Cryptocurrencies share a new technology that algorithmically protects an asset from temptations of governments to engage in inflationary finance and from the public to profit by counterfeiting. Investing in this class of assets, the public must decide whether or not they will transform the economy and society. Will the publics decisions be made on the basis of some observable and understood fundamentals, or will it be driven by what John Maynard Keynes described as waves of optimism and pessimism which are unreasoning? Thus far, in spite of the government crackdowns on some of the industry’s more reckless elements, the public has remained largely optimistic about the future of cryptocurrencies. Yet, there is a substantial risk that the rise of crypto may be distorting consumption and investment, storing up costly problems for the future.
The problem in forming a judgment about the long-term viability of cryptocurrencies is that we are looking at the relatively early stages of their development. Rather than trying to assess the future crypto with limited current information, in this lecture I will look for the common features of previous innovative asset booms, including the South Sea and Mississippi bubbles of the 1720s, the British Railway and Sovereign Debt booms of the nineteenth century, and the American commodity and stock market bubbles of the twentieth century. My assessment will examine the underlying fundamentals of technology that drove these booms and their political economy. Their study reveals the dangers that a persistent bubble presents by pushing an economy off its growth path with often regressive redistributions of wealth.
Eugene N. White, Distinguished Professor of Economics at Rutgers University since 2005, had undergraduate degrees in history and economics from Harvard University and Oxford University. In 1980, he obtained a Ph.D. in Economics at the University of Illinois-Urbana Since then he has held academic positions at the University Paris X Nanterre, at Erasmus University Rotterdam, and the Stern School of Business, among others, and has been a Visiting Scholar and Fellow at several Central Banks in the US and Europe. He has been a Research Associate at the National Bureau of Economic Research since 1990 and has received numerous grants and awards. During his stay in Frankfurt this Spring/Summer, Eugene N. White will teach a course on A History of American Financial Crises: A Perspective on the Causes of American Financial Crises. The seminar will be embedded in the Ph.D. program of the University’s Graduate School GSEFM at the House of Finance.
Please note that a registration is required. The attendance is free of charge. We are looking forward to welcoming you at our event! Please register here: https://safe-frankfurt.de/news-media/events/event-view/financial-history-lecture-is-crypto-a-bubble-a-historical-perspective.html.