Anyone on the fence with regard to Bitcoin should consider coming to the side of supporting it after reading Paul Krugman’s ridiculous and riddled with errors hit-piece in the New York Times this weekend. The key tipoff as to where he is coming from in this absurd editorial is in the title itself in which he calls Bitcoin an “antisocial network.” Anti-social is one of the most favored collectivist/fascist terms and concepts of all time. A term meant to demonize those in a particular society that think for themselves rather than conform to whatever the oligarchs or dictators in charge of the state deem appropriate or “social.” Jews would have been seen as “antisocial” in Nazi Germany, just as anyone with glasses would have been deemed “antisocial” in Pol Pot’s Cambodia. This is a very dangerous term and one that is intended to guilt people into the acceptance of a stale, authoritarian and conformist society.
Now let’s get to some of the more ridiculous passages from his editorial. From the New York Times:
The economic significance of this roller coaster was basically nil. But the furor over bitcoin was a useful lesson in the ways people misunderstand money — and in particular how they are misled by the desire to divorce the value of money from the society it serves.
The similarity to goldbug rhetoric isn’t a coincidence, since goldbugs and bitcoin enthusiasts — bitbugs? — tend to share both libertarian politics and the belief that governments are vastly abusing their power to print money. At the same time, it’s very peculiar, since bitcoins are in a sense the ultimate fiat currency, with a value conjured out of thin air. Gold’s value comes in part because it has nonmonetary uses, such as filling teeth and making jewelry; paper currencies have value because they’re backed by the power of the state, which defines them as legal tender and accepts them as payment for taxes. Bitcoins, however, derive their value, if any, purely from self-fulfilling prophecy, the belief that other people will accept them as payment.
This paragraph is so riddled with blatant errors it is almost difficult to know where to start. First, either Krugman is extremely lazy and intellectually dishonest by misdefining “fiat,” or he is purposefully misleading his readers with full knowledge that they have zero understanding of money and will simply take his word for it. As I have mentioned many times before, fiat is defined as: 1. A formal authorization or proposition; a decree and 2. An arbitrary order. Synonyms include: decree, diktat, directive, edict, rescript, ruling. So Bitcoin is actually the exact opposite of fiat money.
Second, he implies that the value of gold comes from its uses in jewelry and dentistry. Really Paul? I guess Vladimir Putin must have some really rotten teeth and I suppose that Fort Knox still holds billions of gold bricks in anticipation of a massive dental epidemic sure to hit the United States in the near future. Absolutely ridiculous.
The practical misconception here — and it’s a big one — is the notion that we live in an era of wildly irresponsible money printing, with runaway inflation just around the corner. It’s true that the Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis. I know, government officials are not to be trusted and all that, but the truth is that Ben Bernanke’s promises that his actions wouldn’t be inflationary have been vindicated year after year, while goldbugs’ dire warnings of inflation keep not coming true.
Temporary? So I suppose four and a half years of rampant money printing and bank bailouts is “transitory” in Krugman’s mind. I’d love to ask Krugman when this becomes “un-temporary” in his mind. Ten years? Twenty? I’d love to know. For some background, I wrote a lengthy piece called It’s Transitory back in June, 2011.