Robert J. Shiller, Sterling Professor of Economics, Yale University: In Search of a Stable Electronic Currency:
The Bitcoin phenomenon seems to fit the basic definition of a speculative bubble—that is, a special kind of fad, a mania for holding an asset in expectation of its appreciation. Further, a bubble is publicized and amplified by news of price increases, often justified by some kind of inspiring “new era” story that attracts more attention as the price rises. In this case, the narrative was that a computer whiz invented a new kind of money in the form of electronic currency units, as part of a decentralized computer-driven system for a world economy that extends beyond the reach of any single government.
The central problem with Bitcoin in its present form, though, is that it doesn’t really solve any sensible economic problem. Nor should it substitute for banks and the governmental institutions that regulate them. They are reasonably effective institutions, despite their flaws, and should not just be scrapped and replaced by a novel electronic system.
[...] we may conclude that Bitcoin has been focused on the wrong classical functions of money, as a medium of exchange and a store of value. Bitcoin offers a way of “mining” electronic coins that can replace our dollar bills and bank accounts. Yet there is no fundamental need for this. Money, as we’ve known it for decades, works quite well in these respects. It would be much better to focus on another classical function: money as a unit of account—that is, as a basic standard of economic measurement.
What follows in the article is the idea of a nominally-stable unit of account called “basket” and inspired from the Unidad de Fomento (UF). I’m afraid a conventional unit of account is bound to be useless, as long as its exchange rate towards any real currency — being it euro, yen, peso, whatever — is variable. Unless most of the planet uses the “basket” instead of their national currencies, the “basket” is not interesting… in my opinion.
Consider rents. Increases may seem unfair to tenants, yet they may be needed to offset inflation. In Chile, a landlord can easily set the monthly rent for the tenant in U.F.s and then never have to change it, reducing the potential for errors, delays, and misunderstandings. The name “U.F.” reframes people’s thinking so that keeping real economic values stable is natural and easy.
Unless the wages are also nominated in UF, people will still feel that rents are increasing. As I said, unless such a nominally-stable, inflation-adjusted currency is used instead of the national currency… we’re talking of intellectual masturbation here.