Kook of the Week: Bitcoin Buyers
Back in 1998, right as the internet bubble was becoming a bubble, Nobel Prize-winning-Princeton-economics-professor-and-New York Times-columnist Paul Krugman presciently warned:
The growth of the Internet will slow drastically, as the flaw in “Metcalfe’s law”–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.
As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly.
Boy was he spot-on.
Today I am here to warn you about the dangers of another bubble that is forming: bitcoins. Just look at the chart above of the price of one bitcoin in US dollars over the last year. This is one serious bubble forming.
I’m not going to teach you what bitcoins are today, but some kooks seem to think they are money. I have taught you in the past what money is, and trust me, bitcoins are not money.
Money is issued by governments to facilitate trade, but there is no government issuing bitcoins. They are “mined” using computer processing power and used to anonymously transfer money. So obviously the only people using bitcoins want to do so for nefarious purposes. If you have nothing to hide, then why hide?
Keep your money in the bank where the government can keep tabs on what you do with your money. In other words: where it is safe.
Don’t be a kook, avoid bitcoins.