Head in the sand

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Head in the sand

The author is a deputy head of the economic policy team of the JoongAng Ilbo.

“The ‘something’ that connects two transactions is called money, and it has taken innumerable physical forms — from stones to feathers to tobacco to shells to copper, silver, and gold to pieces of paper and entries in ledger books. Who knows what the future incarnations of money will be? Computer bytes?”

I pay my respects to the economist who passed away more than 15 years ago. He made this prediction 18 years before bitcoin was created. The name bitcoin is derived from “bit,” a unit of computer storage, and “coin.” Milton Friedman wrote the line in the preface of his book “Money Mischief.” A Nobel Prize cannot be won by anyone, indeed.

The war surrounding cryptocurrency is in full swing. Some question if cryptocurrency is a currency at all. Vice Prime Minister for Economic Affairs Hong Nam-ki said that it is not a currency, nor stock or bond, and is a “virtual asset.” Friedman would disagree.

Financial Services Commission Chairman Eun Sung-soo represented the true stance of the government. He said that grown-ups need to tell the young if they are going the wrong way.

As the diagnosis is wrong, there cannot be a right prescription. The cryptocurrency craze is a phenomenon, not the cause. When housing prices soared to the extent that it is hard to buy a home by saving up your salary all your life, the government came up with a 40-year mortgage loan for the young generation. It is the age of sudden “panhandlers,” as many lost their jobs and have no income. When you can make big money out of cryptocurrency, it is hard not to be attracted to it.

Going back to the book, Friedman’s “Money Mischief” discusses how countries that played with money by over-issuing it failed due to inflation.

It was good when money was borrowed and released because of the Covid-19 pandemic. Now the time is coming to pay it back. As consumer price began to rise, U.S. Secretary of Treasury Janet Yellen warned the interest rate may need to be raised.

There is no one who doesn’t know that the Moon Jae-in administration is trying to buy time without any clear plan. I only admire the government’s consistent efforts to attribute the cryptocurrency craze to dim-witted investors. Friedman also predicted this situation in his book. He argued that no government admits responsibility for causing mild inflation, not just hyperinflation, and bureaucrats always look for excuses.

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