Economist: Bitcoin should be outlawed

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With the recent, dramatic rise in the value of Bitcoin (BTC), many people are excited and enthusiastic about the future of the cryptocurrency. The price of a single bitcoin has gone from next to nothing just a handful of years ago to over $10,000. Supporters placing big bets on the virtual currency are predicting stratospheric growth. It seems that the bandwagon is growing every day as people rush to get their hands on Bitcoin.

However, on the other side of the fence are a growing army of skeptics who believe that Bitcoin prices are in a bubble and a downturn is eminent. One of the most recent, high profile opponents is Joseph Stiglitz, a professor of economics at Columbia University and former chair of the U.S. President’s Council of Economic Advisers.

…Bitcoin is successful only because of it’s potential for circumvention…lack of oversight. So it seems to me it ought to be outlawed. It doesn’t serve any sort of social, useful function. – Joseph Stiglitz

Stiglitz went on the record in a Bloomberg interview saying that Bitcoin will collapse and that it should be outlawed. He argues that the price of Bitcoin is unsustainable and that the cryptocurrency only has value because of it’s potential for circumvention. Stiglitz went on to say that he believes that digital currency should exist, but should be created and controlled by the government.

Interviewer:

If Bitcoin were to be regulated, could it be viable?

Stiglitz:

One of the main functions of government is to create currency and Bitcoin is successful only because of it’s potential for circumvention…lack of oversight. So it seems to me it ought to be outlawed. It doesn’t serve any sort of social, useful function. We ought to just go back to what we always have had and this is just a bubble as several of your commentators have already pointed out. It’s a bubble that’s going to give a lot of people a lot of exciting times as it rides up and then goes down, but what I was talking about is the medium of exchange that we use for transactions. What I was trying to say is let’s move away from paper into the 21st century of a digital economy.

Interviewer:

This is away from your nobel prize and it’s away from your acclaim in economics, but I’m going to go there anyways. Charles Mackay, 1841 talks about our peculiar follies and the behavioral component that makes for these bubbles. Whether it’s 1637 and tulip bulbs, 1840…bring up the chart here. Here’s a bubble in the making. This is logged Bitcoin. I can’t stand the arithmetic charts. This is all you need to know. This is massive convexity. I haven’t seen that chart since the tulip bulbs when we were doing surveillance by semaphore. Professor Stiglitz, they are relying on a Marxist theory of value. They are going back to middle Marx and looking at the value of exchange. It’s smoke in mirrors, isn’t it?

Stiglitz:

Precisely.

Interviewer:

Thank you. Why?

Stiglitz:

Well, the value of a Bitcoin today is expectations of what the Bitcoin is going to be tomorrow. If the government says “the reason Bitcoin is being used is the circumvention,” they can cut it down at any moment then it collapses.

With any type of innovation, especially a market that is growing as rapidly as Bitcoin is sure to be met with opposition from detractors. It is certainly possible and even likely that government regulation will affect cryptocurrencies in the United States. However, the potential for a change in the market does not necessarily mean that Bitcoin will go away or even decline. It will be interesting to continue to watch the conversation as the public awareness of cryptocurrencies continues to grow.

Editor’s note: All of the “um” “uh” and other unnecessary words have been removed from the transcript. There were a lot of them.