The "Anti-Economist" Vs Paul Krugman Who Calls Bitcoin the Anti-Social Network

Reggie Middleton's picture


Paul Krugman wrote an anti-cryptocurrency Op-Ed piece in the NY Times titled the "Anti-social Network". Now, I know the Times needs to sell ad space and subscriptions, hence technical accuracy may not be exactly what they are going for, but Mr. Krugman (the classical Keynesian economist type - I don't particularly subscribe to such schools of thought, I guess I'm not educated enough) has spewed so many inaccurate statements, false facts and just plain old indications of his total misunderstanding of the subject matter one would think it would behoove the Times to either have him issue corrections (or, since it is Op-Ed after all) have someone such as my self (you know, maybe a little less academically involved) come after him and clean up a little. 

Now, where shall I start? To quote Mr. Krugman:

So how is bitcoin different? Unlike credit card transactions, which leave a digital trail, bitcoin transactions are designed to be anonymous and untraceable. When you transfer bitcoins to someone else, it’s as if you handed over a paper bag filled with $100 bills in a dark alley.

I don't think that's true Mr.Krugman. Let's refer to Wikipedia's write-up on the Cryptocurrency...

 Once validated, every individual transaction is permanently recorded in a public ledger known as the blockchain.[8] 

I believe Mr. Krugman made this error due to the accuracy of a statement made earlier in the Wikipedia description of Bitcoin, to wit:

Bitcoin (signBitcoinSign.svg ; code: BTC or XBT[7]) is a peer-to-peer digital currency that functions without the intermediation of a central authority.[8] 

You see, the old school way of applied economics may very well have a big problem wrapping their collective heads around the concept of the absence of a "central authority" (read central bank) to act as the Grand Pubah, or ultimate financial intermediary. I'm just saying..

And to go on with the oh so witty comments from Mr. Krugman...

And sure enough, as best as anyone can tell the main use of bitcoin so far, other than as a target for speculation, has been for online versions of those dark-alley exchanges, with bitcoins traded for narcotics and other illegal items.

Bitcoin is a currency that's no older than 4 or 5 years. Has any other currency experienced a genesis any different than Bitcoin? The US dollar, when freshly minted was used for the spurious trade of human lives, the lives of my very own relatives several generations back, actually. It was the tool for rampant speculation as well, prone to extreme volatility and purposeful devaluations. Was it really so different from Bitcoin before it went mainstream (that is except for the purposeful devaluations part since there is no Grand Pubah to unilaterally call the market shots)? Methinks this economist may be picking and choosing his facts. For instance, look at how he started the Op-Ed missive in the first place...

Bitcoin’s wild ride may not have been the biggest business story of the past few weeks, but it was surely the most entertaining. Over the course of less than two weeks the price of the “digital currency” more than tripled. Then it fell more than 50 percent in a few hours. Suddenly, it felt as if we were back in the dot-com era.

The economic significance of this roller coaster was basically nil. But the furor over bitcoin was a useful lesson in the ways people misunderstand money — and in particular how they are misled by the desire to divorce the value of money from the society it serves.

Volatility is the name of the game with new currencies that have limited penetration and distribution, no? Why pick on bitcoin? Let's recall how the US dollar got started via the continental note, as per Wikipedia:

By the end of 1778, Continental Currency retained between only 1/5 to 1/7 of their original face value. By 1780, Continental bills - or Continentals - were worth just 1/40th of their face value. Despite efforts by Congress to reform the currency by removing the old bills from circulation and issuing new ones, the attempt met with little or no success. By May 1781, Continentals had become so worthless they ceased to circulate as money. Benjamin Franklin noted that the depreciation of the currency had, in effect, acted as a tax to pay for the war.[1] In the 1790s, after the ratification of the United States Constitution, Continentals could be exchanged for treasury bonds at 1% of face value.[2]..

Hey, it doesn't end there...

 On August 8, 1785, the Continental Congress of the United States authorized the issuance of a new currency the US dollar.

However runaway inflation and the collapse of the Continental currency prompted delegates at theConstitutional Convention in Philadelphia in 1787 to include the gold and silver clause into the United States Constitution preventing individual States from issuing their own bills of credit. Article One states they were prohibited to "make any Thing but gold and silver Coin a Tender in Payment of Debts."[4] 

 Paul then goes on to compare Bitcoin enthusiasts to Goldbugs - which was inevitable. I'm far from a Goldbug, and those that follow me can attest. Apparently Mr. Krugman isn't either, but he appears to make a specious argument, to wit:

The similarity to goldbug rhetoric isn’t a coincidence, since goldbugs and bitcoin enthusiasts — bitbugs? — tend to share both libertarian politics and the belief that governments are vastly abusing their power to print money. At the same time, it’s very peculiar, since bitcoins are in a sense the ultimate fiat currency, with a value conjured out of thin air. Gold’s value comes in part because it has nonmonetary uses, such as filling teeth and making jewelry; paper currencies have value because they’re backed by the power of the state, which defines them as legal tender and accepts them as payment for taxes. Bitcoins, however, derive their value, if any, purely from self-fulfilling prophecy, the belief that other people will accept them as payment.

I really need somebody from the academic ivory towers to explain to me the difference between paper currencies being backed by the power of the state and Bitcoins alleged self fulfilling fulfilling prophecy of the belief that other people will accept them as payment. Both of these concepts share one common theme that seems to have escaped Mr. Krugman - Belief!!! Being backed by the full faith and power of the government means nothing unless you believe that government backing has a real value. That real value, if you do believe in it, is solely a function of your level of belief in the government and the governments willingness to back the currency  and to what extent. After all, Greek bonds written under Greek law are backed by their government as well, as are Somalian bonds. So, pray tell, what's the difference between the value of those bonds and US treasuries? Belief, that's the difference! Again, a refresher from Wikipedia:  

Today, like the currency of most nations, the dollar is fiat money, unbacked by any physical asset. A holder of a federal reserve note has no right to demand an asset such as gold or silver from the government in exchange for a note.[28] Consequently, some proponents of theintrinsic theory of value believe that the near-zero marginal cost of production of the current fiat dollar detracts from its attractiveness as a medium of exchange and store of value because a fiat currency without a marginal cost of production is easier to debase via overproduction and the subsequent inflation of the money supply.



Who is Reggie Middleton?

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The_Prisoner's picture

The local rag just reprinted an snark-filled article by Andrew Ross-Sorkin rubishing bitcoin and gold.

Whatever these crooked-nosed, CFR-member, establishment-ass-kissing, non-pork-eating try to discredit, I'm buying.


mantrid's picture

bitcoin isn't "Anti-Social", it's just "Anti-Marxist"

BigSpruce's picture

From the picture posted at the top of the article, one would think that ole Krudman was about to star in some low budget gay porn flick. 

SilverIsKing's picture

If this asshole is anti-BTC, then the BTCers are definitely onto something big.

BigSpruce's picture

Ahh Krugman - the court economist for the Corptocracy ruling over us.

In another period in time he would have been the most vociferous defender of the flat earth theory. In exchange he would have received all the material desires life has to offer. Individuals like him are weak, pathetic, soulless, smarmy individuals who will do anything in their power to carve out a comfortable living - even if it means peddling ideas and defending actions that destroy the lives of millions. Whatever needs to be done to remain in good graces with the power elite that man will do.  What a loathsome individual. I pity his soul. 

liquid150's picture

Deleted due to double post

liquid150's picture

Paul Krugman is a complete and total fucking idiot. I am shocked the man can even tie his shoelaces, if he can do so at all.

grouchist's picture

BTC derives its value from scarcity.  How is it this is constantly lost in the debate?  I like Middleton's writeup but that point needs to be hammered on: THE MATH KEEPS US FROM ARBITRARILY CREATING AS MANY BTC AS WE WANT.  This is really the point, and I mean the WHOLE point.  The only real belief involved is that the math is correct, that there isn't some undiscovered issue that would allow someone to arbitrarily create as much BTC as they wanted.  The belief in the math fundamentally stems from the number of cryptographers who have reviewed it and failed to find such a hole.  Although I agree that this is still belief it is not on par with belief in "full faith and credit" or any other religious conviction.


Trampy's picture

The only real belief involved is that the math is correct, that there isn't some undiscovered issue that would allow someone to arbitrarily create as much BTC as they wanted.  The belief in the math fundamentally stems from the number of cryptographers who have reviewed it and failed to find such a hole.

Correct?  Consider the ease with which a sweeping generalization can be shown false (in toto) by presenting just a single counter-example.  Murphy's Law applies to everything.  If something can go wrong, it will go wrong.  Why should BTC be immune?  And how many things in the world are truly "impossible"?  Besides perpetual-motion machines, what else?

NSA and its contractors have some of the world's best and brightest working very hard their entire careers in the hope of improving the known algorithms for factoring and finding prime numbers.  If such a discovery is made, you can be sure it would be kept secret at the very highest levels possible.  The pre-planned murder of any possible discoverers would not surprise me.

Throughout the history of applied mathematics it is a fact that every cryptographic code designed by humankind has been broken.  Some here might remember that SSL started out as 40 bits.  The current 128-bit SSL can be broken in real-time given sufficient computing power, but, more importantly, 128-bit SSL can be decoded in real-time with trivial firmware by "MITM" methods used by practically all high-security intranets to monitor the external communications of a worker using employer-owned computer hardware and network to browse the WWW while at work.  Blue Coat Systems (BCSI) was the first-to-market and market leader in the late 1990s for their software installed at the corporate firewall to allow their computer security departments to monitor all web usage by their employees.  The BCSI method, which was patented, and probably come off patent, relied on spoofing the keys of the extrernal site being accessed.  This is very easy to do if the web browsers allowed to be in use at work are modified to make the MITM monitoring invisible, by preventing the user from checking the SSL keys of the "remote site" they access to view their brokerage account to see if they belong to Charles Schwab, say, or belong to their employer.  If you are working in such an environment, trying to modify or install certain types software on an employer-controlled computer will set alarm bells ringing immediately.

And look at the history of PGP to see how extensive reviews of its algorithms and implementation by the world's "best" did not discover problems that were later deemed to at least allow theoretical defeat.  Hostile DLL injection through public keys?  Wow!  Also, Google "tor weaknesses."

Aside from the factoring and prime-number people, NSA is very interested in network routing.  Now what could they be thinking?  Control the Route, Control the traffic, to paraphrase Joe Stalin. 

Quinvarius's picture

A real Keynesian economist loves gold and bitcoin.  More money circulating is more money circulating.  They especially love gold due to the mining jobs it creates.  If they advocate burying boxes of money then digging them up, they LOVE gold mining.  Krugman is just a moron with no affiliation to any known economic theory.  No one understands his nonsense. 

disabledvet's picture

this is ironic but true. Imagine running your Government program on a "bit coin exchange." in many ways that's how the USA fought World War II..."here's your ten bucks...go build me an aircraft carrier." in the age of rapid prototyping you can discover "value" very can simply print it out. If you want to build that thing that means going to Wall Street and raising capital. that's what "moral hazard" means in practice. you have to compete...literally...with all the other "borrowing interests." they are LEGION in both name and number.

Yancey Ward's picture

Krugman's real problem with gold and bitcoin is that both are possible means of escaping theft from the collective.  As long as people hold as assets things that can't be easily hidden, then governments always have a means of dipping into them when necessary.  Krugman, were he an honest man, would just admit this is his real problem with these items.

Missiondweller's picture

Exactly. At his core Krugman is just a stooge for statist policies. Economics be damned.

Walt D.'s picture

This is the same problem that the French Government has with farmers (and small shops that sell farm produts) who barter - something that has been going on for centuries. 

hound dog vigilante's picture


If the lefty statist establishment did not have Krugman they would have to invent him.


monad's picture

Krugman preaches Pol Pot

maskone909's picture

this dickface couldnt even keep his own financial house in order.

Ghordius's picture

Krugman dislikes BitCoin as much as gold and the EUR. That simple

Walt D.'s picture

Krugman is a buffoon in the original sense of the word. Everything he says is wrong and is designed to push the false establishment agenda.

How many dollars does it take to buy a barrell of oil or an ounce of gold compared to 1971?

He is just part of the mainstream media whose sole purpose is to disseminate lies and propaganda. 

The next thing we will be hearing about is the success of Obamacare. The liberal elite should be careful what they wish for - some could end up with the same medical treatment (or the lack thereof) as Boris Yeltzin's mother. Socialist medicine is not going to develop new antibiotics to combat the antibiotic resistant superbugs.

FrankDrakman's picture

Socialist medicine is not going to develop new antibiotics to combat the antibiotic resistant superbugs.

You are correct, but there is surprising news on this front. The New Yorker had a long article a few months back about how our intestinal fauna and flora had become woefully undermanned in the fight against bacteria. The solution proposed by some of the doctors interviewed was "inject someone else's intestinal matter (i.e. "shit") into your abdomen". One doctor in Calgary, Alberta did exactly that, and was able to reduce and/or eliminate c. Difficile infections in hospital patients (C. difficile infection is a growing problem in inpatient healthcare facilities. Outbreaks occur when patients accidentally ingest spores of the bacteria while they are patients in a hospital (where 14,000 people a year in America alone die as a result),nursing home, or similar facility. When the bacteria are in a colon in which the normal gut flora has been destroyed (usually after a broad-spectrum antibiotic  has been used), the gut becomes overrun with C. difficile. ).

However, there are many who think that increased sensitivity to other diseases stems from the same source - the elimination of various useful bugs in our systems by a 'hyper-hygenic' nanny state that demands so much sterilization that when a heretofore innocuous bug sneaks through the cracks, our guts are totally unprepared, and we suffer the consequences. The suggested treatment is the same as above - introduction of new flora and fauna into your intestine.

So, the next time a lefty tells you to "Eat shit", he's only got your health in mind.

FreeNewEnergy's picture

Good job, Reggie. I especially enjoyed your comments about the $$ being used in the slave trade.

Currencies can be used for anything, obviously.

Keep the faith and keep after Dr. Krug. You've got him beat by a mile, or, a bit(coin).


Czar of Defenestration's picture

So...if I understand correctly, the great claim that Bitcoin has going for it is roughly, "we're just as good as fiat, only *without* any country's Central Bank!"

BigJim's picture

Reggie's a bit confused, as is Krugman. To whit:

paper currencies have value because they’re backed by the power of the state, which defines them as legal tender and accepts them as payment for taxes.

er no, fiat currencies don't derive their 'value' from having the state 'accept' them as payment for taxes; the state demands them, on pain of being thrown into a cage, and having your worldly goods confiscated to pay 'your' taxes and any fines the good people inhabiting the IRS decide you 'owe'.

If you're an OPEC dictator, the USD has the added 'attraction' of being the currency you demand from purchasers of your oil so you don't wind up looking like Ghaddafi or Saddam.

painlord-2k's picture

Reality ---> Academic Theory
Bitcoin ---> USD
Stone ---> Head
Windshied ---> Mosquito 

EscapeKey's picture

Who cares about Krugman.

He's to the NY Times what Joe Weaselthal is to Business Insider.

An establishment apologist.

hound dog vigilante's picture


saw an article yesterday explaining that Business Insider is trying to 'cash out' and sell themselves to a bigger fish... they value themselves in the $100million range.

if BI sells for more than a carton of cigarettes i may have to set myself on fire...


Boris Alatovkrap's picture

Boris only can hope to meet Dr. Krugman in dark alley and maybe exchange some pounds, find out how tender is Dr. Krugman face. Of course, this is help local economy because emergency physician, triage nurse, anesthesiologist, attending surgeon of maxio-facial and reconstruction is all paid and can now spend in local economy.

* See what Boris is do with word pun for discussion of monetary regime!?

monad's picture

Why work so hard? It shouldn't cost 20k to have Krugman's bureaucracy of desperate minimum wage schnooks move some zeroes on his tax filings, transpose his SSN with some nasty's at the IRS, SSI, bank and police department, delete all his records Princeton, repo his condo, report his car stolen and get him on the sex offender watch list.

Look around. See all those seriously ugly children? Thats proof how easily young women are gamed. Just find the proud, insecure, poorly educated information workers who can do these things and pay some gigolo to inspire them to do it. They'll work for free. You probably don't even need to leave India to tap all these systems.

Its the Information Age, friend. Its open season on the C students. Brought to you by Carl's Jr. 

Boris Alatovkrap's picture

... but, but, break Krugman face is so much more feel of satisfaction... think of Krugman eat through straw for next year it is joy delirium!

monad's picture

Privacy is a wonderful thing. I'm not sure there is anything you could do to him thats worse than what he's already done to himself. For life.

painlord-2k's picture

a full carton of cigarettes or an empty carton of cigarettes?