Nobel Prize-Winning Economist Says Bitcoin 'Ought to be Outlawed' (cnn.com)

Bitcoin "is drawing harsh criticism from Wall Street investment firms," writes Slashdot reader rmdingler -- and even from some prominent economists. CNN reports: The harshest assessment came from Nobel laureate Joseph Stiglitz, who said that bitcoin "ought to be outlawed. Bitcoin is successful only because of its potential for circumvention," he told Bloomberg TV. "It doesn't serve any socially useful function." Robert Shiller, who won a Nobel for his work on bubbles, said the currency appeals to some investors because it has an "anti-government, anti-regulation feel. It's such a wonderful story," he said at a conference in Lithuania, according to Bloomberg. "If it were only true."

Wall Street titans were getting in on the action, too. Goldman Sachs CEO Lloyd Blankfein told Bloomberg that the currency serves as "a vehicle for perpetrating fraud." Billionaire investor Carl Icahn said on CNBC that it "seems like a bubble." The digital currency previously attracted the derision of JPMorgan boss Jamie Dimon, who called it a "fraud" that would "eventually blow up." Warren Buffett has warned of a "real bubble."
Wednesday the price of bitcoin shot past $11,000 -- just ten days after rising past $8,000.

Comments

Re:Yes it's a scam, but it does have a purpose

[Anonymous Coward]

What is it backed by? Precious metals are rare enough plus they can be used for other purposes. Cash is backed by governments and banks. Stocks / bonds have value based on the worth of the company, cash flow and future earnings. All three of these are covered under financial laws. Are they perfect - certainly not since we've seen prices of metals fluctuate, currency manipulated, and stocks/bonds devalued by poor decisions.

Bitcoin is backed by nothing. Its only purpose is to avoid detection in order to purchase illegal goods and services. It's accepted in almost no legitimate business establishment. Its "value" fluctuates wildly for no reason. Once lost it cannot be recovered. At least cash can be found and used.

Plus the only people making any money are the ones who got in early. That's a pyramid scheme.

There's no Nobel Prize for economics!

[Anonymous Coward]

There's no Nobel Prize for economics. Go look it up.

The economics establishment created a prize for themselves and tried to pass it off as a Nobel Prize when it's not.

That sums up the economics establishment.

Of course economics should be studied scientifically but what we have today is professional justifiers for statists on one side and plutocrats on the other - not scientists.

Re:I see

[Anonymous Coward]

"It doesn't serve any socially useful function."
Except to allow society to conduct direct sale without outside meddling. What next? Outlawing direct trade? Even yard sale items have to go through government escrow?

I think this guy is just angry because he missed the boat. Or he's out of touch. Or both.

Cost of Generation

[ytene]

Technically there is only one correct answer to your question, "What is it backed by?"

As you know the distributed ledger and transaction mechanisms that provide the blockchain that underpins Bitcoin are derived from compute-intensive functions and are created through the process commonly known as "mining". When Bitcoin was originally introduced, the 'value' of a Bitcoin was set in such a way that it was worth slightly less than the cost of the electricity it would take to "mine the coin". [This was entirely intentional - had this not been done Bitcoin would have immediately suffered run-away "inflation" ... ]

However, Bitcoin also has a built-in scarcity model, in which the value given out for mining is being progressively reduced [in fact halved] as more coins are mined. Originally this was set to take place approximately once every four years or so, although with the amount of purpose-built ASICs now operating vast mining farms, it is entirely possible that the four year value has shortened somewhat. Each time the milestone is passed, the value of Bitcoins paid halves. I am not sure if this was done to forestall the effect that Moore's Law would have on mining or done specifically to provide a built-in scarcity value for the coins being mined.

So, in an attempt to answer your question, the "value" backing a coin was originated as the cost of producing it...

What has happened since then is that a raft of different speculators have piled in to Bitcoin and are now treating it like a commodity, not a currency. In other words, different rules apply. Now the driver of "value" to Bitcoin is driven by the perceived scarcity. In this sense the discussions relating to Bitcoin being a bubble are much closer to the market reaction in years past to treating classic cars or rare works of art in the same way. [ In those cases, the thinking was that since it simply wasn't possible to create "more" classic cars, so their scarcity value made them a trade-worthy commodity. This idea may well last for a time with Bitcoin, but - in exactly the same way was true for classic cars and works of art - if the "market" decides that it no longer has an interest in cryptocurrency, then the value will crash.

Detractors point to this and declare that this automatically means that Bitcoin is a fraud. However, it is important to note that we could say the same thing about a $100 bill, or a £100 note if you had one in your pocket. There is no way that the paper/polymers/ink/plastic that comprise the bill or note are worth the currency printed on them. The only reason they have that "value" is because an entire system - propped up by governments and banks - is willing to support them.

It hasn't happened for a long time - perhaps since the end of the Second World War - when we saw a total collapse in a major national economy. [ Although look at the currency in Zimbabwe for an example]. However, in the closing days of WWII, currencies such as the Chinese Yuan devalued so quickly that more money was being printed on recycled newspaper, and it took a wheelbarrow of currency [by volume] to buy a few vegetables. In this regard it would be ignorant and dangerous to argue that there are major differences between Bitcoin and other major fiat currencies.

Bit of a long-winded answer - sorry for that - but in essence the summary is: your question is irrelevant.

Re:Yes it's a scam, but it does have a purpose

[Anonymous Coward]

It's accepted in almost no legitimate business establishment.

Try again.

According to that map, my wealthy American metro area of 3.5 million people has 27 establishments that accept Bitcoin. My city of 300,000 has exactly one. I'd say that qualifies as "almost no legitimate businesses establishments."

Re: I see

[GameboyRMH]

The way I see it, you're getting very worked up about one of the smallest problems with our economic system. BTC and other cryptocurrencies alone present a much larger problem, which is massively enabling criminal finance. To the working class, losses via currency devaluation are a barely noticeable speck compared to wage theft, sub-livable wages, high prices due to oligopolistic market activity, and runaway inequality.