Paul Krugman is Back, Still Hating on Crypto
Plus, a 24-Hour Blockchain TV Station?
The definition of the word “parody” includes the phrase, “deliberate exaggeration for comic effect.” When I read comments from noted Bitcoin haters Paul Krugman and Peter Schiff, it’s all I can think of. That I must be reading a parody, that their words are for comic effect. They both say no, they are dead serious.
Krugman, award-winning economist and NY Times contributor, was back at it again this week. His column in the Times was entitled, “Is Crypto Facing the Music?” His main thesis in this writing is that cryptocurrencies have no clear economic rationale other than speculation. And that we, the public, are foolish and gullible.
In 2013, he penned a column called, “Bitcoin is Evil.” At least he’s stayed consistent.
(It is important to point out that throughout the column, Krugman uses “crypto” and “Bitcoin” interchangeably, and fails to point out any differences between them or any attributes of Bitcoin specifically.)
Risk-on Assets are All Falling
The economist gleefully points out that Bitcoin has fallen 50% from its all-time high of $69,000. And that Luna lost 97% of its value in 24 hours. It’s all true, and it happens in other asset classes as well. In just the last six months, some bellwether tech stocks have lost a good share of their value. Amazon is down 40% from its high, Netflix down 73%, Nvidia 52%. Pandemic darlings Peloton, Teladoc and Zoom have retreated 80-90% in the last year. So it’s not just Bitcoin, and it’s not just crypto. There is no appetite in the markets right now for risky assets.
By the way, the fact that Bitcoin is behaving in close correlation with tech stocks just shows how misunderstood Bitcoin is, and just how early we are.
Missing the Main Points on Bitcoin
Krugman states that his bank account is, for all practical purposes, a digital asset. Thus, no need for Bitcoin, right? Well, is your bank money sovereign? Do you yourself hold control over it? Nope. Is your money scarce? Hardly. US dollars are printed every day, devaluing the money in your bank account. With inflation raging and likely to continue, do you feel good holding those dollars? Bitcoin, of course, has a fixed supply and is not controlled by anyone, except you. No mention of any of these features of Bitcoin.
He states that other platforms can accomplish what Bitcoin can, more easily and cheaply. Examples he throws out are debit cards and Venmo. Trust me, transactions with debit and credit cards are not cheap. And with cards and Venmo, you’re still shuffling around fiat dollars. You’re missing out on the great features of Bitcoin. These are just digital ways to transact fiat. Lipstick on a pig, if you will.
“Bitcoin is Ancient”
Krugman goes on to say that crypto “plays almost no role in economic transactions other than speculation….and illegal transactions.” And he believes that if Bitcoin is as great as its supporters say, then it should play a bigger role. After all, it’s been around since 2009, “ancient by tech standards.”
Bitcoin is still young. Its adoption, its growth rates, its market cap, are all growing by large percentages each year. Compare Bitcoin’s growth to the internet, and you’ll see it’s catching on much faster. The internet took much longer to go mainstream. The first web browser came out in 1990, but it wasn’t until the late 1990s that it started to grow by 100% per year in terms of users. And it didn’t stop. In the year 2000, there were 413 million internet users. In 2016, there were 3.4 billion. Twenty-six years after the first browser, and still growing. So we are still very early with Bitcoin.
But the internet. What did Paul have to say about that, back in 1998? Actual quote, “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.” Swing and a miss.
He also stated that jobs for IT specialists would decelerate and then turn downward. Missed that, too. Strike two.
Will his predictions on Bitcoin and cryptocurrencies be the called third strike?
Link to my previous article: The Bitcoin Haters
Note: Krugman has also championed the minting of a trillion dollar coin to help pay down the country’s debt, saying “it would cause no harm to the economy at all.” Wow.
Former Hedgie, Now Broke, Proposes Blockchain TV Network
Well, there’s already a Pokémon TV channel, the Tennis Channel, and the Dictators Channel. Would a 24-hour Blockchain TV network be so weird? Actually, to me, it would not. That’s what former hedge fund founder Phil Falcone is banking on.
So Who is Phil Falcone?
Falcone, 59, grew up in Minnesota and went to Harvard University, where he played varsity hockey. After a season of pro hockey in Sweden, Falcone went to work at Kidder, Peabody, then Wachovia and other financial firms. In 2000 Falcone and partner Raymond Harbert founded Harbinger Capital, where he would go on to be named one of the top 40 highest-earning hedge fund managers in the country.
Falcone also owned a minority share of the Minnesota Wild hockey team, and with Harbert owned a 20% share in the New York Times. Falcone also invested heavily in the telecommunications company, Light-Squared, Inc. The company was attempting to build a satellite-based 4G network to compete with AT&T and Verizon, but the FCC in 2012 revoked their approval of the project. He is currently suing investment firm Apollo for $2 billion for fraudulently getting Falcone to invest in the Light-Squared project.
What Would Blockchain TV Look Like?
Sources close to Falcone say that he envisions a 24-hour network dedicated to bringing news, entertainment and trending activity in the digital space. The largest platform for coverage in this area is YouTube, but plenty of crypto content there has been heavily censored, leaving room for another player.
I could envision features on the network similar to CNBC or Bloomberg, such as price tickers, interviews with major players in the space, trading and options action, and more in-depth feature stories. There are plenty of areas that could be covered on such a channel, like:
Bitcoin and cryptocurrencies
Stablecoins
NFTs
Web 3
Metaverse
Crypto mining
Regulations and taxation
A website for the network states that they hope to be up and running in the third quarter of 2022. That’s not far away, and Falcone hasn’t raised any capital yet.
A lot of questions remain unanswered. Sure, there’s a void in this particular niche. But is it necessary? Will they be able to draw advertisers?
Will the current craze of NFTs continue? Will the 20,000 or so altcoins survive? Most will not, it seems.
Meanwhile, Falcone and Harbinger Capital are being sued for $113 million for securities fraud by the SEC. It is alleged that Falcone used that amount of the investment firm’s assets to pay his personal taxes.
He is also currently selling off assets, including his Upper East Side townhouse, his estate in the Hamptons, and valuable artwork to pay off a reported $100 million in debt.
The concept of Blockchain TV sounds interesting, but many hurdles remain for this entrepreneur. Stay tuned.
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Issue No. 58, May 27, 2022
Rick Mulvey is a CPA, forensic accountant and crypto consultant. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.
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