To bitcoiners (BTC): be aware that not everyone in the financial establishment is jumping on the bandwagon that the cryptocurrency is a revolutionary currency or electronic payment system, including Nobel Laureate and Keynesian economist Robert Shiller, who argues bitcoin is an example of a bubble.
This week, heads of state, economists and pundits gathered in Davos, Switzerland for the 2014 World Economic Forum to discuss economic matters affecting the globe and what the future holds for markets and nations. One of the topics consisted of digital currency.
The Business Insider, which attended the annual meeting, quoted Shiller as saying he is interested in bitcoin because of the computer science behind it, but not for advancement in the overall economy. In the end, according to Shiller, acceptance of bitcoin would be a road back to the dark ages.
“It is a bubble, there is no question about it. It’s just an amazing example of a bubble,” stated Shiller, who was the co-recipient of last year’s Nobel prize in economics for empirical analysis on stock, home and bond prices. “I’m amazed by how people are so excited about it and I tell my students ‘no, it’s not such a great idea.’”
Besides winning a Nobel, who is Shiller exactly? Well, he has published papers blaming unemployment on capitalism and has called for either tax increases or deficit spending, otherwise known as a Keynesian economic model, to reinvigorate the economy.
“[W]e need fiscal stimulus – ideally, the debt-friendly stimulus that raises taxes and expenditures equally. The increased tax burden for all who are employed is analogous to the reduced hours in work-sharing,” stated Shiller. “But, if tax increases are not politically expedient, policymakers should proceed with old-fashioned deficit spending. The important thing is to achieve any fiscal stimulus that boosts job creation and puts the unemployed back to work.”
In recent years, the Royal Swedish Academy of Sciences has awarded most economic prizes to economists originating from the Keynesian viewpoint.
Nevertheless, bitcoin has been enjoying a wave of momentum in recent months as it is both climbing in value and is being accepted by merchants and even some countries and central banks around the world. Shiller isn’t the only one to believe bitcoin is in a bubble.
Peter Schiff, president of Euro Pacific Capital and author of “Crash Proof,” has been arguing for the past couple of months that the virtual currency is indeed in a bubble and has likened it to the Dutch’s Tulipmania of the 17th century, which is believed to be the very bubble of its kind in history.