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Thu Jan 27, 2022, 09:16 PM

How crypto became the new subprime - Paul Krugman

Whatís this crypto thing about? There are many ways to make digital payments, from Apple Pay and Google Pay to Venmo. Mainstream payment schemes, however, rely on a third party ó usually your bank ó to verify that you actually own the assets youíre transferring. Cryptocurrencies use complex coding to supposedly do away with the need for these third parties.


Skeptics wonder why this is necessary and argue that crypto ends up being an awkward, expensive way to do things you could have done more easily in other ways, which is why cryptocurrencies still have few legal applications 13 years after Bitcoin was introduced. The response, in my experience, tends to take the form of incomprehensible word salad.

Recent developments in El Salvador, which adopted Bitcoin as legal tender a few months ago, seem to bolster the skeptics: Residents attempting to use the currency find themselves facing huge transaction fees. Still, crypto has been effectively marketed: It manages both to seem futuristic and to appeal to old-style goldbug fears that the government will inflate away your savings, and huge past gains have drawn in investors worried about missing out. So crypto has become a large asset class even though nobody can clearly explain what legitimate purpose itís for.

Investors in crypto seem to be different from investors in other risky assets, like stocks, who consist disproportionately of affluent, college-educated whites. According to a survey by the research organization NORC, 44 percent of crypto investors are nonwhite, and 55 percent donít have a college degree. This matches up with anecdotal evidence that crypto investing has become remarkably popular among minority groups and the working class.

https://www.nytimes.com/2022/01/27/opinion/cryptocurrency-subprime-vulnerable.amp.html

Why are the riskiest financial products being sold to the least sophisticated investors (Just the way subprime mortgages were marketed)?

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Reply How crypto became the new subprime - Paul Krugman (Original post)
Tomconroy Jan 2022 OP
Dawson Leery Jan 2022 #1
progree Jan 2022 #2
mike_c Jan 2022 #3
appmanga Jan 2022 #4
Aussie105 Jan 2022 #5

Response to Tomconroy (Original post)

Thu Jan 27, 2022, 10:06 PM

1. kick

The financial class is always hustling for ways to make money.
There have been countless stories of "lost passwords" and all your "value" is forever gone.

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Response to Tomconroy (Original post)

Fri Jan 28, 2022, 01:34 AM

2. Most, including bitcoin, are huge consumers of electricity, making our global climate disaster worse

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Response to Tomconroy (Original post)

Fri Jan 28, 2022, 02:01 AM

3. the lure of easy money has been the ruin of many

Same as it ever was.

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Response to Tomconroy (Original post)

Fri Jan 28, 2022, 04:37 PM

4. Never invest...

...in things you don't understand.

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Response to Tomconroy (Original post)

Fri Jan 28, 2022, 05:02 PM

5. I've looked at crypto . . .

The blockchain idea, the mining idea, the investment costs involved in hardware and electricity of mining.

And at every point, I've been looking for one thing: what actually creates the wealth?
And I cannot find an answer inside the word salads being touted.

But there are other sources of personal wealth creation people believe in, that are easy to spot:

Gambling - the winner takes the money of the losers.
The stock market - wealth created by the productivity of successful businesses.
Ponzi schemes - early entrants take the money of later investors.
Forging bank notes - take something of little value, pass it off as valuable legal tender.
Prostitution, drug dealer - yeah, well, that might work for some.
Being an elite sports person, or a popular performing artist, inheriting a fortune - see prostitution above.

(Probably other 'get rich quick schemes' I've missed.)

But with crypto - I can't see the source of potential personal wealth.

Human greed or desire for easy money. Crypto seems to fit that bill for some.



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