It’s only a matter of time before Bitcoin “death spirals” down to its true intrinsic value, which is $0, said Steve Hanke, professor of applied economics at Johns Hopkins University.
“What’s the fundamental value of Bitcoin? The fundamental value is zero,” Hanke said. “The flow of [income generated by Bitcoin] is zero. It’s not like money. Money, broadly defined, most fiat monies have a fundamental value because they pay interest. If you look at the fourteen components of M4, that’s the broadest measure of money in the United States, ten of those components, like Treasury bills, pay interest. Bitcoin doesn’t pay interest.”
Speaking on Federal Reserve Chair Jerome Powell’s testimony to Congress this week, Hanke doesn’t agree with Powell’s remarks that the growth of the money supply would not contribute to economic expansion or inflation.
Powell, in his testimony, had said that “there was a time when monetary policy aggregates were important determinants of inflation and that has not been the case for a long time,” adding that “the correlation between different aggregates [like] M2 and inflation is just very, very low, and you see that now where inflation is at 1.4% for this year.”
“Chairman Powell is clearly delusional. I can’t believe the chairman of a central bank actually said that,” Hanke said. “Broad money measures are linked very closely to nominal GDP [gross domestic product], and nominal GDP includes real economic growth plus inflation.”
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