Joseph Stiglitz has joined forces with fellow economists Nouriel Roubini and Kenneth Rogoff in attacking bitcoin. The trio claim that the digital currency will be “regulated into oblivion” as authorities clamp down on money laundering. “You cannot have a means of payment that is based on secrecy when you’re trying to create a transparent banking system,” Stiglitz tells Financial News. Indeed, “if you open up a hole like bitcoin then all the nefarious activity will go through that hole, and no government can allow that”. A major crackdown has not happened yet because the market for cryptocurrencies is still relatively small, but “once it becomes significant they will use the hammer”.
However, bitcoin is not the only currency in trouble: “the euro may be approaching another crisis”, noted Stiglitz on the Project Syndicate website last month. From 2008 to 2016 the eurozone’s real (after-inflation) GDP grew by just 3%. In 2017 it grew by about 2.4%, but it is now “faltering again”. The euro “was supposed to bring shared prosperity… [but] has done just the opposite”. The trouble is that the system was “almost designed to fail”. It “took away governments’ main adjustment mechanisms (interest and exchange rates)” while restricting public spending.
Stiglitz believes a common deposit insurance scheme would “prevent runs against banking systems in weak countries”. But while Germany’s Angela Merkel (pictured) – the key power in the eurozone – recognises the importance of a banking union, it’s apparently “a reform to be undertaken sometime in the future, never mind how much damage is done” now.