Paul Krugman, a Nobel Prize-winning economist, has made a comparison between the present state of cryptocurrency and the housing bubble or the subprime mortgage crisis. Noting that crypto lacks any real value, he said: “it is a house built not on sand, but on nothing at all.”
Paul Krugman: Crypto, Housing Bubble and Subprime Mortgage Crash
Paul Krugman, Nobel laureate for Economics, discussed cryptocurrency’s current status in an opinion piece that was published Monday in The New York Times.
Krugman won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2008 “for his analysis of trade patterns and location of economic activity,” the Nobel Prize website details.
He began by referencing The Big Short, a book and a movie that tell the story of investors betting on “the proposition that the huge 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 helped inflate housing would eventually be revealed as worthless junk,” the economist described, adding:
It just didn’t seem plausible that markets, and the conventional wisdom saying that markets were OK, could be that wrong. However, they were.
Proceeding to discuss “the current state of crypto,” he cited the Federal Trade Commission (FTC) stating that cryptocurrency is becoming the payment of choice for many scammers. He also mentioned the collapse of algorithmic stablecoin terrausd (UST), stating that the “stablecoin” was “neither stable nor a coin.”
Krugman then pointed out that at their peak in November, cryptocurrencies’ total market value was almost $3 trillion. Krugman said that investors in the beginning made enormous profits and that blockchain training is available at renowned business schools. Several cities are now competing for being crypto-friendly.
Nobel Prize-winning economist:
It sounds extreme and implausible to suggest that an asset class that has become so large, whose promoters have acquired so much political influence, could lack any real value — that it is a house built not 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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