The Economist on Bitcoin (and some weird claims)

The Economist has two interesting articles on Bitcoin this week (here and here), as well as a blog entry (here). Coloured coins and the potential development (and other uses) of Bitcoin’s technology are mentioned.

But two of the articles make very strange (if not outright wrong) claims in order to criticise some of the principles underlying Bitcoin. One considers the inherent deflationary effect of Bitcoin as being a limitation on the ability of the currency to become mainstream. The article once again seems to miss the difference between good and bad deflation. For sure, this differentiation wasn’t mainstream until recently and is still not accepted by many mainstream economists (see one of the latest examples here). Still, introducing some nuance in its articles wouldn’t hurt the newspaper. In addition, the Economist makes claims such as:

A modicum of inflation greases the system by, in effect, cutting the wages of workers whose pay cheques fail to keep pace with inflation.

Don’t they see the problem with this sentence? Inflation fuelling inflation anyone?

In the blog post, Ryan Avent also makes a very inaccurate claim:

What’s more, the idea that modern central banks with their loosey-goosey printing presses have generated an epidemic of inflation is a little nuts; if anything, rich-world central banks have become too effective at protecting the value of their respective currencies.

Really? According to research by Selgin and White, the dollar has lost most of its value since the Fed was set up (whereas the value remained relatively stable over the previous century, though with short-term large fluctuations). (although it is possible that Ryan only refers to the last few years)

US inflation

While I agree that Bitcoin isn’t perfect, its critics will have to find other angles of attack.

Advertisements

Tags: ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Marginal REVOLUTION

Small Steps Toward A Much Better World

Dizzynomics

Finding patterns in finance, econ and technology -- probably where there are none

Alt-M

When financial markets spontaneously emerge through voluntary human action

Pumpkin Person

The psychology of horror

Uneasy Money

Commentary on monetary policy in the spirit of R. G. Hawtrey

Spontaneous Finance

When financial markets spontaneously emerge through voluntary human action

ViennaCapitalist

Volatility Is The Energy That Drives Returns

The Insecurity Analyst

When financial markets spontaneously emerge through voluntary human action

Sober Look

When financial markets spontaneously emerge through voluntary human action

Social Democracy for the 21st Century: A Realist Alternative to the Modern Left

When financial markets spontaneously emerge through voluntary human action

EcPoFi - Economics, Politics, Finance

When financial markets spontaneously emerge through voluntary human action

Coppola Comment

When financial markets spontaneously emerge through voluntary human action

Lend Academy

Teaching the World About Peer to Peer Lending

Credit Writedowns

Finance, Economics and Markets

Mises Institute

When financial markets spontaneously emerge through voluntary human action

Paul Krugman

When financial markets spontaneously emerge through voluntary human action

Free exchange

When financial markets spontaneously emerge through voluntary human action

Alt-M

When financial markets spontaneously emerge through voluntary human action

Moneyness

When financial markets spontaneously emerge through voluntary human action

%d bloggers like this: