Nobel Prize-winning economist Paul Krugman compared the current state of cryptocurrencies to the housing bubble and subprime mortgage crisis. Noting that crypto lacks any real value, he said, ” It is not a house built on sand, but on nothing at all.”
Paul Krugman on crypto, the housing bubble, and the subprime mortgage crash.
Krugman won the Alfred Nobel Memorial Swedish Riksbank Prize for Economic Sciences in 2008 “for his analysis of trade patterns and the location of economic activity,” the Nobel Prize website details.
He begins with the book and movie “The Big Short,” the story of an investor betting on “the proposition that the massive rise in housing prices in the years before the (2008 global financial) crisis was a bubble and that many of the seemingly sophisticated financial instruments that inflated housing would eventually be revealed to be worthless junk. Referring to “The Short,” the economist adds.
The markets, and the conventional wisdom that markets are fine, didn’t seem so wrong. But they were.
Regarding “The State of Crypto,” he quoted the Federal Trade Commission (FTC) as saying that cryptocurrencies are becoming the payment method of choice for many fraudsters. He also mentioned the collapse of the algorithmic stablecoin Terraud (UST), stating that “stablecoins” are “neither stable nor coins.”
Krugman then noted that at its peak in November, the cryptocurrency’s market capitalization reached nearly $3 trillion. He also noted that early investors have made huge profits, renowned business schools are offering blockchain courses, and several cities are competing to be the most crypto-friendly.
The Nobel Prize-winning economist opined.
It sounds extreme and unrealistic to suggest that an asset class that has grown so large and whose proponents have acquired so much political influence could lack real value – it is not a house built on sand, but on nothing at all.
“But I remember the housing bubble and the subprime crisis. And if you ask me, it looks as if we’ve gone from the Big Short to the Big Scam,” he concluded.
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