The Economy Is Full of Cryptocurrency and Collective Delusion

https://www.bloomberg.com/view/articles/2018-02-11/the-economy-is-full-of-crypto-and-collective-delusion

by JumpCrisscross • 8 years ago

60 24 8 years ago

bloomberg.com

jaimex2• 8 years ago

Because fractional banking and governments printing money isn't a thing right?

tmnvix2• 8 years ago

I think finance was already mostly untethered from productive work - at least in the anglosphere.

Just look at what banks are lending for these days. It's mostly mortgages. By giving people money just to transfer ownership of unproductive assets we've created a speculative asset boom which has had all sorts of downsides for productivity.

toomuchtodo• 8 years ago

Those assets are productive as long as the mortgage is being paid, either by the owner or the tenant.

Why are loans being originated for properties with values that have decoupled from realistic wage multipliers? That’s an important fianance question.

pishpash• 8 years ago

Because the Fed supports housing prices so banks can always take their liens in.

tmnvix2• 8 years ago

Yes, that was badly worded on my part - the mortgaged properties can and are likely to be productive.

What I was trying to get at was that the lending of money to bid up the prices of those assets beyond prices that can be justified by their income earning potential is unproductive.

aoeusnth1• 8 years ago

Agreed that overpriced housing is bad for productivity, and also bad for local governance (see SF). But - easy access to credit also has the effect of increasing liquidity of the housing stock by allowing people to arbitrage across time. By that, I mean by borrowing money, the purchaser exchanges future capital for current housing. This is usually a productive trade which would otherwise be impossible to take advantage of without easy access to credit.

I don’t think it’s clear that low priced mortgage rates are a net negative.

mrjaeger• 8 years ago

Why was this not submitted under it's original title "The Economy Is Full of Crypto (And Collective Delusion)"? The submitted title is wildly misleading, as the author is not arguing generally that finance has become untethered from productive work, but that this has become the case for certain crypto related use cases.

Hasz• 8 years ago

I wouldn't exactly characterize it as misleading -- "Finance has become untethered from productive work" is the subtitle.

tikhonj• 8 years ago

The subtitle is misleading out of context. The actual title is far more representative of the article.

DoreenMichele• 8 years ago

Probably because it is clickbait and that is one of the reasons the guidelines asks you to change the title instead. Using a non clickbait subtitle is pretty common in such cases.

loeg• 8 years ago

The replacement title is, if anything, even more clickbaity than the original.

Animats• 8 years ago

I'd go for changing the title. I agree that finance has become untethered from productive work, but that happened a long time ago, when derivatives became bigger than their underlying asset categories. This article isn't about that.

zanny• 8 years ago

On the bright side, you can immediately tell in the comments here who didn't read this article since the title is so vapid and misleading.

dang• 8 years ago

It was, but a mod changed it to the subtitle. That's a standard practice when an article's title is baity and its subtitle less so. Unfortunately this time the subtitle was misleading.

The real problem though is that the article itself is pretty fluffy, below the author's usual standard. I don't think there's much to gratify intellectual curiosity here, or news that there's a cryptocurrency craze. All this has been discussed on HN well past the point where we just recycle.

tananaev• 8 years ago

Like with any other market bubbles in the past, there will be a day of reckoning. I believe most of the coins and tokens will become almost worthless, but it's likely that we'll have a number of winners that will bring some utility value.

Roritharr• 8 years ago

As someone who isn't even claiming to be knowledgeable about finance, I often get asked by many peers why their work is worth so much less than owning assets is. The ownership of a decently placed house can generate as much income as 10 years of training and a full year of work as an engineer. Why?

Is there a comprehensive answer? I can only shrug.

autokad• 8 years ago

"ownership of a decently placed house can generate as much income as 10 years of training and a full year of work as an engineer. Why?"

that depends on what you mean by 'decently placed'. the right decently placed numbers can win you 400 million dollars in the lottery.

i own a house, and i made a 'decently' placed bet and my home increased from 250k to 330k in 5 years. in theory. 80k is great, but over 5 years is no whear near what an engineer can make during that time. and i did PRETTY good.

anything else, you are talking about winning the lottery.

AznHisoka• 8 years ago

Because a house fulfills one of the basic needs of humans (shelter)?

justboxing• 8 years ago

This exactly. Food, clothing and shelter. If your investment provide any of this, you'll make money in and up or down economy.

cjensen• 8 years ago

Wow. The first sentence is so wrong I can't even.

Venezuela's problems are entirely self-inflicted. US sanctions have very little effect on the worth of their money. Spending vastly more than they make, in part because of their incompetence at running an oil industry, is causing the hyperinflation.

The second part about the Berkeley city council proposing a dumb idea is a "dog bites man" story. It's not news when they suggest doing something dumb. It's only news when they try something crazy and it ends up being a great idea.

AlexCoventry• 8 years ago

These cherry-picked examples are akin to claiming on the basis of this article that "Journalism has become untethered from productive work," when all it really shows is "Bloomberg column-inches have become untethered from productive work."

spodek• 8 years ago

It's true! There is something sort of charming and hopeful about it though. In the old economy, to build something valuable, you had to build something valuable. In the new economy, you can just launch an intrinsically worthless token and go around to people and say "what if this was valuable?" And if you can convince them of your vision -- your vision of it being valuable -- then it will be valuable. It's finance untethered from productive work. It's so ... postmodern.

For those too young to remember, paragraphs exactly like this appeared in the late 90s before the dot com bubble burst.

When the shoe shine guys start talking stocks, it's time to sell. Same with random people talking ICOs. http://archive.fortune.com/magazines/fortune/fortune_archive...

It's not postmodern. It's predictable.

jpmattia• 8 years ago

Matt Levine's article reads like a dinosaur whining that a meteor that has hit his environment, and now everything is changing. I must have missed the point.

It's strange, because Matt's articles are usually worth reading slowly and digesting.

The Economy Is Full of Cryptocurrency and Collective Delusion

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