Originally Posted By: DWallach
Paul Krugman (Nobel prize winning economist, etc.) weighed in on the economics of Bitcoins. Krugman's critique has nothing to do with the technical aspect of how Bitcoin works, instead pointing out that it's a bad monetary design. What's sad is that this would have been trivial to fix. If there were a "BitCoin central bank" that could control the BitCoin monetary supply, they could change the rate at which new currency comes into existence, and that would address Krugman's critique.


Well, you can expect that from the central-bank fanatic/apologist Krugman. Bitcoin was developed expressly to avoid the problems associated with central banking (and tyrants like Krugman) in the spirit of the Austrian school of economics, which is the less-fashionable, anti-statist, libertarian school that opposes Krugman and everything he stands for. It has a very strong academic tradition, starting with Ludwig von Mises. Freedom-minded people reject centrally-controlled money, and tend to see money as nothing more than a convenient commodity that the free market uses as a universal medium of exchange.

What I don't understand (as a follower of Austrian economics myself) is the underlying value of the bitcoin. A "real" money, to an Austrian economist, has intrinsic value -- the exact opposite of the Krugman/Keynesian idea of manipulated fiat money. I don't really understand if or how the bitcoin has intrinsic value. If there is a monetary flaw, it would be this. The fact that it is beyond the reach of statist meddlers like Bernanke, Krugman, et. al. is the most exciting thing about it.

Jim