Nobel Laureate Shiller on Bitcoin: Failed experiment

According to Robert Shiller, the advent of the crypto currency market imitates some of the most failed monetary experiments in history.

Shiller: “No one can explain how crypto currencies work.”
In a new blog post published today, the Yale professor and Nobel laureate wrote that enthusiasm for the crypto market remains strong despite warnings that it might be a scam. It must be remembered that attempts to reinvent money reach far back into the past. But while new monetary innovations initially cause excitement, they don’t last long, Shiller says.

An example of Bitcoin Code

As an example, he cited Josiah Warner, who opened the “Cincinnati Time Store” in 1827, which sold goods in units of working hours. These were based on work notes that resembled paper money. However, while they were seen as a sign of the importance written this review of Bitcoin Code working people, the shop closed in 1830.

Two years later Robert Owen tried to establish the National Equitable Labour Exchange in London. This was based on ‘time money’ as a currency. But similar to Warner, Owen’s experiment failed.

This was based on Bitcoin Profit

A hundred years later, during the Great Depression, economist John Pease Norton proposed a dollar supported Bitcoin Profit not by gold but by electricity. But even that has not prevailed.

“EACH OF THESE MONETARY INNOVATIONS IS LINKED TO A UNIQUE TECHNOLOGICAL HISTORY,” SHILLER WROTE. “BUT BASICALLY EVERYONE IS CONNECTED WITH A DEEP LONGING FOR SOME KIND OF REVOLUTION IN SOCIETY.

In his opinion, crypto currencies like Bitcoin are no different:

“THE CRYPTO CURRENCIES ARE A PROFESSION OF FAITH IN A NEW COMMUNITY OF ENTREPRENEURIAL WORLDVIEWS THAT OVERRIDE NATIONAL GOVERNMENTS, WHICH ARE SEEN AS DRIVERS OF A LONG HISTORY OF INEQUALITY AND WAR. PRACTICALLY NO ONE OUTSIDE THE INFORMATICS DEPARTMENTS CAN EXPLAIN HOW CRYPTO CURRENCIES WORK. THIS SECRET CREATES AN AURA OF EXCLUSIVITY, LENDS GLAMOUR TO THE NEW MONEY AND FILLS THE FOLLOWERS WITH REVOLUTIONARY ZEAL. NONE OF THIS IS NEW, AND AS WITH PREVIOUS MONETARY INNOVATIONS, A COMPELLING STORY MAY NOT BE ENOUGH.”

This is certainly not the first time Shiller has spoken out against the crypto market. Last October he called Bitcoin a ‘fad’ when he commented on the ‘strange enthusiasm’ for the currency. He also said that Bitcoin is a bubble and that it only attracts investors because it has a good history.

Year 2030: Bitcoin will replace 25 percent of FIAT

Thomas Frey predicts that crypto currencies will replace parts of FIAT currencies by 2030. In his opinion, about 25 percent of national FIAT currencies will be replaced by crypto currencies by 2030. Above all, he refers to the fact that Bitcoin & Co. are much more efficient. My first thought was whether he might actually be right and that these statements are bold. But we already reported this week about the introduction of the first legal crypto currency – Sovereign Token – on the Marshall Islands.

Bitcoin really legitimate?

Dr. James Canton of the Institute for Global Futures agrees with the statement and underlines once again that we have witnessed the emergence of a completely new form of asset class in recent years. Wall Street has also helped legitimize crypto currencies by integrating them into the existing financial system through the introduction of Bitcoin futures. Even governments unconsciously contributed to Bitcoin being seen as a legitimate form of asset. Bitcoin has been confiscated from time to time in recent years in various cases of fraud and insolvency, so even governments believe that Bitcoin and other crypto currencies are a form of wealth. In Russia, on the other hand, crypto currencies cannot yet be confiscated because the state has not yet granted digital money any legitimacy.

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The volatility problem

Bitcoin’s critics will definitely refer to the extreme volatility of crypto currencies. One should not forget, however, that FIAT currencies can also show strong fluctuations, such as the decoupling of the Swiss franc. Bitcoin & Co. are so volatile at the moment, because this market is still relatively new & small and not yet really much capital, in relation to the foreign exchange market, is. With increasing acceptance the fluctuations will also stabilize in the long run. Of course, the market must achieve capitalisation for the first time, in which individual major investors cannot achieve anything on the price when buying or selling. At the moment this is still much too low to be considered as a stable currency.

It may well be possible that Bitcoin will replace some of the FIAT currencies. Especially for smaller countries such as the Marshall Islands or Venezuela, crypto currencies may become relevant as legal tender.