Friday, January 26, 2018

Dr. Lawrence White - How a Bitcoin System is Like and Unlike a Gold Standard

A thank you to a blog reader who pointed me to this recent article by Dr. Lawrence White of George Mason University. He offers a comparison of Bitcoin and Gold for those who may be interested in this kind of analysis. 

As he points out in the introduction, many people are making a comparison between gold and Bitcoin in one way or another. So he delves into that comparison and offers his view on how they are similar and how they are different. Below are a couple of excerpts.


Many commentators have compared Bitcoin to gold as an investment asset. “Can Bitcoin Be Gold 2.0?,” asks a portfolio analyst. “Bitcoin is increasingly set to replace gold as a hedge against uncertainty,” suggests a Cointelegraph reporter.

Economists, by contrast, are more interested in considering how a monetary system based on Bitcoin compares to a gold-standard monetary system. In a noteworthy journal article published in 2015, George Selgin characterized Bitcoin as a “synthetic commodity money.” Monetary historian Warren Weber in 2016 released an interesting Bank of Canada working paper entitled “A Bitcoin Standard: Lessons from the Gold Standard,” which analyzes a hypothetical international Bitcoin-based monetary system on the supposition that “the Bitcoin standard would closely resemble the gold standard” of the pre-WWI era. More recently, University of Chicago economist John Cochrane in a blog post has characterized Bitcoin as “an electronic version of gold.”

In what important respects are the Bitcoin system and a gold standard similar? In what other important respects are they different?"  . . . . .  read here for his answers


My added comments: I always try to point out that Dr. Lawrence (Larry) White are not related in any way that I know of even though we share the same name. Dr. White has a PhD in Economics from UCLA and is a highly respected contributor to economic thought.

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