Is the establishment afraid of rising competing currencies against the United States dollar? Or is there genuine and reasonable concern over the digital currency? There is an ongoing, fierce debate on the true value of bitcoin.
Speaking in an interview with Bloomberg Television in Washington on Wednesday, former Federal Reserve Chairman Alan Greenspan claimed that bitcoin, a growing cryptocurrency, is in a bubble and its current levels are unsustainable. At the time of this writing, bitcoin is trading just under $1,000.
“It’s a bubble,” stated Greenspan. “It has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can.”
Greenspan added that he doesn’t understand what is backing bitcoin. “There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it’s a government or an individual.”
Right now, the central bank has admitted that it cannot and will not regulate the virtual currency. However, that could change as what is transpiring in China, which announced that it would prohibit financial institutions from utilizing bitcoins for transactions. Beijing regulators argued the digital currency does not maintain the traits of traditional currency and cannot circulate in the marketplace.
An interesting note is that Greenspan can possibly see a bubble in the cryptocurrencies market, but he couldn’t see the economic collapse in 2007 and 2008. He claimed in his latest book “The Map and the Territory: Risk, Human Nature, and the Future of Forecasting” that no one foresaw the Great Recession, which is false because those from the Austrian School of Economics warned consistently about a coming collapse.
Here is what Greenspan wrote in his book:
“On the face of it, the financial crisis also represented an existential crisis for economic forecasting. I began my [post-crisis] investigations, culminating in this book, in an effort to understand how we all got it so wrong, and what we can learn from the fact that we did.”
So, Greenspan sees a bubble in bitcoin but he couldn’t see a housing bubble? What about now? Does he see a bond bubble? A debt bubble?
The fact is that the federal government, the Federal Reserve and the financial establishment, including Greenspan himself, fear competing currencies, whether it’s bitcoin or megacoin, gold or silver. A free market would permit currency competition and allow consumers to opt for a sound currency.
Question: if the U.S. powers are confident in the dollar then why not end the monopoly and allow the market to determine what currency the public wants to use? In any case, anything could be an improvement from the greenback.