Tags: Shiller | bitcoin | bubble | money

Shiller: Bitcoin Looks Like a Bubble, But Some Good Can Come of It

By    |   Monday, 03 March 2014 12:42 PM

The bitcoin appears to be a bubble, but some good things can still arise from it, says Nobel laureate economist Robert Shiller of Yale University.

"Bitcoin's future is very much in doubt. Yet whatever becomes of it, something good can arise from its innovations — even if the results are very different from its current form or its numerous competitors," Shiller writes in The New York Times.

"What I have in mind isn't another wave of price speculation. Instead, I believe that electronic forms of money could give us better pricing, contracting and risk management."

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And what of the bubble issue?

"The bitcoin phenomenon seems to fit the basic definition of a speculative bubble — that is, a special kind of fad, a mania for holding an asset in expectation of its appreciation," Shiller notes.

Right now the bitcoin doesn't solve any fundamental economic problem, he explains. "Bitcoin has been focused on the wrong classical functions of money, as a medium of exchange and a store of value."

Regular money works fine for that, Shiller says. What's needed instead is a new unit of account, he writes, noting that means "a basic standard of economic measurement."

"Scientists spend a lot of time thinking about ways to improve systems of measurement. Business people should, too."

CNBC commentator Larry Kudlow doesn't think the bitcoin works as a medium exchange and store of value either.

"Bitcoin is not real money," he writes in an article for CNBC. "It has no central bank regulation, network operations or even centralized issuance. And because of its wild price fluctuations, bitcoin can never be a reliable payment system."

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The bitcoin appears to be a bubble, but some good things can still arise from it, says Nobel laureate economist Robert Shiller of Yale University.
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2014-42-03
Monday, 03 March 2014 12:42 PM
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