Jason Farrell

Former Fed Chairman Alan Greenspan was asked recently on Bloomberg TV whether he thought Bitcoin, which had an 80-fold run-up this year, was a bubble. Video below:

“I guess so… currencies, to be exchangeable, have to be backed by something,” he grumbled. Without intrinsic commodity value or the force of a government, Greenspan claims, there’s no way to “back up” a currency. Bitcoin is worthless as an exchange medium, he says, because it has no such backing.

He did note, however, that wealthy individuals might create their own individual currencies quite easily. So Buffettcoins might really be worth something. Bitcoins, however, which merely run on trust built by a few million individuals, are headed for ruin.

We’d better trust Mr. Greenspan’s opinion. He ran the Fed for nearly 20 years, after all, and can predict bubbles better than anyone. Like when he predicted in 2004 that the housing bubble would burst: “While local economies may experience significant price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity.”

OK, maybe he didn’t predict that. But he’s on TV being interviewed, so he must know something, or whatever. The Sunlight Foundation’s Eric Mill disagrees, having recently tweeted that “decentralized, immutable records of activity guaranteed by network consensus are revolutionary, and only Bitcoin is doing it.”

What do you think? Let us know in the comments.

Jason Farrell

For The Daily Reckoning

Ed. Note: The future of Bitcoin remains to be seen. But rest assured the Laissez Faire Today email edition will be following it very closely. If you want the most up-to-the-minute research on this and other freethinking topics, you owe it to yourself (and your portfolio) to sign up for the FREE Laissez Faire Today email edition.

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Understanding Bitcoin requires that we understand the limits of our ability to imagine the future that the market can create for us. That is exactly what is happening with Bitcoin right now. As I type, the price is exploding, the main exchanges are overloaded, and people around the world can’t convert from government currency into […]

Jason Farrell

Jason M. Farrell is a writer based in Washington D.C. and Baltimore, MD. Before joining Agora Financial in 2012 he was a research fellow at the Center for Competitive Politics, where his work was cited by the New York Post, Albany Times Union and the New York State Senate. He has been published at United Liberty, The Federalist, The Daily Caller and LewRockwell.com among many other blogs and news sites.

  • Jonathan @ Pensas.co

    Bitcoin looks very much like a bubble. The current chart is identical to every bubble we’ve seen in history.. As for Greenspan? The reason he can predict bubbles is because he helped create them during his 20 years in the Fed.

  • Daryl

    The same goes for debit/credit cards. These days all is electrified.
    By the way you can still use your phone for transactions.

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