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Nobel Laureate Economist Thinks the US Govt Has ‘Shut Down’ Bitcoin

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Nobel prize winning economist Joseph Stiglitz has, in a public event at the London School of Economics, stated that bitcoin has been “effectively” shut down by the U.S. government.

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Joseph Stiglitz is, by any account, a renowned economist, an influential figure and scholar in world economics. The 73-year-old American is notably a recipient of the Nobel prize in Economic Sciences in 2001 and is currently a professor at Columbia University, New York.

Stiglitz has received over 40 honorary degrees from the likes of Harvard and Cambridge Universities while being decorated by several governments such as South Korea, Colombia, Ecuador and more. He was also the chief economist at the World Bank for three years between 1997 and 2000. The list of accolades above still does not do him justice, his Wiki article sums up an exhaustive survey of his credentials.

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The Bitcoin Question

At a recent public event at London School of Economics while promoting his latest book, Stiglitz issued a public lecture before fielding questions from the audience.

It was here that Stiglitz was asked to offer his views on bitcoin. The question is notable in itself. A member of the audience asked Stiglitz:

Hi. My question is what is your opinion of bitcoin? Not necessarily on what is its impact, the trend and how it’s shaping the international system, globalization, but what is your perception of bitcoin and cryptocurrencies?

[In the way that] everyone being able to use and own their own banks and money, use it and trade it without any government regulation, authority. It is thoroughly decentralized and it’s unregulated, freely by the markets.

[My question is] It’s not about the impact of cryptocurrencies, but your personal philosophical opinion about the creation of cryptocurrencies. Thank you.

The question was sweeping in its context and summarized the-most-unique facets and functionalities of bitcoin, compared to fiat currencies. Unregulated and decentralized, a significant innovation to be sure. Wall Street seems to agree, in the way banks are flocking toward blockchain technology – the core innovation powering bitcoin.

The Response

The stage was set for Stiglitz – the 4th most influential economist in the world according to academic citations as of August 2016 – to offer what could very well be his first publicly-expressed opinion on bitcoin.

He replied:

My own view is: bitcoins have been greatly exaggerated. A common medium of exchange or a store of value is a basic public function and needs to be regulated.

Already, it is apparent that Stiglitz is, unsurprisingly, aware of bitcoin and the underlying potential that cryptocurrency observers praise it for.

For context, Stiglitz is the current Director of Graduate Summer Programs at the Brooks World Poverty Institute, an arm of the University of Manchester dedicated exclusively to research on poverty, inequality and growth around the world. One of bitcoin’s many advantages is the way in which it can help bring respite to those who remain unbanked, around the world. Mainstream media has frequently covered the very subject of bitcoin conflated with poverty.

However, Stiglitz’s comments reveal that he does not buy into the idea or notion of a borderless, unregulated world currency, free from any authority. Instead, he offers a very different take on what bitcoin, as he sees it, is meant for:

The main use of bitcoin has been to circumvent tax authorities and regulation. I think the US government did the right of thing of shutting or trying to shut it down and I think effectively…it has done that.

Stiglitz is, of course, mistaken in his view that bitcoin has been ‘shut down’ by the U.S. government. It begs the question: what was he referring to? It’s possible that the Nobel laureate could be referring to Silk Road, the darknet drug market that is prominently associated with bitcoin.

A Renegade Against the Institution

It is somewhat unfortunate that Stiglitz’s grasp of bitcoin is currently limited. This is a man who, as a Nobel prize winner and former chief economist at the World Bank, lambasted the International Monetary Fund (IMF) publicly in the past for its part in crises faced by economies around the world. His unrelenting criticism of the IMF, some say, even resulted in his departure from his role as the World Bank’s chief economist.

IMF

He once described of the IMF staff as:

“[T]hird-rate economists from first-rate universities.”

To expand on Stiglitz’s criticism of the IMF, a 2002 article from the Guardian reads:

The IMF made two big errors in the 1990s, in Mr Stiglitz’s view. The first was to bow to Wall Street’s demand for new markets, by making IMF loans conditional on countries opening up their financial sectors. The resulting rise in speculative capital flows has proved disastrous for fragile economies.

At the first sign of trouble, foreign investors pull out. At the height of the Asian crisis, some countries faced capital outflows of more than 10% of GDP.

The second error was to prescribe a mix of fiscal austerity and high-interest rates for the countries in the speculators’ firing line. Calling on countries running healthy budget surpluses to tighten their belts only intensified the recession

His stinging criticism of the IMF turned so many heads that the director of external relations at the IMF gave an entire speech that retorted the many accusations and criticisms of Stiglitz. That speech-in-response, from June 2002, is still available on IMF’s website.

As things stand, Stiglitz’s take on bitcoin is somewhat coinciding with that of Christine Lagarde, the managing director of the IMF. In a speech in late 2015, Lagarde was addressing bankers at a banking industry conference, quelling any fears that bitcoin and blockchain technology would threaten the banking industry.

Surely, there are a few students at Columbia University refreshing their pinned bitcoin price tabs while attending Stiglitz’s courses. It would be prudent to inform the professor that bitcoin is not only not-shut-down by the government, the cryptocurrency is also gaining in value recently.

Images from Shutterstock and Wikimedia.

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18 Comments

18 Comments

  1. Douglas Crets

    September 7, 2016 at 3:14 pm

    Ha. Love how the headline is supposed to milk the conspiracy theorists for all their attention, but the first quote from Stiglitz is pretty much the real headline: IT AIN’T MUCH TO WORRY ABOUT!

  2. grahvity

    September 7, 2016 at 3:21 pm

    Yet another bitcoin obituary.

    • Orchideric

      September 27, 2016 at 5:54 am

      Haha indeed my thoughts exactly.

  3. Giulio Prisco

    September 7, 2016 at 4:48 pm

    I remember that in 1986 late unlamented Colonel claimed that he “destroyed” the Italian island Lampedusa. Actually, they fired a missile that went very much off-target and didn’t do any damage. This claim that the US Gov “shut down” Bitcoin looks similar to me.

  4. ViP Berbigao

    September 7, 2016 at 5:16 pm

    The Bitcoin is transparent, very transparent and very public. Another academic four walls. The correct for him are corrupt governments who steal the savings of people with inflation.

  5. 한재영

    September 7, 2016 at 8:40 pm

    How ? And i think if US gov want kill the Bitcoin, they need Internet Shutdown. But lot of business melted within internet. that opinion is very stupid thinks.

  6. smd

    September 7, 2016 at 11:00 pm

    It will be an insult for Nakamoto to get Nobel prize while Stiglitz has one.

  7. Claudio Levrini

    September 8, 2016 at 9:50 am

    Ignorant and pretentious as you would expect from a former chief economist at the World Bank

    • Alexander Kopriwa

      September 25, 2016 at 2:41 pm

      And the IMF follows suite with Ms Lagarde… Transparency is NOT wanted.

      • Orchideric

        September 27, 2016 at 5:59 am

        Exactly… They are terrified of the Bitcoin blockchain, which is why Banking Cartel’s like R3 instantly formed. They’re scrambling to catch up so they can say Bitcoin has no advantage on speed; but transparency and decentralization will bite them in the butt. My prediction is that the moment they launch private chains, they will get hacked bigtime.

  8. Elwar

    September 8, 2016 at 2:27 pm

    Reminds me of Iraq’s Information Minister, Muhammed Saeed al-Sahaf, standing in front of his own media talking about how Iraq has defeated the US army while in a split screen it shows US troops downtown Baghdad.
    Nothing to see here. Everything is ok with the banks. Keep your money there.

  9. Ade

    September 8, 2016 at 4:50 pm

    40 Honorary Degrees in economics and still doesn’t know that the current centralised fiat ponzi scheme the world operates under is….a 200+ yr old get rich quick Scam for the 0.000001%

  10. Michael Bailey

    September 10, 2016 at 6:52 pm

    This has to be one of the most hilarious claims I’ve ever heard. It serves to demonstrate that “credentials” signify only one thing . . . that the holder is a top-notch pawn and mouthpiece of those who are really in control . . for now. Utter and complete ignorance doesn’t begin to describe the condition of this man’s mind. He hasn’t learned anything since studying Keynes in the 1960’s.

  11. Orchideric

    September 19, 2016 at 4:15 am

    Haha, as an American, I can assure you that Bitcoin has been welcomed with rolling out the red carpet and with open arms. The formation of the NYDFS and several other new regulations = nothing but loving adoption. Even in Florida where the Local Bitcoins fiasco happened the case was overturned.

    • WNDRKND

      September 24, 2016 at 3:21 am

      Even here in North Carolina, P2P sales are legal. Id say that’s about as open as it gets as far as making money legally.

  12. tracy lane

    September 27, 2016 at 5:57 am

    hyperhacktive1 @gmail .com is a professional hacker that specializes in exposing cheating spouse,and every other hacking related issues. he helps catch cheating spouse by hacking their communications like call, Facebook, text, emails, Skype and many more. i have used this service before and he did a very good job, he gave me every proof i needed to know that my fiancee was cheating. You can contact him on his email hyperhacktive1 @gmail .com to help you catch your cheating spouse, or for any other hacking related problems, he will definitely help you, he has helped a lot of people, contact him and figure out your relationship status. i wish you the best too.

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  13. Gimmel Yod

    October 3, 2016 at 8:02 pm

    Have you looked at “Noble-Prize recipients” over the last decade? Seriously. No, SERIOUSLY. Have you looked at the list? Because the “Noble Prize” has essentially been “shut down by the US Government”. Oh, they still have a “thing” called the “Noble Prize”, – but it has the same value as a “PreApproved Credit card” notice: NONE. ZER0. ZILTCH. NADA. From those who push JUNK-SCIENCE – to WAR-MONGERS who win “Peace prizes” — the “Noble Prize” means NOTHING other than the recipient is some sort of political whore.

  14. Gimmel Yod

    October 3, 2016 at 8:12 pm

    “God is dead” – Nietzsche
    “Nietzsche is dead.” – God

    Which statement has been PROVEN true?
    Bitcoin is trading at over $600/per. What was the value of the “Dollar” again?

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Analysis

Notable Bitcoin Price Growth Events in October

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October has been an interesting month for Bitcoin, with growth of about 40% so far, breaking a market cap of over $101,881,681,652.

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But if you are looking at Bitcoin long-term, this is more than just numbers now. Yes, Bitcoin did experience some explosive growth this month (and has been this entire year), but we shouldn’t let that distract us from some of the main components that will fuel Bitcoin’s growth in the long-term.

  1. Not only did the price break $6,000 per Bitcoin for the first time ever, we started to see Bitcoin’s market cap rate surpass that of big banks such as Goldman Sachs ($93 billion) and Morgan Stanley ($89 billion). While comparing the market capitalization of a cryptocurrency with that of publicly traded companies doesn’t make much financial sense, it’s entertaining to watch financial institutions stress out about Bitcoin.

For example, the CEO of JPMorgan Chase Jamie Dimon can’t stop talking about Bitcoin and venting his frustration with the topic by calling Bitcoin a “fraud” and threatening to fire any employee trading it for the simple reason of “being stupid”.

We also saw Goldman Sachs state that Bitcoin is not the “new gold” in terms of currency, calling it volatile and the methods of storage vulnerable. Goldman Sachs also stated that precious metals like gold are still the best way to store value-long term. While this may be historically accurate, the world hasn’t seen anything like Bitcoin before. Understanding Bitcoin’s growth a matter of equipping yourself with the perspective and ideology that Bitcoin (or  if/when whatever cryptocurrency evolves to take its place) can play a substantial long-term role in how society views money.

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Traditional financial institutions such as investment banks are at an interesting point. Cryptocurrencies such as Bitcoin and Ripple are inherent threats to the very foundation that these multi-hundred-billion dollar companies operate on, and they can’t be defeated because of their decentralized nature. Additionally, many of the same banks that are threatened are also investors looking to reap the rewards of Bitcoin’s explosive growth, and also are incubating similar blockchain concepts to not get left in the dust.

  1. People are starting to look at Bitcoin as an oasis of solidity in an otherwise tumultuous alt-coin market.

In September, we saw an unprecedented crackdown on ICOs and alt-coins by government entities. China and South Korea outright banned the sales of ICOs, and the United States warned investors to be skeptical. While there are hundreds (soon to be thousands) of dubious ICOs, this crackdown did have effects on how investors view legitimate alt-coins. For this reason, many investors flocked to Bitcoin and were able to enjoy some solid growth in October.

So, that brings up the question of whether Bitcoin will be a source of stability in the future. Although the price has gone up a lot this month, that doesn’t make it any less volatile.

  1. Bitcoin still has a long way to go. One of the key pieces of news in October that influenced the writing of this piece was the prediction that Bitcoin will hit $27,000 in four months by an avid cryptocurrency investor and enthusiast called Trace Mayer. While Twitter is filled with all kinds of Bitcoin hooplah, Mayer’s prediction was based on a simple 200 day moving average. This 200 day moving average would put Bitcoin well over $27,000.

Four months is close enough in the future to anticipate, so I’m really interested to see where BTC ends up between then and now. The counter-argument against this would be that Bitcoin may just be experience a state of exponential growth and will cool off, but that’s what people have been saying for years.

It’s also important to note that Bitcoin’s main competitors for value storage and a medium of exchange are the US Dollar and gold. Bitcoin was able to earn a market capitalization of over $100 billion in just a few short years, but this hardly holds a candle to its competitors. The US Dollar money supply circles around $12,500 billion. All the gold that has ever been mined is worth around $8,000 billion.

This means that Bitcoin, this innovative new technology with exponential growth is only around 1% of its two main competitors. This leaves Bitcoin a long way to grow, and I personally don’t think it’s going to slow down anytime soon.

Final Thoughts

By all means, this isn’t a conclusive argument for where Bitcoin’s price will end up. These are just a few points I want to bring up regardless of whatever you choose to do with your money.

There are a handful good of arguments on both sides of the Bitcoin growth discussion, but it all comes down to how well you can either respond to short-term events, or how cemented you are in your long-term beliefs.

Personally, I don’t recommend day-trading or trying to “game” exchanges for the simple fact that losing money sucks, and this is an easy way to lose money.

However, what I can advocate is the thorough research of the fundamental factors influencing the growth of particular cryptocurrencies and how the world responds to it. For example, in October we saw investment banks start commenting more about Bitcoin (which at the very least hints at more media coverage), how many users decided to stick with Bitcoin instead of liquidating for fiat during rough alt-coin times, and some explosive growth that backs up the lofty price goal assumptions by crypto enthusiasts.

 

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Bitcoin

We Have to Talk About Bitcoin Again

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It hasn’t been a day since our last bitcoin article, but the world’s leading cryptocurrency has soared to fresh all-time highs yet again. This time, prices approached $6,200 for the first time ever.

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Bitcoin’s Bull Market

BTC/USD touched a session high of $6,180.00, bringing its total market cap to $103 billion. Prices were last seen hovering around $6,100, according to Bitstamp.

The rally on Saturday came less than 24 hours after the bulls tested the waters near $6,000. Analysts are almost certain that prices can still go higher, making a compelling case for investors who are still on the sidelines of the crypto rally. FundStrat Global Advisor’s Tom Lee believes prices could top $25,000 over the next five years. In fact, he says this is a conservative estimate.

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Bitcoin’s epic run has dwarfed Wall Street’s post-election rally, and has defied repeated warnings from big banks and policymakers.

Bitcoin Gold’s Private Fork

Coinbase made a startling revelation Friday in its FAQ section, where it claimed that Bitcoin Gold (BTG) has already privately forked. The private fork occurred “at a point known only to the Bitcoin Gold development team.” The newly minted digital currency will be made publicly available when the Bitcoin blockchain reaches block no. 491,407. That’s estimated to occur Wednesday.

Bitcoin Gold isn’t your typical fork in the traditional sense of the term. The Wednesday fork date is when the first Genesis block will be mined. The Bitcoin network will have no part in this process whatsoever.

Market participants are still skeptical whether BTG is legitimate. The code has not been made available, and its developers have already mined tens of thousands of blocks.

BTG’s reluctance to release its code publicly is a “major security risk,” according to Coinbase. As such, the U.S.-based exchange will not support the new coin. The broker remains committed to adding support for the Segwit2x hard fork in November.

“After the fork, we will enable access when we have determined each blockchain is secure and stable,” Coinbase Dan Romero said in a blog post earlier this month. “We expect this to happen within a few days after the fork, but it may take longer if additional risks emerge.”

Featured image courtesy of Shutterstock. 

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Analysis

Long-Term Cryptocurrency Analysis: Bitcoin Outshines Altcoins Again

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The most valuable coin had another encouraging week, as it emerged from a brief but violent correction, just to reach new highs towards the end of the week, draining capital from altcoins. The total value of the market is stagnating near the all-time high, but BTC crossed the $100 billion mark as it surged past the $6000 price level, controlling 58% of the market.

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With the long-term MACD clearly being overbought, and as the long-term target has been hit, investors should now be looking for exit points, even as the short-term uptrend is intact. The range projection target of the recent correction is found at $7000, but correction risks are already high, and only small positions should be kept in the current setup.

BTC/USD, Daily Chart Analysis

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Most of the major altcoins are trading in narrow ranges this weekend after a slightly bearish week, as the optimism surrounding Ethereum’s major update faded and the second largest coin re-entered its previous range.

Litecoin, Dash, and Monero are still looking encouraging despite the lengthy correction, while the recently, while the relatively weak Ethereum Classic IOTA continue to show worrying signs. As the Bitcoin long trade is getting stretched,  let’s see the how the daily charts of the altcoins are shaping up.

(more…)

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