BUSINESS
12/30/2013 11:32 am ET

Paul Krugman Trolls Bitcoin Fans. Guess What Happens Next.

Bloomberg via Getty Images

The first rule of Bitcoin is never joke about Bitcoin. Paul Krugman learned this the hard way.

The Nobel Prize-winning economist wrote a blog post this weekend expressing some mild doubts about the digital crypto-currency. He's not sure it works as a store of value or a medium of exchange, but is open to arguments in favor of it. He dislikes Bitcoin's "libertarian political agenda" -- it is beloved by people who chafe at government control of money and yearn for the good old days of the gold standard -- and thinks some Bitcoin fans let their political leanings blind them to Bitcoin's flaws.

Nothing much to get excited about, in other words.

But! For laughs, Krugman slapped the title "Bitcoin Is Evil" on his post. Though he never actually argued that Bitcoin is evil, that was enough to uncork the wrath of the Bitcoin army, which bombarded Krugman with what he called "rage-filled missives."

Not satisfied, Krugman further poked the bear by calling the Bitcoinistas "humor-impaired." He also called their mothers hamsters and declared that their fathers "smelt of elderberries", proving once and for all that Krugman is actually French (hi, Monty Python).

In response, the Bitcoinati began mocking Krugman with a piece he wrote in 1998 seemingly predicting that the Internet would be no big deal. Advantage Bitcoin, it would seem.

The Bitcoinists were once again missing the joke, Krugman wrote in response to a question from Business Insider: "It was a thing for the Times magazine's 100th anniversary, written as if by someone looking back from 2098, so the point was to be fun and provocative, not to engage in careful forecasting," he wrote.

Krugman also pointed out that he never claimed to be a technology expert and that he was criticizing Bitcoin from an economic, not technical, standpoint. Does it work as money or not, is what he wants to know, and he's leaning toward "not."

Just to move the discussion one small inch forward (or backward, depending on your perspective): Bitcoin might eventually work as money, but not now: Speculators looking for quick profits have poured into the currency lately, leading to wild price swings that make it pretty much useless as a store of value or a stable currency.

If and when Bitcoin settles down, it will still have one major flaw that means it can't, or at least shouldn't, replace fiat currencies: There is a limit to how many Bitcoins can be produced, meaning its value can only fall so low. It is a lot like gold in that respect, and we learned decades ago that basing an economy on gold is a bad idea: When a currency is too scarce, people stop spending it, leading to economic depression. That's why we will (or should) never go back to a gold standard and why Bitcoin will (or should) forever stay on the margins.

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