Nobel Prize-winning economist Paul Krugman compared the current state of cryptocurrencies to the housing bubble and the subprime mortgage crisis. Noting that cryptocurrencies are devoid of any real value, he said: “it is a house built not on sand, but on nothing at all“.
Paul Krugman speaks on cryptocurrencies, the housing bubble and the subprime mortgage crisis.
Nobel laureate Paul Krugman discussed the current state of cryptocurrencies in an op-ed published Monday in The New York Times.
Mr. Krugman won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2008”for his analysis of the structure of trade and the location of economic activity“, says the Nobel Prize website.
He started by talking about The Big Short, a book and film that tells the story of investors betting on “the proposition that the huge rise in property prices in the years preceding the crisis [financière mondiale de 2008] was a bubble, and that many of the seemingly sophisticated financial instruments that helped inflate real estate would eventually be revealed as worthless junk.“, describes the economist, who adds: “It did not seem plausible:
It just didn’t seem plausible that the markets, and the conventional wisdom that the markets were OK, could be so wrong. But it was.
Then addressing “the current state of cryptocurrencies“, he quoted the Federal Trade Commission (FTC), which said that cryptocurrencies were becoming the preferred method of payment for many scammers. He also mentioned the collapse of the algorithmic stablecoin terrausd (UST), stating that the “stablecoin“was”neither stable nor a coin.”
Krugman then pointed out that at their peak in November, the total value of the cryptocurrency market reached nearly $3 trillion. He added that early investors have made huge profits, renowned business schools are offering blockchain courses, and several cities are competing to become the most crypto-friendly.
The Nobel Prize-winning economist said:
It seems extreme and implausible to suggest that an asset class that has become so large, whose promoters have acquired so much political influence, could lack any real value – that it is a house built not not on sand, but on nothing at all.
“But I remember the real estate bubble and the subprime crisis. And if you ask me, it looks like we’ve gone from Big Short to Big Scam“, he concluded.