Robert Shiller: cryptocurrencies are doomed to failure

Cryptocurrencies may be yet another in a long line of failed attempts to establish new kinds of money, says Nobel-prize inner and professor of economics, Robert Shiller.

Robert Shiller,Nobel laureate and professor of economics at Yale University

Alexander Mahmoud

Cryptocurrencies may be yet another in a long line of failed attempts to establish new kinds of money, Robert Shiller wrote on the Project Syndicate's website this week. Shiller, a Nobel prize winner who popularised the cyclically-adjusted price/earnings ratio as a measure of market valuation, and is famous for his warnings about both the US housing market and dotcom bubbles, notes that "attempts to reinvent money have a long history".

Advertisement - Article continues below

Examples include Josiah Warner's "Cincinnati Time Store", which opened in 1827. It sold merchandise for "labour notes", which were backed by "units of hours of work". It shut down just three years after it launched. A similar experiment launched in London a couple of years later by social reformer Robert Owen failed, too. During the Great Depression, economist John Pease Norton proposed a "dollar backed not by gold, but by electricity", which also failed.

"Each of these monetary innovations has been coupled with a unique technological story," Shiller notes. "More fundamentally, all are connected with a deep yearning for some kind of revolution in society." Cryptocurrencies are no different, he said. They were introduced by "entrepreneurial cosmopolitans" who "hold themselves above national governments, which are viewed as the drivers of a long train of inequality and war". The air of mystique around these innovations not to mention the fact that the means by which money itself derives its value is nebulous and faith-based also helps the ideas to gain traction, at least in the initial stages. For example, says Shiller, "practically no one, outside of computer science departments, can explain how cryptocurrencies work. That mystery creates an aura of exclusivity." Yet devotees beware. "None of this is new, and, as with past monetary innovations, a seemingly compelling story may not be enough."




Bitcoin has just crashed hard – where will it go next?

The bitcoin price has taken a beating, down by 15% in one day. Dominic Frisby looks at what’s behind the crash, and where the cryptocurrency might go …
25 Sep 2019
Spread betting

Another bubble in bitcoin for traders to short

This surge in the bitcoin price seems no more likely to endure than the last one, says Matthew Partridge.
16 Jul 2019
Investment gurus

Terry Smith: I'm not used to being ignored

Running a £20bn fund doesn’t guarantee good treatment from the companies you invest in.
22 Jun 2020
Tech stocks

Jeremy Siegel: "pandemic played right into the hands of the FAANG stocks”

Jeremy Siegel, professor of finance at Wharton, says the tech giants benefited from the closure of many physical businesses.
12 Jun 2020

Most Popular


The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020

This chart pattern could be extraordinarily bullish for gold

The mother of all patterns is developing in the gold charts, says Dominic Frisby. And if everything plays out well, gold could hit a price that invest…
1 Jul 2020
Global Economy

How “pent-up demand” could drive a V-shaped economic recovery

“Pent-up demand” is usually a myth. But not this time. The Covid lockdown has created genuine pent-up demand, says Merryn Somerset Webb. That’s now be…
29 Jun 2020