The Great Bitcoin Bubble

There’s this new idea that plans to revolutionise money. It’s called bitcoin and aims to be an online currency to replace the real thing. Unlike printed money, it is not controlled by any central bank or government and prides itself on its lack of rules and regulations. Its proponents see it as a 21st century version of the gold standard and it has been enthusiastically endorsed by libertarians and anarchists around the globe as its price sky rockets. However, it is in reality a giant internet bubble based primarily on speculation that will inevitably crash. It is open to abuse, hacking and is no more trust worthy than the government. It is an economic calamity and trapped in hyper deflation death spiral. It can teach us a lot about how currencies work, and just as importantly, why some don’t. Continue reading “The Great Bitcoin Bubble”

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The Irish Housing Bubble And Bust

The recent housing bubble in Ireland defied the laws of economics. Supply and demand rose simultaneously, the market rose to absurd heights before crashing to unheard of lows. It went from an extreme of being able to sell a house no matter how high the price, to one where you can’t sell a house no matter how low you drop the price. According to everything I have been taught about economics, this could not happen. Textbooks are useless in understanding the bubble. According to them the price is always right, that left alone the free market will make everyone better off. Bubbles or recessions don’t happen. Any exceptions are temporary; it’s not possible for a decade of boom to be replaced by a decade of bust. But that is what has happened. Continue reading “The Irish Housing Bubble And Bust”

The Fool’s Gold Standard

Having money linked to a Gold Standard is an idea that almost every economist opposes. It is described as the economic equivalent of creationism and a major cause of the Great Depression. It is ignored by policymakers and no country has one anymore. Yet there is some support for it on the internet. It is one of Ron Paul’s main ideas in his campaign for the Presidency and is supported to some extent by Paul Ryan. The Republican platform promises a commission to consider reintroducing it. So what is a Gold Standard and why is it so bad? Continue reading “The Fool’s Gold Standard”