Following the collapse of the Mt. Gox online currency exchange, Professor of Economics Richard Grossman writes on Slate that, as some bitcoin proponents argue, universal adoption of bitcoin would similar in many ways to adopting the gold standard. “And that would be a disaster,” he contends. As with bitcoin, gold has historically been subject to meddling–both official and private. It also seriously restricts the ability of governments to respond to economic downturns.
He writes: “The United States is fortunate that it was not on a ‘bitcoin standard’ when the subprime crisis hit. Because it was not, the Federal Reserve was able to undertake extraordinary monetary easing, pushing interest rates to near zero and increasing the supply of money…Had the Federal Reserve’s hands been tied by the bitcoin standard, the economic and financial devastation would have exceeded that of the Great Depression.”