Of money
One currency will rule?
The surprising connection between Lord of the Rings and Bitcoin
Many respected economists have been influenced by fantasy and science fiction books - and successful businessmen such as Elon Musk.
What does Musk's literary taste say about his perception of the market and how does it make cryptocurrencies unstoppable?
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Bitcoin
Elon Musk
Lord of the Rings
Avichai Snir
Friday, 02 April 2021, 00:08
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Lord of the Rings (Photo: ShutterStock)
A few years ago, Professor Paul Krugman, Nobel laureate in economics and one of the most influential economists in the world noted in an interview that there are two books that can greatly affect a 14-year-old boy: The Fall of the Elephants by Ayn Rand, and The Lord of the Rings by JRR Tolkien.
The first, Krugman said, deals with an imaginary world in which the unrealistic nature can turn a child's head.
The second book is about orcs.
One can argue about Professor Krugman's taste in books.
But in distinguishing between Ayn Rand readers and Tolkien readers, Krugman distinguished between two types of economists.
Economists affected by Maine Rand represent economists who believe in a free economy, and in that the government should not intervene in the market, except when their businesses need help.
Such economists include Alan Greenspan, president of the US Federal Reserve from the 1980s to the early 2000s, as well as Benjamin Netanyahu.
Economists influenced by Tolkien (and other science-fiction writers) include Nobel laureates Roger Myerson and Paul Krugman, and more recently, a large portion of high-tech economists.
Their most outspoken speaker is Elon Musk, who sent a copy of "The Celestial Institution" to space, wrote about his spacecraft 42 to remember the meaning of life, the universe and everything else from "The Hitchhiker's Guide to the Galaxy", and a few weeks ago also used a tweet that included clues to the Lord of the Rings to bounce The value of bitcoin by a good few percent.
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Bought Bitcoin and bounced Tesla.
Elon Musk (Photo: GettyImages)
One can dislike what Elon Musk is doing - his tweets bounce off the value of Bitcoin, and at the same time the value of Tesla.
In fact, the rise in the value of Bitcoin since Tesla announced it had purchased about $ 1.5 billion worth of coins has given Tesla more profit than any of the cars it sells in the quarter.
But one thing cannot be argued.
The more companies enter the field of cryptocurrencies, the more difficult it is for regulators to restrict the use of cryptocurrencies.
Regulators could have tried to restrict cryptocurrency trading in the past, but when damage to cryptocurrencies leads to billions of dollars in damage to Wall Street investors, regulators must learn to live with them.
But it also highlights the pros and cons of cryptocurrencies.
The great advantage of Bitcoin-type coins, whose printing rate is known in advance, is their high volatility.
This makes them great assets for those who want to profit from volatility.
But it also makes them problematic assets for those who want to use them as currency.
When volatility is so high, it is almost impossible to set prices.
Bitcoin also has another problem, and that is the high power consumption involved in operating the system.
This makes the costs of trading Bitcoin too high to allow efficient trading in small units of currency.
Which brings me back to Elon Musk's tweet with the mention of the Lord of the Rings.
Musk wrote there that "Frodo was the underdog, everyone expected him to fail."
This sent a lot of people buying Bitcoin, which boosted its price.
But anyone who has read The Lord of the Rings knows that Frodo may have succeeded in his mission, but after that he sailed west.
Like Moses, Frodo saw the Promised Land, but did not enter it.
In my opinion, Elon Musk actually hinted that Bitcoin is not a currency that can rule the world.
Musk probably thinks the dogikoin is the currency that can succeed.
I actually do not think so.
But it will be interesting to see if and when the currency that can really conquer the world will appear.
Dr. Avichai Snir - Netanya Academy and Bar-Ilan University
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