Robert J. Shiller, Professor of Economics at Yale and winner of a Nobel Prize for his work on financial bubbles, has come out yet again against Bitcoin stating that it may be just another failed currency experiment.
In his article entitled, “The Old Allure of New Money,” Shiller recounts a number of “revolutionary” and failed attempts at creating new forms of currency outside traditional monetary systems:
- an attempt by the proprietor of the Cincinnati Times Store in 1827 to trade merchandise for work using labour notes to keep track;
- an attempt in London by “father of socialism” Robert Owen to establish a National Equitable Labour Exchange using “time money” as currency.
According to Shiller, it’s the combining of the abstract mystique of money with that of technology that has historically created particularly potent forms of gaga.
Technocrats in the 1930s proposed that value be doled out to individuals in the form “energy certificates” representing a percentage of a nation’s total energy supply.
“The Technocracy fad proved to be short-lived, though, after top scientists debunked the idea’s technical pretensions,” writes Shiller.
Shiller writes that after proposing an electricity-backed dollar in 1932, the American economist John Pease Norton was ridiculed by an newspaper columnist who mused on the idea of sending tax payments to the government in the form of “300 volts.”
Shiller quotes economist Ashoka Mody who has argued that the irrational mystique, “glamour” and “revolutionary zeal” that has accompanied past monetary innovations may even have informed the “groupthink” underlying the creation of the Euro.
In his book, Euro Tragedy,: A Drama in Nine Act, Mody argued that fans of the pan- continental Euro might want to give their heads a shake for believing, “the mere existence of a single currency…would create the impetus for countries to come together in closer political embrace.”
Naive visionary notions, writes Shiller, inform the current fintech investing landscape, where, “Investing in an ICO is thought of as an entirely new inspiration,” and ICO (Initial Coin Offering) creators argue their inventions should be securities-law exempt because they’re innovative.
Shiller came down hard on Bitcoin last September when he told an interviewer at Quartz that Bitcoin was the “best (contemporary) example” of irrational exuberance. A significant driver of demand for Bitcoin was the “motivating quality” of its mysterious origin story. (Bitcoin was created by a pseudonymous cryptographer calling him or herself “Satoshi Nakamoto.” Nakamoto issued the Bitcoin software, witnessed it’s early proliferation then disappeared.)
“Have you by any chance looked at initial coin offerings?” asked the interviewer at Quartz.
“No, what’s an initial coin offering?” asked Shiller.