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Krugman: “Faith in Techno-Magic”
Krugman made headlines just days ago in partaking in a tweetstorm that bashed cryptocurrencies in general in the strongest possible terms. Unsurprisingly, then, Krugman’s just one-upped his previous display with a new Twitter rant.
Specifically, Krugman noted that he felt what he dubbed “cryptofreude” — a reference to the word “schadenfreude,” which can be defined as “pleasure derived by someone from another person’s misfortune.”
Laying on the salt, then, the Nobel Prize-winning economist bashed Bitcoin fans as being “crazy” and akin to cultists:
I am surely not the only person experiencing a fair bit of cryptofreude — pleasure in watching the Bitcoin etc bubble deflate. Bitcoin cultists tend, after all, to be nasty as well as crazy; not all of them, but surely above the average 1/
[…] But one thing people may wonder is, why aren’t we having a simple Wile E. Coyote moment (Wile E. Cryptocoyote?)? As we know from the laws of cartoon physics, someone who runs off a cliff is supposed to plunge as soon as he notices there’s nothing under his feet 2/
[…] What we see instead is a series of plunges followed by partial recoveries 3/ pic.twitter.com/aWY0URpc9w
[…] It’s worth noting, then, that you saw the same thing (in much slower motion) as the dotcom bubble burst way back when 4/ pic.twitter.com/lYODFoqtzq
[…] Back then there was a reserve of true believers who kept buying the dips, sure that the market would eventually regain its faith in techno-magic. Some of the same thing presumably happening now. Plus there are probably market manipulators now, trying to support things 5/
[…] The point is that even though bubbles are, in effect, natural Ponzi phenomena, they don’t end as cleanly and suddenly as deliberate Ponzi schemes. To realize the full joy of cryptofreude, you need to be a bit patient 6/
— (@paulkrugman) February 3, 2018
It’s clear, then, that supporters of digital assets won’t be able to make Krugman see the “light of day” when it comes to cryptocurrencies, especially bitcoin, any time soon.
Wait, Bubbles Don’t End Suddenly?
Krugman’s most curious comment from his recent tweetstorm is that, in his view, economic bubbles don’t necessarily end “cleanly and suddenly.”
One might be tempted to take his word for it, since he is a Nobel laureate after all. But does such an assertion really add up? Not according to Troy University economics professor Malavika Nair.
In 2017, Nair made waves in the cryptoverse after she asserted that bitcoin’s price performance wasn’t behaving like an economic bubble. “Whatever it is, it’s definitely not a bubble,” Nair commented at the time.
Why? Because, per Nair, traditional bubbles behave somewhat like fireworks: they “burst” at the first and only peak of their speculative frenzy.
Consider the oft-touted Tulip mania from hundreds of years ago, which the Bitcoin craze is often likened to. What’s the glaring difference between the former and the latter? That tulip prices during the mania didn’t retrace down only to surge to new heights consistently. Bitcoin has done just that and then some — numerous times.
So, to Nair, bitcoin isn’t like any true bubble she’s ever seen. It’s something else entirely — a new cryptoeconomic phenomenon, seemingly. And that’s a line of thinking Paul Krugman still clearly hasn’t come around to seeing just yet.