Crypto Has Parallels With Subprime Mortgage Crisis, Says Paul Krugman
The economist sees evidence that the risks of crypto are falling on those who do not know what they're getting into and are less able to handle the downsides.
Jan 28, 2022 at 4:27 p.m. UTC:format(webp)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/2ANJDWPQFRA6BLBPJV3J3VDHZU.jpg)
Nobel Prize-winning Economist Paul Krugman, professor of international trade and economics at Princeton University, speaks during a Bloomberg Television interview in New York, U.S., on Monday, Jan. 28, 2013. Krugman discussed the performance of bonds, Fed monetary policy, and the U.S. economy compared with that of Japan. Photographer: Scott Eells/Bloomberg via Getty Images
Longtime crypto skeptic Paul Krugman sees "uncomfortable parallels" between crypto and the subprime mortgage crisis of the 2000s.
The Nobel Prize-winning economist wrote in an opinion piece for The New York Times on Thursday that there's evidence that the risks of crypto are falling on those who do not know what they're getting into and are less well positioned to handle the downsides.
Citing the recent slide that has seen over $1 trillion shed from the crypto market, Krugman wrote, "Who is being hurt by this crash, and what might it do to the economy? Well, I’m seeing uncomfortable parallels with the subprime crisis of the 2000s."
Krugman does not believe that crypto is likely to cause a wider economic crisis, but he says that a crypto bear market would disproportionately affect the more vulnerable people in society, referencing research which finds that 55% of crypto investors do not have a college degree and anecdotal evidence that it is particularly popular among the working class.
He compares this to the way that subprime mortgages made home ownership a possibility among people for whom it was previously unlikely.
Krugman is a longtime crypto skeptic, with his criticism of bitcoin dating back to 2013 when he penned a piece for The New York Times entitled "Bitcoin Is Evil." He has claimed that bitcoin has no legitimate uses and no intrinsic value.
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Jamie Crawley is a CoinDesk news reporter based in London.
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