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New York Times opinion columnist Paul Krugman called cryptocurrencies a “scam” in an op-ed published on Monday. The article, titled “From the Big Short to the Big Scam,” compared cryptocurrencies to the 2008 housing bubble that contributed to the Great Recession.
“Do you remember ‘The Big Short’?” Krugman asked. “Michael Lewis’ 2010 book, adapted into a 2015 film, told the story of the 2008 global financial crisis by following a handful of investors who were willing to bet on the unthinkable – the proposition that the huge rising house prices in the pre-crisis years was a bubble, and that many of the seemingly sophisticated financial instruments that helped inflate housing would eventually turn out to be worthless bric-a-brac.”
“Even though there was clear evidence that house prices were off the mark, it was hard to believe they could be this far out of line,” he wrote.
“It just didn’t seem plausible that the markets, and the conventional wisdom that the markets were doing well, could be so wrong,” Krugman recalled. “But they were. Which brings us to the current state of crypto.”
Krugman noted that according to the Federal Trade Commission, crypto is used for fraud and questioned its usefulness in the real world.
“Last week, the Federal Trade Commission reported that ‘cryptocurrency is rapidly becoming the payment of choice for many scammers,’ accounting for ‘about one in four dollars reported lost to fraud,'” it said. he brings back. “Given the small role that cryptocurrency plays in ordinary transactions, this is impressive,” he continued.
He recalls attending cryptocurrency meetings where “skeptics” raised concerns about the true purpose of the product and what they “do that cannot be done more easily with means of more conventional payment”.
“They also ask why, if crypto is the future, Bitcoin – which was introduced in 2009 (!) – has yet to find meaningful real-world uses,” he continued and wondered. whether there are “legitimate applications” of crypto in addition to illicit applications. Activities.
“Still, to suggest that crypto makes no sense comes up against the disbelief factor,” Krugman acknowledged.
“It seems extreme and implausible to suggest that an asset class that has become so large, whose promoters have acquired such political clout, could lack real value – that it is a house built not on sand, but on nothing at all,” he wrote.
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“But I remember the housing bubble and the subprime crisis. And if you ask me, it seems like we went from Big Short to Big Scam,” he concluded.
President Joe Biden has ordered a broad review of cryptocurrencies and a study on the issuance of a central bank digital currency, which would be managed by the Federal Reserve. Central bank digital currencies are not cryptocurrencies but are sought after by countries like China, partly in response to them.
Critics of Biden’s executive order argue that a digital dollar would lead to loss of freedom because it would give the government the power to monitor every transaction, freeze people’s assets more easily, and establish a social credit system.