I was sad when I read that you had written your last NYT piece. But, this format works so well for you. Thank you for sharing your thoughts and expertise (and musical recommendations). Happy holidays.
Paul, thanks for calling crypto for what it really is a Ponzi scheme and when the great grifter pushes it you know it is grifting at its best!!! Happy holidays!!!
I wonder if he has delivered those $100,000 watches to his “marks” or politely called supporters! A watch expert examined one of them and proclaimed it a pile of junk and recommended the marks buy a Rolex submariner watch for $40K that will last a lifetime!!!
"it's a floor wax AND a dessert topping" - I used to think I liked to read your stuff because it was so informative, but I'm coming to realize it's probably because we're the same age so I get all your jokes.
I have no dispute with what you've written, but you missed the most basic addiction we see. It's the simple addiction to the accumulation of wealth that capitalism allows. How many CEO's take home much much more than they need, or deserve, to the detriment of ALL of their workers? It's the unlimited greed that knows no bounds. Another tax break is never enough! That our capitalist system allows this unlimited greed only enables it, excuses it. The excessively greedy are looked up to, envied, seen as some kind of cultural icon, and not as the destroyers of the middle class, or of the well being of others. Greed is the capitalist addiction, separate from the addiction of games of chance. It's a game of certainty. They know what they are doing, and behave rationally, but ONLY in their own interest.
Yes, I have written about this recently. I consider greed and the hoarding of money a serious mental illness. I say this because a billionaire has more money than he can spend in 10 lifetimes. It serves no real purpose.
Professor Krugman: twitter is crawling with crypto these days -- the ads that they shove down their readers' throats after every third post are nonstop, and at least 3/4s of all spaces are, at any given time, about crypto. crypto ads have even infiltrated video games, which is just so incredibly annoying. i do block everything that i possibly can, but it has to pop up to be blocked in the first place. but even worse, "mining" crypto is destroying the environment, but no one seems to know this, or care.
What really worries me are the crypto ads on Facebook that are very carefully targeted at wannabe "girl bosses", particularly females of colour, which absolutely play into their desperate desires to become rich, quickly.
It's widely recognized among sane economists that Crypto is Ponzi scheme but it goes on & on to make new highs. But the big danger i see today is when government legitimizes Crypto Ponzi scheme by creating a "strategic reserves" of it.
I have long felt that a tax on selling a security that has been owned for less than, say, 10 days would be helpful in stabilizing markets, by penalizing speculative day traders. Is this workable, or even a good idea?
What will happen to markets and the economy overall when the crypto bubble bursts, particularly when the incoming president and his family have great personal stakes in the commodity?
I would also like to see an assessment of the risks crypto poses for the markets/economy as well as a discussion of debt/deficits. The ignorance level of the media that writes about these topics seems high.
So glad I can continue to read you. Note that you missed a critically effective means of reducing tobacco use - taxation! In addition to banning ads, putting warnings on packages, and making public spaces smoke free, tobacco taxes made a big difference. The tax in not uniform – Massachusetts has among highest, and Kentucky (which grows tobacco) among the lowest. Smoking rates by state reflect the tax rate – it’s been very effective. Surprised that you – the economist – missed this. : )
That 2018 Supreme Court decision that opened the door to sports betting was a travesty. The federal statute that prohibited sports betting had two parts. The court found that one part was unconstitutional. That part of the decision was reasonable. The court then needed to consider whether Congress would have wanted the second part to stand if the other part had been stricken. The Court's reasoning on this second part was totally bogus, arbitrary, and result driven to strike the second part as well. I am very thankful that my adult sons are not attracted to sports betting. I feel sorry for the mostly young men who are being financially harmed and even destroyed by sports betting. The conservative members of the 2018 Supreme Court are totally to blame.
I think the core and fundamental issue is best thought of in very old school economic terms-- people who think and behave in ways that confound consumption with investment. Because things like playing poker and betting on sports and betting on crypto are, fundamentally, consumption activities. And if people think of them as that, it's... fine? There's no economic (if not moral) reason that it's better to spend $200 on opera tickets than it is to lose it at a poker table or betting on the New York Giants. But people act as if they're investing-- that is, they expect a positive return, and they behave that way too, putting their savings rather than their leisure funds into these activities. Crucially, the tax code gets this right-- there's a good reason to treat things like lottery and poker winnings as taxable income, but not allow for poker and lottery losses to be deducted from taxable income; those things are just regular consumption, like going to the movies.
And at that point, I think the issue is the failure to understand how to distinguish the two. Because an investment isn't just something that is worth more in period 2 than it was in period 1-- it's something that generates a positive social return. You might have "made more money" putting $1000 into bitcoins in 2010 than into Apple stock. But Apple made a lot of profit building useful phones that lots of people use in that period, while bitcoins... redistributed cash from the initial seller to the initial buyer. Nothing was created or gained. No cash flow was generated. It was all a gamble.
And that behavior has in part infected stock markets, where internet people buy up shares of crummy companies like GameStop and AMC not because they have business models that are innovative or generate returns, but for really no reason at all. And that's ultimately bad not just because those stocks are likely to collapse and lose those internet people money, but because there is a finite supply of talent and capital, and handing capital to broken companies of yesterday is going to create far less innovation and worse jobs than handing it to innovative companies of today and tomorrow. All of society (other than lucky ducky GameStop execs and stockholders, and internet people who get out ahead, I suppose) loses.
I think if people actually stopped to think about what investment IS, we could avoid a lot of these issues...
Gamestop wasn’t just a meme stock. Short sellers were trying to drive the company out of business to make a profit. People who liked the company wanted it to stay in business. Some people organized a short squeeze which forced short sellers to buy the stock at excessively high prices to cover their short positions.
It was a meme stock. That completely misunderstands how capital markets work. Short sellers put downward pressure on an obsolete company whose stock they considered overvalued. Meme lords jumped in to punish short sellers by squeezing them. It lost a few hedge funds and a bunch of meme lords money.
Pushing the stock down the way meme lords did was not going to keep the company in business by itself— it wasn’t even going to help. You buy public stocks because you expect them to eventually pay dividends. GameStop was never going to do that because… it’s a dying company with an obsolete business model. Instead, all that did was get GameStop executives big unearned bonuses because a chunk of their pay is tied to stock performance. Then the company did what they should have done in the fact of an absurdly priced stock and raised new capital. Their publicly filed prospectus read that their stock was wildly overvalued and that anyone buying was, in effect, an idiot. Lots of idiots bought in. If they actually wanted to keep GameStop in business was… gone out and bought stuff at GameStop. Especially high margin stuff. That actually would’ve sent the signal that GameStop is a worthwhile business— by juicing its fundamentals, not creating a bubble where it was clear to everyone and their grandmother that you had a meme stock driven by internet pictures.
So now you’ve got a wildly overvalued stock in a dying company that’s being kept on life support and wasting resources by some couch surfers who are determined to lose money. In a rational market GameStop would’ve gone out of business half a decade ago, and capital would’ve flowed into productive and not dying companies that create better jobs and sell actual desired products.
Yes a hedge fund or two lost money. For the most part, the losers were… meme lords. The big winners were GameStop executives who got an inexplicable windfall from a bunch of internet ignoramuses.
One of the most scary upcoming things is that our incoming administration wants to use the federal government to cover their potential crypto losses. I am sure you will comment on this.
I was struck by how this deeply applies to our current politics.
"But what if the crowd isn’t independent, but acts in unison? Well, this has the potential not just to destroy the magical crowd wisdom but to turn it into a negative. So, has there ever been a better vehicle for turning a wise, independent crowd into a coordinated clueless, even dangerous, mob than social media?"
We keep reading traditional news coverage about voter attitudes and how Democrats have lost the working class or Latino men etc. That's missing the point. Those voting groups are sucked into the rightwing media ecosystem where reality goes to die. Political junkies and the commentariat live in a totally different media environment and think everyone will learn about the bad effects of Trump's policies or the true past of the crooks and commen Trump is appointing to high office and power. Most voters will never hear any of it.
We live in a completely changed news environment where most get their world view from social media influencers and podcasts. The addictive qualities of that are bad enough but now they've been taken over by rightwing billionaires who fiorce algorithms favoring rightwing content.
How much do you think Trump's new 2024 electoral constituencies (such as Gen Z and/or Latino men) were in part motivated by the "get rich quick thru crypto" dream?
The "get rich quick" message is one of the messages targeting younger men. Twenty five years ago it was "get rich from internet startup stocks". Most of these eventually crashed and lost all their money.
This is part of the core rightwing messaging that uses resentment at poor wages and high costs by blaming "out" groups instead of rich elites.
Hitler blamed Jews for all of Germany's ills. America traditionally has blamed blacks and, by extension, all people of color, even Italians. Americans also used to fear Catholics and anyone not following mainstream Protestant religion.
Marketers, my profession, know that people act on emotion. The rightwing uses fear, anger and hatred of outsiders to get support and votes. They create a false threat from outsiders ("brown hordes swamping our southern border") to generate fear. When people are deeply afraid they are drawn to a strong leader for protection. Trump and Republicans are just using a standard strongman strategy used by dictators for centuries to takeover democracies.
What has changed in the past thirty years is the collapse of national news media that gave people in democracies a common worldview tied to facts. Now millions get their worldview from social media, which is explicitly designed to amplify more extreme emotional messaging like rightwing rhetoric. Combine that with rightwing billionaires buying up traditional media and pushing its coverage to hide an scandals by Trump and Republicans and push their attacks on Democrats.
There is a robust rightwing media ecosystem where reality goes to die. It creates an alternative worldview completely disconnected from reality, filled with fantasy conspiracies and lies about Democrats. No hint of scandal or corruption by Trump and his supporters is heard. That's why your conversations with your rightwing uncle or nephew feel like you've stumbled into a crazy funhouse of delusion.
My central point in the original comment was that all our discussion and fighting about a better message that would have reached swing voters and won the election for Democrats is a distraction and will fail when our messages aren't even reaching voters.
This new media world is a severe threat to our democracy. That's what we need to fix first.
To what extent is rightwing propaganda media (both traditional and social) popular, because:
1) It's more entertaining than reality-based media (eg how the UK's Sun newspaper uses the sports coverage and celebrity gossip sugar to help the rightwing propaganda medicine go down), or
2) It is subsidized (or even gratis) thanks to billionaire owners running it at a loss to help their wider economics interests?
You want media that grabs attention (I'm old enough to remember the topless ladies in the Sun). If they get bored, you lose. There's an audience for more serious discussion of issues but that audience can think everyone should be like them, maybe interested in different issues but still want serious discussions of policy, They miss the huge audience that doesn't pay attention but wants entertainment. Sports, celebrity, fashion, topless ladies.
Even billionaires need their news media to be profitable or at best run at small manageable losses. The news division used to the the loss-making prestige part of a tv network that made their money on popular entertainment. Now if you aren't politically motivated, owning a news division has unpleasant political consequences given the explicit threats from Trump and his MAGA thugs. It takes guts to stand up to them. Most corporate leaders caved.
I was sad when I read that you had written your last NYT piece. But, this format works so well for you. Thank you for sharing your thoughts and expertise (and musical recommendations). Happy holidays.
I canceled my NYT subscription because of their editorial trend towards trump, so I was thrilled to see Paul Krugman here at Substack.
I kept mine because of the writers, including PK. I ignore other headlines and stories and only read journalists I admire and trust.
I miss some of the real journalism, but the sanewashing of trump was just too much for me to pay for any longer.
Same for me. I could no longer support a paper that do blatantly sanewashed Trump and his any good news about the Democrats.
Paul, thanks for calling crypto for what it really is a Ponzi scheme and when the great grifter pushes it you know it is grifting at its best!!! Happy holidays!!!
Or worst! The orange conman will grift off of anything!
I wonder if he has delivered those $100,000 watches to his “marks” or politely called supporters! A watch expert examined one of them and proclaimed it a pile of junk and recommended the marks buy a Rolex submariner watch for $40K that will last a lifetime!!!
"it's a floor wax AND a dessert topping" - I used to think I liked to read your stuff because it was so informative, but I'm coming to realize it's probably because we're the same age so I get all your jokes.
I have no dispute with what you've written, but you missed the most basic addiction we see. It's the simple addiction to the accumulation of wealth that capitalism allows. How many CEO's take home much much more than they need, or deserve, to the detriment of ALL of their workers? It's the unlimited greed that knows no bounds. Another tax break is never enough! That our capitalist system allows this unlimited greed only enables it, excuses it. The excessively greedy are looked up to, envied, seen as some kind of cultural icon, and not as the destroyers of the middle class, or of the well being of others. Greed is the capitalist addiction, separate from the addiction of games of chance. It's a game of certainty. They know what they are doing, and behave rationally, but ONLY in their own interest.
Yes, I have written about this recently. I consider greed and the hoarding of money a serious mental illness. I say this because a billionaire has more money than he can spend in 10 lifetimes. It serves no real purpose.
Professor Krugman: twitter is crawling with crypto these days -- the ads that they shove down their readers' throats after every third post are nonstop, and at least 3/4s of all spaces are, at any given time, about crypto. crypto ads have even infiltrated video games, which is just so incredibly annoying. i do block everything that i possibly can, but it has to pop up to be blocked in the first place. but even worse, "mining" crypto is destroying the environment, but no one seems to know this, or care.
Move to bluesky!
I deactivated my X account (happy to call it that now that I'm no longer there) the day I heard Trump had won.
What really worries me are the crypto ads on Facebook that are very carefully targeted at wannabe "girl bosses", particularly females of colour, which absolutely play into their desperate desires to become rich, quickly.
It's widely recognized among sane economists that Crypto is Ponzi scheme but it goes on & on to make new highs. But the big danger i see today is when government legitimizes Crypto Ponzi scheme by creating a "strategic reserves" of it.
https://www.truthdig.com/articles/we-dont-need-a-strategic-reserve-of-bitcoin/
In fact, it appears to be a great scam. Tech bros finance politicians. Then politicians bailout Crypto by giving it legitimacy.
Someone called the Bitcoin "Strategic Reserve" idea making the government a greater fool of last resort. That's precisely spot on.
I have long felt that a tax on selling a security that has been owned for less than, say, 10 days would be helpful in stabilizing markets, by penalizing speculative day traders. Is this workable, or even a good idea?
A tax on speculation is long overdue.
What will happen to markets and the economy overall when the crypto bubble bursts, particularly when the incoming president and his family have great personal stakes in the commodity?
I would also like to see an assessment of the risks crypto poses for the markets/economy as well as a discussion of debt/deficits. The ignorance level of the media that writes about these topics seems high.
So glad I can continue to read you. Note that you missed a critically effective means of reducing tobacco use - taxation! In addition to banning ads, putting warnings on packages, and making public spaces smoke free, tobacco taxes made a big difference. The tax in not uniform – Massachusetts has among highest, and Kentucky (which grows tobacco) among the lowest. Smoking rates by state reflect the tax rate – it’s been very effective. Surprised that you – the economist – missed this. : )
That 2018 Supreme Court decision that opened the door to sports betting was a travesty. The federal statute that prohibited sports betting had two parts. The court found that one part was unconstitutional. That part of the decision was reasonable. The court then needed to consider whether Congress would have wanted the second part to stand if the other part had been stricken. The Court's reasoning on this second part was totally bogus, arbitrary, and result driven to strike the second part as well. I am very thankful that my adult sons are not attracted to sports betting. I feel sorry for the mostly young men who are being financially harmed and even destroyed by sports betting. The conservative members of the 2018 Supreme Court are totally to blame.
Question: what is the risk to the Stock Market of a collapse of the crypto market.
I think the core and fundamental issue is best thought of in very old school economic terms-- people who think and behave in ways that confound consumption with investment. Because things like playing poker and betting on sports and betting on crypto are, fundamentally, consumption activities. And if people think of them as that, it's... fine? There's no economic (if not moral) reason that it's better to spend $200 on opera tickets than it is to lose it at a poker table or betting on the New York Giants. But people act as if they're investing-- that is, they expect a positive return, and they behave that way too, putting their savings rather than their leisure funds into these activities. Crucially, the tax code gets this right-- there's a good reason to treat things like lottery and poker winnings as taxable income, but not allow for poker and lottery losses to be deducted from taxable income; those things are just regular consumption, like going to the movies.
And at that point, I think the issue is the failure to understand how to distinguish the two. Because an investment isn't just something that is worth more in period 2 than it was in period 1-- it's something that generates a positive social return. You might have "made more money" putting $1000 into bitcoins in 2010 than into Apple stock. But Apple made a lot of profit building useful phones that lots of people use in that period, while bitcoins... redistributed cash from the initial seller to the initial buyer. Nothing was created or gained. No cash flow was generated. It was all a gamble.
And that behavior has in part infected stock markets, where internet people buy up shares of crummy companies like GameStop and AMC not because they have business models that are innovative or generate returns, but for really no reason at all. And that's ultimately bad not just because those stocks are likely to collapse and lose those internet people money, but because there is a finite supply of talent and capital, and handing capital to broken companies of yesterday is going to create far less innovation and worse jobs than handing it to innovative companies of today and tomorrow. All of society (other than lucky ducky GameStop execs and stockholders, and internet people who get out ahead, I suppose) loses.
I think if people actually stopped to think about what investment IS, we could avoid a lot of these issues...
Gamestop wasn’t just a meme stock. Short sellers were trying to drive the company out of business to make a profit. People who liked the company wanted it to stay in business. Some people organized a short squeeze which forced short sellers to buy the stock at excessively high prices to cover their short positions.
It was a meme stock. That completely misunderstands how capital markets work. Short sellers put downward pressure on an obsolete company whose stock they considered overvalued. Meme lords jumped in to punish short sellers by squeezing them. It lost a few hedge funds and a bunch of meme lords money.
Pushing the stock down the way meme lords did was not going to keep the company in business by itself— it wasn’t even going to help. You buy public stocks because you expect them to eventually pay dividends. GameStop was never going to do that because… it’s a dying company with an obsolete business model. Instead, all that did was get GameStop executives big unearned bonuses because a chunk of their pay is tied to stock performance. Then the company did what they should have done in the fact of an absurdly priced stock and raised new capital. Their publicly filed prospectus read that their stock was wildly overvalued and that anyone buying was, in effect, an idiot. Lots of idiots bought in. If they actually wanted to keep GameStop in business was… gone out and bought stuff at GameStop. Especially high margin stuff. That actually would’ve sent the signal that GameStop is a worthwhile business— by juicing its fundamentals, not creating a bubble where it was clear to everyone and their grandmother that you had a meme stock driven by internet pictures.
So now you’ve got a wildly overvalued stock in a dying company that’s being kept on life support and wasting resources by some couch surfers who are determined to lose money. In a rational market GameStop would’ve gone out of business half a decade ago, and capital would’ve flowed into productive and not dying companies that create better jobs and sell actual desired products.
It wasn’t JUST a meme stock. There apparently were a lot of naked shorts and the really high prices were due to a short squeeze.
Yes a hedge fund or two lost money. For the most part, the losers were… meme lords. The big winners were GameStop executives who got an inexplicable windfall from a bunch of internet ignoramuses.
One of the most scary upcoming things is that our incoming administration wants to use the federal government to cover their potential crypto losses. I am sure you will comment on this.
As usual, Professor Krugman has written another downright brilliant column. I just wish more Americans were reading it.
So very glad you are here on Substack. Paul Krugman. And thanks for jumping ship too.
I was struck by how this deeply applies to our current politics.
"But what if the crowd isn’t independent, but acts in unison? Well, this has the potential not just to destroy the magical crowd wisdom but to turn it into a negative. So, has there ever been a better vehicle for turning a wise, independent crowd into a coordinated clueless, even dangerous, mob than social media?"
We keep reading traditional news coverage about voter attitudes and how Democrats have lost the working class or Latino men etc. That's missing the point. Those voting groups are sucked into the rightwing media ecosystem where reality goes to die. Political junkies and the commentariat live in a totally different media environment and think everyone will learn about the bad effects of Trump's policies or the true past of the crooks and commen Trump is appointing to high office and power. Most voters will never hear any of it.
We live in a completely changed news environment where most get their world view from social media influencers and podcasts. The addictive qualities of that are bad enough but now they've been taken over by rightwing billionaires who fiorce algorithms favoring rightwing content.
When Trump policies go bad they will just find other people to blame and punish.
How much do you think Trump's new 2024 electoral constituencies (such as Gen Z and/or Latino men) were in part motivated by the "get rich quick thru crypto" dream?
The "get rich quick" message is one of the messages targeting younger men. Twenty five years ago it was "get rich from internet startup stocks". Most of these eventually crashed and lost all their money.
This is part of the core rightwing messaging that uses resentment at poor wages and high costs by blaming "out" groups instead of rich elites.
Hitler blamed Jews for all of Germany's ills. America traditionally has blamed blacks and, by extension, all people of color, even Italians. Americans also used to fear Catholics and anyone not following mainstream Protestant religion.
Marketers, my profession, know that people act on emotion. The rightwing uses fear, anger and hatred of outsiders to get support and votes. They create a false threat from outsiders ("brown hordes swamping our southern border") to generate fear. When people are deeply afraid they are drawn to a strong leader for protection. Trump and Republicans are just using a standard strongman strategy used by dictators for centuries to takeover democracies.
What has changed in the past thirty years is the collapse of national news media that gave people in democracies a common worldview tied to facts. Now millions get their worldview from social media, which is explicitly designed to amplify more extreme emotional messaging like rightwing rhetoric. Combine that with rightwing billionaires buying up traditional media and pushing its coverage to hide an scandals by Trump and Republicans and push their attacks on Democrats.
There is a robust rightwing media ecosystem where reality goes to die. It creates an alternative worldview completely disconnected from reality, filled with fantasy conspiracies and lies about Democrats. No hint of scandal or corruption by Trump and his supporters is heard. That's why your conversations with your rightwing uncle or nephew feel like you've stumbled into a crazy funhouse of delusion.
My central point in the original comment was that all our discussion and fighting about a better message that would have reached swing voters and won the election for Democrats is a distraction and will fail when our messages aren't even reaching voters.
This new media world is a severe threat to our democracy. That's what we need to fix first.
To what extent is rightwing propaganda media (both traditional and social) popular, because:
1) It's more entertaining than reality-based media (eg how the UK's Sun newspaper uses the sports coverage and celebrity gossip sugar to help the rightwing propaganda medicine go down), or
2) It is subsidized (or even gratis) thanks to billionaire owners running it at a loss to help their wider economics interests?
You want media that grabs attention (I'm old enough to remember the topless ladies in the Sun). If they get bored, you lose. There's an audience for more serious discussion of issues but that audience can think everyone should be like them, maybe interested in different issues but still want serious discussions of policy, They miss the huge audience that doesn't pay attention but wants entertainment. Sports, celebrity, fashion, topless ladies.
Even billionaires need their news media to be profitable or at best run at small manageable losses. The news division used to the the loss-making prestige part of a tv network that made their money on popular entertainment. Now if you aren't politically motivated, owning a news division has unpleasant political consequences given the explicit threats from Trump and his MAGA thugs. It takes guts to stand up to them. Most corporate leaders caved.