robert-shiller-bitcoin
Robert Shiller warned that the US stock market could be on the verge of a recession. | Source: Flickr/World Economic Forum.
robert-shiller-bitcoin
Robert Shiller thinks Bitcoin is a bubble

As reported by Business Insider, Robert Shiller recently revealed his opinion on Bitcoin at a panel about digital trends in Davos, Switzerland.  Shiller remarks that he finds Bitcoin to be an “inspiration” because of the computer science, but as a currency he feels that Bitcoin would return us “to the dark ages.”  The reference to the “dark ages” is a clear sign that Robert Shiller understands some if not most of the computer science behind Bitcoin and views Bitcoin as a digitized commodity, or an exotic asset.  Of course, Robert Shiller currently considers himself the foremost expert on not only bubbles but also assets, as recently validated by the Swedish Central Bank in the form of a Nobel Prize.  He went on to say:

“It is a bubble, there is no question about it. … It’s just an amazing example of a bubble.”

Robert Shiller, the 2013 recipient of the Nobel Prize in Economics for his work in “Trendspotting in asset markets,” is highly revered by Americans because he predicted both the dot-com bubble and the housing bubble.  Prior to the popping of both of those bubbles, Shiller published books titled: Irrational Exuberance that detailed the coming crashes.  It seems that this time, Robert Shiller is attempting a hat trick by claiming that Bitcoin is a bubble.  The difference being, there is not yet a third edition of Irrational Exuberance featuring Bitcoin.

However, seeing as how Robert Shiller has yet to pen any analysis or data to support his claims, he clearly does not (yet) think that a Bitcoin bubble popping would have as disastrous or wide-reaching affect as the dot-com or housing bubbles did.  Of course, at this point Nobel Prize winner Robert Shiller is invariably correct: If Bitcoin were to cease existence tomorrow morning… the dent left in the worldwide economy would not be much noticed, though mainstream media would have a field-day.  However, by the time Bitcoin’s economic influence is actually that large, not only will Robert Shiller have been proven wrong but likely the Keynesian school of thought’s hold on central banks around the world will have lightened.

That won’t stop Robert Shiller from publishing a third Irrational Exuberance specifically targeted at Bitcoin in the coming years though.  You heard it here first at CryptoCoinsNews.  As no stranger to Economics myself, I am very eager to read this forthcoming book and seeing what kind of data is presented.

 

In fact, Robert Shiller can’t even use one of his most famous charts, the cyclically-adjusted price-earnings (CAPE) ratio, or anything like it to defend his claim that Bitcoin is a bubble.  The CAPE ratio is derived by taking the S&P 500 and dividing it by the average of 10 years worth of their earnings.  The calculated ratio is then compared to the long-term average of calculated ratios to determine if the market is oversold or not.  Add in irrational exuberance, and you have a bubble.  While I will not argue that irrational exuberance has reared its ugly head in the Bitcoin markets time and time again in several “bubbles”, calling Bitcoin a big bubble requires turning two blind eyes to the real driving factors behind Bitcoin adoption.

I’ll give you a hint, “irrational exuberance” is not the reason why Paco, the deep fry cook at your local Chinese restaurant, buys Bitcoin; rather, he uses it to send international remittances back to his family in Guatemala without paying exorbitant fees to Western Union or the Cartel.

 

…It’s just an amazing example of a bubble

The housing bubble was an amazing example of a bubble as well; more importantly, it was a front and center example of the far reaching effects of moral hazard.  The inevitable issues that arise from centralized systems that is one of the most glaring reasons why Bitcoin is needed.

Let’s take this moment to realize that as one of the most prominent living Keynesian Economists, Robert Shiller was never ever ever ever ever ever ever ever (Lemony Snicket reference) ever ever ever ever ever ever ever going to appreciate Bitcoin due to an utter lack of fresh perspective.

Quite simply, words such as deflation and inflation have different connotations to Bitcoiners than they do with die-hard Keynesians such as Robert Shiller.  Robert Shiller, and other economists, have called Bitcoin a bubble in the summer of 2011, earlier in 2013, and of course now.  They were wrong about Bitcoin being a bubble every time before… When will they stop?