Stephen Kinsella: Once bitten twice shy, so stay away from Ponzi-like Bitcoins
Sometimes in economics it feels like we simply jump from one bubble to another, learning nothing as we go. During a session on new forms of money at the Kilkenomics festival, the subject of Bitcoins came up.
It is a virtual currency which exists on peer-to-peer networks. The room was full of people who had bought the stuff, delighted its price had increased by several thousand per cent in the past year. I pointed out that while some people were getting very, very rich, this was precisely because the market for Bitcoin was a bubble. And what do bubbles do? They burst.
My deep and terribly clever insight was about as welcome as a fart in a spacesuit to the Bitcoin faithful. But you don't need a PhD in economics to realise this: we've lived through a massive bubble, and we know what happens when it bursts. Look around you.