Bitcoin, Bubbles and More: Chicago Booth Faculty Tackle Big Issues

Bitcoin, Bubbles and More: Chicago Booth Faculty Tackle Big Issues

Chicago Booth Economic Outlook #BoothEO provided a thoroughly informative session that covered many of the most important and pressing financial and economic issues of the day. A multitude of topics were covered, including the recent tax cut bill, what effect a Donald Trump impeachment would have on the stock market, the bitcoin/cryptocurrency craze and much much more.

It was moderated by CNBC anchor/reporter Michelle Caruso-Cabrera, who is certainly no moderate when it comes to her political and economic views. She's unabashed about her devotion to the so-called "free market," as she mentioned during the session that her book is dedicated to to Milton Friedman.

michelle-caruso-cabrera

Additionally, she credited him with her worldview, and when transitioning to the tax bill discussion "joked" with this quip: “just how great is this tax cut that we just got.”

Caruso-Cabrera was certainly on brand during this session, as she later "joked" again:

“isn’t it always better when the government has less money and the private sector has more?"

Now let's move on to the sociopolitical viewpoints on economic and financial issues that do not fall under the far right and corporatist umbrella.

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Market Bubbles/Recession/Financial Crisis 

The title of the session, and hence the first/main issue examined was of course "Could the 2008 Global Financial Crisis happen again?"

Professor Raghuram G. Rajan was credited with predicting the last one: and he said that if another one is coming, "it won’t be like the first one," but he also added that “anything is possible,” because “the truth is we don’t understand markets and how they expect changes.”

Professor Randall Kroszner offered the following: “I’m worried when people are not worried, and that’s what we’re experiencing; it can’t be that everything is just perfect.”

He flashed back to 2006, when he was at The Fed, and he described the atmosphere today with the phrase: “now, where have I heard this song before?”

Professor Austan D. Goolsbee said a a 2000-2001 style internet bubble is very conceivable, and he cited worries about China, with their accelerating levels of debt, and concerns relating to the European Union.

Goolsbee added that: “central bank actions have been lighters of fires.”

The Dow Jones Industrial Average just keeps bursting through ceiling after ceiling of record highs. A serious market correction is long overdue.

2008-global-financial-crisis

Bitcoin/Cryptocurrency

It's been a brutal month for Bitcoin and cryptocurrency in general, with the last two days bringing the worst carnage of all.

Kroszner referred to it as “not a currency, but crypto-assets,” however, he agrees that block chain will be used in different areas. “There are a lot of people who like volatility, so if you are into volatility, go long on bitcoins."

Goolsbee said he had no idea why bitcoin reached the levels that it did, but he also sees a future in block chain technology, which he believes is here to stay.

"There's a marginal cost of creating currency," he said. "They made up cat video money and now cat video money is worth 2 billion dollars. You saw it at the bitcoin convention, they refused to take bitcoin for the entrance fee.”

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How a Trump Impeachment Could Impact the Market

Goolsbee: "We don’t have much history of impeachment to go on. Certainly the Bill Clinton impeachment was thought to be catastrophic for markets, but it wasn’t."

He also commented on how the market has a tendency to adversely overreact to partisan bickering in Washington, citing the government shut down fears and debt ceiling crisis as examples.

“For whatever reason, the public does not like to see the parents fighting each other.”

wall street 2008 global financial crisis

Tax Cuts

Goolsbee was somewhat upset by the tax cut, but he doesn’t see it according to the same doomsday scenario that we often hear from some Democrats on the hill. “I think most of the money ends up being a windfall, it doesn’t change behavior,” he said. He believes that they could have gone about trying to help the middle class, workers, and increase production in much better ways.

All in all, it seems like Bitcoin and the Bitcoin bubble is the leading financial story to keep an eye on right now.

Paul M. Banks runs The Sports Bank.net and TheBank.News, which is partnered with News Now. Banks, a former writer for the Washington Times, NBC Chicago.com and Chicago Tribune.com, currently contributes regularly to WGN CLTV and the Tribune corporation blogging community Chicago Now.

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