Paul Krugman calls cryptocurrencies a “house built not on sand”

American economist, Nobel Laureat and crypto-skeptic Paul Krugman wrote in a 2018 New York Times op-ed titled “Why I’m a Crypto Skeptic”:

“What problem does this technology solve? What does it do that other, much cheaper and easier-to-use technologies can’t do just as well or better? I still haven’t heard a clear answer.”

Since then he didn’t change his mind. In June this year he made more comments on cryptocurrencies . Cryptocurrencies, according Krugman, are a swindle, he is comparing them to the 2008 real estate catastrophe.

Paul Krugman, speaking to Fox News, mentioned the book The Big Short, which was aired in 2015. The film was based on the best-selling book by American journalist Michael Lewis, which tells the story of the international financial crisis of the 2000s, which arose as a result of the collapse of the real estate market. Real estate prices were extremely high, but this did not stop people. The same situation is happening in the cryptocurrency market, Krugman explained.

The economist also recalled the May statements of the US Federal Trade Commission (FTC), which warned the public about the increase in the number of fraudulent cryptocurrency schemes. Krugman called this another reason to question the usefulness of cryptocurrencies in the real world.

Cryptocurrency - house built not on sand.
Cryptocurrency – house built not on sand. Source: Pexels

“Last week the Federal Trade Commission reported that ‘cryptocurrency is quickly becoming the payment of choice for many scammers,’ accounting for ‘about one of every four dollars reported lost to fraud. Given how small a role cryptocurrency plays in ordinary transactions, that’s impressive”

He criticized people who claim that crypto assets are the future of finance. Introduced in 2009, bitcoin has not yet found significant practical use over the years, other than for illegal activities, Krugman said. This further causes distrust of cryptocurrencies, the economist is perplexed.

“It sounds 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 on sand, but on nothing at all.”

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