Nobel Laureate on ‘Disturbing’ Similarities Between Crypto and Subprime Mortgages

Nobel-prize winning American economist Paul Krugman has issued a warning to crypto investors, drawing a “disturbing” parallel between the digital asset industry and the meltdown in subprime mortgages. 

According to the bio on his website, Krugman has multiple jobs:

“Paul Krugman has at least three jobs: he is professor of economics and international affairs at Princeton University, Centenary Professor at the London School of Economics, and, perhaps, his best-known job, as an op-ed columnist for The New York Times. In recognition of his influence The Washington Monthly called him ‘the most important political columnist in America.’“

In an opinion piece penned for The New York Times, Krugman warned that he was seeing “uncomfortable parallels” between crypto and the U.S. subprime mortgage market that crashed in the late 2000’s, leading to a global financial crisis and economic recession:

There are disturbing echoes of the subprime crash 15 years ago. 

Krugman said that crypto investors are being sold speculative financial products without understanding the underlying risk, similar to how banks issued high-risk loans to homeowners who were unable to make the payments. The faulty loans led to significant losses for the lenders, leading to a collapse in the financial market.

Krugman added:

And cryptocurrencies, with their huge price fluctuations seemingly unrelated to fundamentals, are about as risky as an asset class can get.

Krugman has a history of disparaging Bitcoin and the crypto markets, likening the industry of digital assets to a Ponzi scheme. 

However, despite predicting doom and gloom ahead, Krugman is not convinced a crypto crash will affect the broader financial market. He noted that the “numbers aren’t big enough to do that,” with the total value of crypto amounting to roughly $2 trillion. 

Disclaimer

The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.

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