Harvard Trained Economist Bungles His US Senate Testimony on Bitcoin
On Thursday, October 10th, 2018 Stern School of Business Professor Dr. Nouriel Roubini who earned his Ph.D. in Economics from Harvard University, testified on cryptocurrency before the US Senate Banking Committee. Dr. Roubini became famous for being one of the few economists to foresee the housing bubble crash that impacted the entire world economic system. Given his past success it makes sense he would be looking for his next bubble to predict and for years now has been fervently speaking out against Bitcoin. He is not alone in calling Bitcoin a bubble and his latest testimony before the US legislature is no different. However, in spite of Dr. Roubini’s education and expertise he appears to have overlooked some of the basics of cryptocurrency, almost as if he has not done his research.
The Centralized versus the Decentralized
While Dr. Roubini seems to value blockchain technology, he does not seem to value the public decentralized version of blockchain that forms Bitcoin, Ethereum, and MilitaryToken.
“I don’t think we are going to solutions based on a public, permissionless, and trustless systems. Nobody’s going to accept it. No governments, corporations, no banks.”
~Nouriel Roubini, Ph.D. 11 OCT 2018 Senate Bank Committee testimony
In particular, Dr. Roubini believes that those in power today will never adopt a system that removes some of their power. He is basing this on conjecture because even psychologists cannot always predict what people will do. He is correct that people in power tend to work hard to keep their power, but Dr. Roubini missed the core of what cryptocurrency is doing.
Bitcoin Changed the World
Dr. Roubini appears to miss the entire point of what Satoshi invented. The first rule of power is that it is not yours, you do not own it and you are not entitled to it. Power is granted to you by your followers. In the case of governments, power is granted to government by the people, even in dictatorships. What Satoshi invented is a method that returns power to the people.
Power is Granted, Not Owned
The US system of law is a highly stabilizing force that does a great job of ensuring a predictable and safe society. However, in the US there are not enough police and jails to handle the population should everyone decide to ignore the law tomorrow. In fact, the US Constitution restricts the US Federal government enough to ensure the people will remain largely in control should they need it. Nonetheless, humans tend to accept power structures they are born into.
Government-backed money is one of those power structures humans have accepted and it is the current system of fiat money that Dr. Roubini believes will last forever. He argues that fiat’s system of control keeps economies stable and “cryptocurrencies instead have not and will never have the tools to pursue economic and financial stability.” But Dr. Roubini is assuming that those in power today will always have that power and they can therefore simply decide not to adopt cryptocurrency. To Dr. Roubini I say, ‘it is not the government’s decision to make, it is the people’s decision.’
Bitcoin and cryptocurrency grant us, the people, a stable system that allows us, the people, to decide if we, the people, want to use government-backed currency or not. For the first time in modern history, the people have a choice in global currencies and in reality, no one can predict what people will decide. More than 20,000,000 accounts on Coinbase suggests that many people are choosing cryptocurrency.
Even if the masses refuse to adopt cryptocurrency, will central governments one day accept Bitcoin as a form of payment? Although Dr. Roubini says no, the answer is probably yes. “Cryptocurrencies have no intrinsic value, whereas fiat currencies certainly do because they can be used to pay taxes,” says Dr. Roubini. Perhaps Dr. Roubini is not aware that Arizona’s legislature passed a bill in 2018 to allow citizens of that state to pay their state taxes in Bitcoin. Even though the bill was later vetoed by the Governor of Arizona, similar bills were also considered in Georgia and Illinois. That answers Dr. Roubini’s question for him. The answer is that governments have not but likely will eventually allow people to pay taxes in cryptocurrency thereby giving cryptocurrency “intrinsic” value.
The Heart of the Matter
Dr. Roubini misses the fundamental benefit of cryptocurrency: Satoshi gave us an alternative to needing governments to back and regulate our currency. This is not the first time private currencies have been used in modern societies, in fact, they exist all around us in the form of gift certificates, airline miles, and credit card points. Even the US military has its own form of currency that is used for purchases on US government facilities. The difference with Bitcoin is that it does not require membership in a special group or a special behavior to earn them, you can simply buy them and Bitcoin is an accepted form of payment all over the world. To reiterate, it is the people who grant the power and as long as people accept Bitcoin as payment, the governments do not need to endorse it. This is at the heart of cryptocurrency and why the public distributed ledger works. Adoption is the sign it is working and adoption grows rapidly every year. Dr. Roubini gets a lot wrong in his Senate testimony, but at the heart of the matter, he misses the fundamental concept of cryptocurrency freedoms.
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