222 Comments

Thanks Paul. Kamala Harris was able to raise $1 billion with mostly small donors for her campaign. But that was laughable compared to the dark money of the opposition. Stock manipulation by DJT and crypto schemes I suspect allowed Trump and MAGA to rake in many billions in bribes from foreign entities and South African billionaires who will expect their pound of flesh.

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The biggest benefit to Trump from crypto was not attracting international dark money but the ability to sell his campaign as a Ponzi scheme to nontraditional voters. Non-whites, Gen Z and Independents own crypto at a far higher rate than the general population. While Harris promised vague plans of economic redistribution Trump offered immediate huge gains to anyone with an irresponsible level of their life savings invested in crypto. The crypto angle has definitely been an under discussed factor in Trump’s ability to pull young and nonwhite voters away from the Democrats.

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Another case of illegally buying votes. It is not legal to pay voters or even to pay to register voters. They got away with it with transparent work arounds.

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Perhaps because it's bullshit.

Crypto is for criming. It's about as useful as gold bars as a medium of exchange for lawful purposes (as Krugman says, try buying a car with gold bars).

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Nana Booboo While crypto is certainly for crime for most people it's a game, a very profitable game for early entrants. A ponzi scheme. And the early ones can make and have made huge amounts of money. Allowing crypto to be integrated into our financial system is a certain recipe for disaster. Most of us didn't own MBS, but in 2008 when that house of cards came crashing down the entire global economy was in peril. Some fast work by regulators using our tax dollars prevented a global collapse. With crypto there will be no salvation. Anyway I'm tired of my money saving reckless gamblers.

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It’s also a speculative asset.

The scheme is straightforward: Trump says he will do good things for cryptocurrency > I buy cryptocurrency > Trump wins > Profit

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Yes, I agree

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Trump knows all about money laundering, he engaged in illegal laundering of Russian rubles for decades! That’s his motive with bitcoin—illegal bribes to be undetectable, money laundering under the radar, no thanks, the US Government is NOT getting involved in this crime world medium! Not to mention tax evasion!

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Bitcoin allows retail investors to invest in the black market economy.

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Exactly. We should all benefit from this illicit trade, not just the kingpins.

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The US strictly outlaws the creation of "other currencies" with in it's borders. I still don't get why it's not just illegal from the start. The Fiona reference makes my heart warm.

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Because it’s not really a currency - its value is tied to actual currencies, so it doesn’t seem to be illegal. However, as has been discussed here, it’s simply a BS tool for gamblers, speculators and worse, and so should be regulated (but won’t be, alas).

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Aren’t ALL currencies tied to others? If I go to Europe, not all merchants take dollars. I have to exchange (tie) my dollars for their coin before I can buy anything. The exchange rate is the tie.

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No. Your USD has value in the real world, as do other national currencies. The exchange rate lets you turn one into the other, and there's a paper trail of the transactions. The two are not tied to each other in any way.

Crypto doesn't have value in the real world, mostly because a seller can't know how many dollars (or whatever) they'll get when they change them back into USD (or some other national currency). The exchange back to national money is inevitable because sellers don't want the value of their crypto to plummet while holding onto it, which happens All. The. Time.

And crypto is like a VPN for the transaction because the only record of the exchange is on the blockchain, which is not very transparent.

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Financial meltdowns seem de rigueur for Republican administrations, so I guess something around crypto is in the cards for Trump II.

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Aside from the uses and features of cryptocurrencies, isn’t there an environmental cost?

My information may be outdated, but doesn’t BlockChain require facilities near physical energy sources and cooling systems, such as rivers?

If this is true, then the actual cost of cryptocurrency must include the impact on our environment, as well as the costs of building and running those facilities. Maybe I’m wrong, but somewhere along the line there must be physical components that require energy. Do any of the reports consider the whole, true cost of cryptocurrency production?

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Bitcoin still requires an enormous amount of energy. And as Dr. Krugman says, it's still most of total crypto value. Ethereum, the other major cryptocurrency (or at least most of it, it's complicated) switched to different math that uses a lot less (~90% less?), but the energy use is still significant.

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Yes, it do requires a lot of energy. https://crypto.com/bitcoin/bitcoin-energy-consumption

The energy requirement has so far risen. I think it will continue that way. This is probably the biggest problem with bitcoin.

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I’m looking forward to blackouts that cripple crypto…

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Blackouts might trigger backlash against it. That could be a silver lining of the crypto cloud.

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Would you please explain why and how bitcoin and other crypto currencies increased in value? It all seems illogical.

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Think Holland and tulips.

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Agreed. At least tulips have some intrinsic value.

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Same for gold and the gold standard. I suspect from the few people I know who have invested in crypto that a lot of the same people who favor the gold standard support it too which is irrational. They say like the gold standard because there would be something tangible with its own value backing the dollar up. Currently all the dollar has to back it is the big bad, I mean feeble, US government behind it but crypto has absolutely nothing backing it up.

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At any given time, more bitcoin can just be mined. It is not a scarce resource. Isn’t that a serious threat to Bitcoin’s current speculative value? I honestly don’t get it, and I’m a degreed economist. PLEASE ANSWER THIS QUESTION MR KRUGMAN. Thank you.

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There is a limit to how much btc you can mine. The limit is 21 million btc. And the closer you get, the harder it will be.

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Who manages that and do you truly believe it? There is no formal structure in place to limit mining as far as I can tell. It better not become the US treasury!

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It is a hard limit in the definition and the mathematics of the cryptography. There will never be more than 21 million BTC.

FYI, this is why the Libertarians are so enamored of it, because it is possible for one person to own it all.

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I don't understand the mathematics behind this, but as i understand it, it is a mathematical limit of some kind. So this limit is there no matter what anyone decide. I can't explain why. But you will see exactly that statement if you read about bitcoins.

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The limit it wired into the protocol.

But you're correct to note the utter lack of transparency in its governance.

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David, don't forget greed.

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It's _all_ speculation like tulips & gold. And as such no one _invests_ in crypto, it's all based on a greater fool.

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Or on a supportive government to help you turn the fake money into real money.

Like many Americans hope the incoming Trump administration will be, or like the Wagner-installed puppet dictatorship in the Central African Republic that allowed the Wagner group to exchange their bitcoin loot from ransomware into blood diamonds.

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They are “collectibles” and like all collectibles are priced by supply and demand. Crypto has an advantage over a lot of collectibles though because it is easily traded and its authenticity and provenance is continuously verified by its “miners” (who should more properly be called blockchain auditors). Bitcoin’s mathematical structure limits its supply and theoretically makes it impossible to forge which along with tradability and provenance are the characteristics that make it an attractive place to store wealth.

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What makes Bitcoin “collectable” in the first place? Is it the belief in its scarcity? It “value seems like a doomsday prepper phenomen based on the hope that all other currencies ultimately fail

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Each Bitcoin is unique and cannot be forged. It has a unique identifier that is continually verified by experts (miners), They are limited in supply (by the formula and code that creates them). The only category they fit is collectible. The intrinsic value is the ledger (blockchain) that verifies their authenticity and that makes them easily tradeable, and fungible. Their only value is market value. Unlike currency, there is no mechanism or control to stabilize their price. Unlike commodities, they have no other purpose so their liquidation price is zero. Like other collectibles, if you couldn't verify their authenticity, they are worthless but, as long as they are provably unique, they are whatever value the market assigns.

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Your explanation makes perfect sense to me. Thank you. It comports neatly with my own basic understanding. We called them Hummel Figurines in my day!

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Wrong! At least you can admire the beauty and craftsmanship of your Hummels.

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Intrinsic value!

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If you squint at Bitcoin, you can see it as a financial toy for the bored wealthy.

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Bitcoin functions as a transferable, divisible and fungible insurance policy against currency devaluation. Our fiat banking and monetary system is built upon a foundation of IOUs from a government that will be run by lunatics and incompetents the next four years. To make matters worse those same lunatics will have all the perverse incentives to devalue the fiat dollar against crypto to redistribute wealth toward themselves and their followers. Bitcoin will never function as money but its inherent scarcity and transferabilty allow it to work as a store of value life raft to survive the choppy financial waters ahead. Unfortunately the more liberals overlook this function and claim Bitcoin has no use case the more at risk we are of witnessing an unprecedented redistribution of wealth across partisan lines.

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Crypto is just a con. Thought up by tech bros who have watched to much Sci Fi. It is just another age old example of pump and dump. Nothing behind it but pumped up demand. FOMO. Where is the beef? There is no there there. Just air and a lot of blather talk by tech "deep thinkers". At least gold can be used as a paper weight but crypto is just like that mirage that looks great until it is shimmers out of existence. Calling real money backed by GDP and issued by the government "fiat" currency is just part of the con. Number go up.

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Tell me you're a crypto bro without telling me you're a crypto bro.

No crypto has any actual value until it's converted into a fiat currency. And the value can fluctuate wildly in a few heartbeats, negating any usable store-of-value properties you are trying to persuade the next fool that your crypto has.

It should be outlawed, and the vaunted blockchain should go into the dustbin of bad ideas.

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You cannot avoid a foundation of IOUs no matter the medium. The current "value" of Bitcoin is determined by such IOUs to begin with, and any L2 solution is another network of IOUs. Any "store of value" apart from the value provided by the IOU network itself is what actual productive work can be facilitated by the IOU network, e.g. gold as a store of cultural value, silica as a store of supply chain value. Bitcoin, if it stores any such value, as the article articulates, stores criminal value. Now, if you do not refute that and still insists in predicting a "redistribution of wealth across partisan lines", you are merely advocating for a *criminal* redistribution of wealth.

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A store of value thats up 100% in less than a year.

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The volatility prevents Bitcoin from being a stable unit of account, which is a major reason why it will not function as money. But with Bitcoin hitting all time highs again it has essentially fulfilled the function as a store of value (plus additional speculative gains) for nearly anyone who has ever purchased and not sold. That value could crater tomorrow but as of right now the store of value proposition holds.

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"That value could crater tomorrow"

Cool. Hook me up!

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Walmart stock is up about 92% in the last year. They have real stores. Bitcoin is an investment, but there are much safer ways to make money.

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I’ll stick with gold.

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As a small-time property owner I see lots of 100’s in cash from rent so they aren’t all overseas. Some tenants work in businesses where lots of cash is used (think nail salons, hair dressers, tattoo shops). I collect it and put it in the bank. I definitely wouldn’t take bitcoin for rent!

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Perhaps you're seeing lots of Benjamins yourself because the particular businesses you name (nail salons, hairdressers, tattoo shops) are notorious for being popular ways for criminals to launder ill-gotten gains?

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Not recently for sure. All are scanned at the grocery store and/or bank around here. Not sure if scanning was going on more than 5 years ago so maybe I passed a bad bill years ago.

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By "scanned" do you mean that the notes were tested for (non-trivial) traces of drugs?

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No. And I’m pretty sure there isn’t a some ring of rich women getting their nails and hair done that come in with cash. The marines at the nearby base getting tattoos could have some drug use but they won’t last long in the marines if that’s the case.

The following info is easy to find:

Scanning machines for $100 bills work by detecting various security features embedded in the currency. These machines often use ultraviolet (UV) light to reveal a security strip that glows pink in $100 bills. They also check for magnetic signatures, as U.S. currency is printed with ferromagnetic ink and metallic threads. Advanced detectors utilize spectrum analysis to compare the intricate patterns and colors on the bill against known authentic patterns. Other features like color-shifting ink, raised printing, and micro-printing are also verified to ensure authenticity.

As a retired cybersecurity specialist I only accept cash, Zelle and Apple Pay. I don’t take PayPal after meeting their security team. Call me picky.

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Oh, I was wondering how a dumb machine could possibly tell if a given $100 bill was the proceeds of criminal activity, and the only way I though of that it could determine that is if the note in question was drug money and it had become contaminated by the drugs.

It now seems like what you were thinking of was _counterfeit_ bills, which wasn't what I was thinking of all.

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If its only use case is crime, isn't that a very good reason to invest in it? There are a lot of criminals.

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Especially if a band of criminals is taking over the White House and the Treasury Department.

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One legitimate use for crypto that appears to growing rapidly is as a medium for transferring remittances back home to families. While crypto transaction fees are high, compared to the fees and complexity of sending remittances back to many developing nations they are cheap.

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Crypto shills have been spreading this remittance nonsense since at least 2013. The "use case" changes with the wind.

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Remittances using Wise (previously Transferwise) is very cheap and it takes 2 clicks and usually less than 15 seconds. And totally legal

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Bitcoin is just another Ponzi scheme pushed by the computer boys and Elon the muskrat. This idea of making it “respectable” by backing it with 10% of the USA gold reserves at Fort Knox is just another way to “steal” from Americans as the autocracy championed by the Orange Idiot and his favorite muskrat rev up for 2 years of kleptomania!!!

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Nobody explains crypto better than you. Glad you are staying on this beat.

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But you fail to mention Crypto's appeal as getting in on the ground floor of the Wealth fad/Ponzi

Our president-elect has promised to expand the demand for the extremely-limited supply of Cryptocurrencies, which will need to be met by current holders selling off their low-basis-cost crypto at fabulous profits. It matters not at all to them if/when the govt buys them out and then the exchange rate for crypto approaches zero; it only matters that they can sell enough of their magic beans at a satisfactory profit

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This

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Paul K. knows stuff and writes about it so well. Thanks for retiring from NYT and being here full-time.

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I went into a state of total panic when Paul announced his last nyt column—so relieved to have you here, Paul!! Phew!! Also re: crypto: LAUNDERING drug profits, yes but even more disgusting: HUMAN TRAFFICKING

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Way more bad than good involved with crypto, and lots of the bad is awful.

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A coincidence this morning, while I made coffee ☕😁, I was watching a YouTube video and a crypto commercial played. I didn't pay close enough attention, but caught the part claiming the New York Central Bank has agreed to replace paper money with digital.

Well, isn't that special! 😡 My first thought was a crypto mafia is getting ad time on YouTube! Again, isn't that special!😡

Thank Professor Krugman for this well timed and thorough response to this malignant and festering problem in society (across the world). I despise all of it, taking more stability from our future and YES, think of the young!

Sigh, my idea is to erase this despicable digital menace out of existence! I don't care who loses! To me, it's another FAFO moment!

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Btw Krugman, brilliant music videos 🎧🤘🏼💯🎶🎸🎙️🎶

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It was always the cherry 🍒 on top of the NYT newsletters along with the live music he was seeing in Brooklyn.

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