Food for Thought Concerning Bitcoin

Feds give thumbs up to bitcoin

Virtual currencies like bitcoin have legitimate uses and should not be banned, federal law enforcement officials told a Senate panel Monday.

While the officials warned that virtual currencies are popular with drug dealers and child pornographers, they said existing laws should be sufficient to stop criminal activity.

Bitcoins exist only online, and owners of the currency are mostly anonymous. There is no central bank managing or backing bitcoins, and owners can trade the digital currency on a variety of exchanges or privately.

The value of the bitcoin has fluctuated widely since they were introduced four years ago, but the currency surged in recent weeks on hopes that it could become an alternative to the dollar.

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Are Bubbles Caused by Psychological Problems?

The key identifying points of a typical bubble according to Shiller, are:

1. Sharp increase in the price of an asset.

2. Great public excitement about these price increases.

3. An accompanying media frenzy.

4. Stories of people earning a lot of money, causing envy among people who aren’t.

5. Growing interest in the asset class among the general public.

6. New era “theories” to justify unprecedented price increases.

7. A decline in lending standards.

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