural way that most people use it and understand it; as a means for transactions and a store of value.
On the other hand there is the way that certain economic schools want to use it, some for personal gain, some for misguided theories.
The trouble comes when the first group understand what the second group intend, because the first group actually do want a store of value and they are going to get it even if that means hoarding limited real-world resources instead of pieces of organic fibre. Which ends up with the pieces of fibre being worth their actual resource value as the faith in them is lost.
The idea that deflation itself leads to hoarding is flawed. Many economic sectors suffer constant deflation; computing and electronics are a good example. When people know that prices will fall, people invest in products as they are needed instead of before they are needed. That is not a disaster, that is a basis for a stable real economy.
Having people buy things before they are needed (to 'stimulate' and create non-existent jobs) means they are constantly undermining future demand. As soon as a dip comes it's magnified as purchases are not actually needed, they have already been made to get rid of unstable currency, so there is already a large overcapacity and a store of products that will easily let the consuming side forego purchases for a long time.