Robert Shiller has created quite a name for himself as an Economist and professor. He specialises in asset bubbles and is best known for predicting the housing market crash long before it eventually burst.
In an interview that he gave with Quartz magazine, Shiller went into his rationale as to why he thought Bitcoin was in a bubble and how he was previously ably to identify bubbles.
They also went over the general economic environment in the world right now as well as previous bubbles such as the tech bubble and the stock market crash in 1987.
On Why Bitcoin is a Bubble
The main premise behind Shiller’s analysis is that there is this great excitement that surrounds Bitcoin and the technology that underpins it. The whole premise that there was a mysterious figure called Satoshi Nakamoto who created the currency (Shiller questions whether he is real).
He claims that there is some sort of bewilderment behind the complex technology of decentralised ledgers and cryptography which is able to make a currency. It is an idea that is so powerful that “governments can’t stop it”.
He the claims that in the third edition of his book that there is this “fundamental angst” that people have about digitization and computers. People look at how the world is changing and whether humans could eventually be replaced by computers and machinery.
His premise is that Bitcoin fits in nicely with this theory. That people think they can understand the technology and see something that everyone else cannot. That they can become rich from investing in it and catching the technological wave that is forming.
When pushed on his Bitcoin theories, he tries to make the point that the election of Trump fed on the same forces. This underlying fear of a digitized world and how people want to be on top of it.
And it’s that angst that he spoke to, and he presented a story that involves you, the voter, as a success in this new world, and that’s why the Trump story was so popular
In a separate interview with CNBC host Brian Kelly, Mr Shiller explained his rational a bit more in depth.
In the epic bitcoin battle between @RobertJShiller and @BKBrianKelly, who won? pic.twitter.com/xMwPtPl7zd
— CNBC's Fast Money (@CNBCFastMoney) September 6, 2017
On Central Bank Monetory Policy
There is currently a really low level of volatility which is as a result of central bank policies. The current monetary policy environment is unlike any other time in recent history. Mr Shiller says that the closest time was in the 1930s when the US was in the throes of a great depression.
Mr Shiller claims that the lowering interest rates are also not necessarily to do with the financial crisis. They have been trending down ever since 1982. He makes the point that this is just to do with particular narratives that are in place.
News media like to tie things in with already popular narratives
On Initial Coin Offerings
When Mr Shiller was asked about whether he would invest in ICOs, he did not know what they were. He asked the reporter exactly what an ICO was. When the reported clarified exactly what an ICO was, Mr Shiller could not see the distinction between them and Bitcoin.
When the reporter went further with information, Mr Shiller merely claimed that it was a “classic bubble” and that he had to do more research on the topic and possibly write something about it.
Although we are sure that Mr Shiller is indeed an esteemed academic, something has to be said about the notion that one can dismiss something as a bubble without having an idea of what it was exactly.
Whether Bitcoin is in a bubble is really hard to tell and there are so many different professionals who hold opposing views. What is certain though is that we will have many more individuals who will be sharing their views on the bubble vs. revolution in Bitcoin.