Why Nobel Prize Winning Economist Joseph Stiglitz is Wrong about Bitcoin
Noble Prize-winning economist and Columbia Professor Joesph Stiglitz has long presented his controversial opinions on what he sees as the shortcomings and dangers of Bitcoin.
Prof. Stiglitz says Bitcoin Serves No Purpose
Stiglitz has been on the public record saying that Bitcoin should be made illegal and that once it is regulated to the point where it can’t be used to launder money or fuel other illicit activities it will disappear. Like many of the old money guard including Warren Buffet Stiglitz has repeated the axiom that Bitcoin and by proximity all-digital currency exist primarily for criminal use.
The argument against the illegal use statement is as well trodden as the accusation itself. All currencies are used to fund illegal activities, Bitcoin gained an early reputation because of a few people abusing it’s inherent decentralized and anonymous characteristics and now most of that is in the past while people are using it to buy everything from real estate to snacks at their local newsstands.
Professor Stiglitz told Tom Keene on the Bloomberg podcast Surveillance that “We have a good medium of exchange called the dollar… we can trade in that. Why do people want bitcoin? For secrecy.” That statement alone shows that he doesn’t understand or perhaps can’t comprehend the multifaceted benefits of cryptocurrency.
The Dollar is a prime example of fiat currencies inherent inflationary nature. Because the Federal Reserve can print as many dollars as it sees fit the dollar loses between 2 and 5% of its value every year. Bitcoin, on the other hand, is a deflationary currency. It has a finite number of coins (around 21 million) meaning it will continue to gain value despite the highs and lows of a changing market.
While a few hundred dollars can be spent without any red tape or long and drawn out legalities what about a few thousand, or fifty thousand or five hundred thousand? With Bitcoin, large amounts of value can be easily and quickly transported from person to person across the globe without harassment or inquiry.
This may lead to misguided indictments of money laundering or terrorist funding but in reality, it gives the hundreds of millions of people in the world who have no access to financial services the ability to make and take payment, send money to their families or even invest their wealth.
Add to that same scenario the fees involved in either using wire transfer services through a bank or private companies like Western Union where fees range from 5 to 20% plus usually some kind of processing fees on both ends and what happens to the Dollar amount? One of the key components of digital currency is the ease and relative inexpensive of sending money anywhere, anytime.
Blockchain and Bitcoin go hand in hand.
Perhaps most glaring of Stiglitz misperceptions of Bitcoin is what he doesn’t mention, the underlying blockchain technology that has made Bitcoin possible. The technology that enables Bitcoin to offer its high level of security, transparency and transportability is being recognized by businesses and countries around the world as revolutionary and the greatest technological innovation since the internet itself.
The blockchain and Bitcoin go hand in hand and by most expert opinions neither are going away anytime soon whereas old economists have a definite sell-by date.
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