Category: Economics

The Bitcoin Bubble and the Future of Currency

Volatility is a serious problem, if you’re trying to put together a currency, rather than a vehicle for financial speculation. If the currency of a country ever fluctuated as much as bitcoins did, it would never be taken seriously as a medium of exchange: how are you meant to do business in a place where an item costing one unit of currency is worth $10 one day and $20 the next? Currencies need a modicum of stability; indeed, one of the main selling points of bitcoin was that it couldn’t be destabilized by government institutions. But that comes as scant comfort to people watching the value of a bitcoin behave like some kind of demented internet stock during the dot-com bubble.

In reality, then, bitcoin doesn’t really behave like a currency at all. In terms of its market value, it looks much more like a highly-volatile commodity. That’s by design: bitcoins were created to be the most fungible commodity the world had ever seen – to the point at which they would effectively erase the distinction between a commodity and a currency.

→ Medium

As Banks in Cyprus Falter, Other Tax Havens Step In

The rush by rival havens could pose economic troubles as Cyprus struggles to keep afloat a financial industry that employs tens of thousands of people. Cypriot unemployment, already at 15 percent, is expected to soar as the finance sector and the overall economy contract, aggravating a crisis that the bailout was intended to solve.

→ New York Times

A Resurgent Goldman Can Reshape Wall Street

Indeed, had such a plan been in place in the years leading up the collapse of Lehman, I bet the bank would still be around, because former Chairman Richard Fuld and his acolytes would have been far more prudent. They would have taken the time to analyze the risk the company was taking on, which is exactly what Goldman Sachs did in late 2006 when it decided to short the mortgage market to take advantage of its competitors’ foolishness.

William D. Cohan is certainly right about his statement. But the problem doesn’t simply lie behind prudent behavior, it is also Goldman not being in-line with its clients, to the mind of general public. Take a look at the comments, no one seems to care about Goldman changing its internal compensation model for the top-tier of the payroll, because to most people’s mind Goldman is morally bankrupt.

→ Bloomberg