The “unpleasant parallels” between the cryptocurrency market and the collapse of the US mortgage market that brought the world “to its knees and triggered the global financial crisis of 2007-2008,” described the Nobel Laureate in Economics Paul Krugman in a January 27 article in The New York Times.
Krugman recalled that “by the autumn of last year, the total market value of cryptocurrencies had reached nearly $3 trillion. Since then, however, prices have collapsed, wiping out about $1.3 trillion in market capitalization ,” Krugman pointed out, raising the question of who is the victim of this collapse.
“No, cryptocurrencies do not threaten the financial system – the numbers are not big enough for that. But there is growing evidence that the risks associated with cryptography are disproportionately borne by people who do not know what they are getting into and are ill-prepared to deal with the negative consequences ,” the laureate noted.
When asked about who the affected party was, Krugman noted that according to a poll by the research organization NORC, 44% of crypto investors are not white, and 55% do not have a higher education. “This is consistent with anecdotal evidence that cryptocurrency investing has become extremely popular among minority groups and the working class ,” he noted.
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KRUGMAN’S ARGUEMENT ON CRYPTOCURRENCIES!!!
Arguing with NORC, which says it’s “great that cryptocurrencies open up investment opportunities for more diverse investors ,” Krugman notes that he “remembers the days when subprime mortgage lending was also glorified — when it was hailed as a way to open up the benefits of home ownership to previously excluded groups.
Krugman reminded readers of the words of Ned Gramlich, one of the leaders of the US Federal Reserve in 1997-2005, who was “known to warn in vain of rising financial dangers . “
Then he asked, “Why are the riskiest loan products sold to the least sophisticated borrowers?” Then he stated: “The question answers itself ,” Krugman emphasized.
The Nobel laureate summed up that cryptocurrencies “with their huge price fluctuations, seemingly unrelated to fundamental factors” , in his assessment, are “as risky as possible” .
WHO IS KRUGMAN?
Paul Robin Krugman is an American economist and public intellectual, who is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for The New York Times. In 2008, Krugman was the winner of the Nobel Memorial Prize in Economic Sciences for his contributions to New Trade Theory and New Economic Geography.
The Prize Committee cited Krugman’s work explaining the patterns of international trade and the geographic distribution of economic activity, by examining the effects of economies of scale and of consumer preferences for diverse goods and services.
Krugman was previously a professor of economics at MIT, and later at Princeton University. He retired from Princeton in June 2015, and holds the title of professor emeritus there. He also holds the title of Centennial Professor at the London School of Economics. Krugman was President of the Eastern Economic Association in 2010,and is among the most influential economists in the world.[11] He is known in academia for his work on international economics (including trade theory and international finance),economic geography, liquidity traps, and currency crises.
Krugman is the author or editor of 27 books, including scholarly works, textbooks, and books for a more general audience, and has published over 200 scholarly articles in professional journals and edited volumes. He has also written several hundred columns on economic and political issues for The New York Times, Fortune and Slate.
A 2011 survey of economics professors named him their favorite living economist under the age of 60. According to the Open Syllabus Project, Krugman is the second most frequently cited author on college syllabi for economics courses. As a commentator, Krugman has written on a wide range of economic issues including income distribution, taxation, macroeconomics, and international economics. Krugman considers himself a modern liberal, referring to his books, his blog on The New York Times, and his 2007 book The Conscience of a Liberal. His popular commentary has attracted widespread attention and comments, both positive and negative.
SOURCE: WIKIPEDIA
