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Hard to imagine a stronger denunciation of Bitcoin than the broadside launched on March 12 by Jeffrey Sachs. The famed Columbia economist made his comments at the “All About People: Digital Transformation in Science, Education, and Art” conference sponsored by Alma Mater Europaea university in Maribor, Slovenia, and the European Academy of Arts and Sciences. In response to a question on the investment prized by the likes of Elon Musk, Sachs declared, “I am not a fan at all of Bitcoin,” adding that the flagship cryptocurrency “is not store of value, is not a medium of exchange” and offers “nothing of social value.”
Sachs is most famous for his work in promoting sustainable development and fighting extreme poverty worldwide. He views Bitcoin as an enemy to the environment, and a hidden tax on everyone, rich and poor. He does see potential uses for digital currencies, but apparently not for the crypto versions. “If a digital Euro or dollar makes actual transactions in our currencies more efficient without giving up the ability to track illicit operations and tax fraud, this is a good step forward,” he declares in the Alma Mater Europaea video.
The problem with Bitcoin, he continued, consists of two parts, a “smaller” and a “bigger.” “The smaller part is bad enough,” says Sachs. “Which is the Bitcoin mining is an unbelievable waste of resources and a highly polluting waste of power, a lot of CO2 emissions resulting from nothing of social value.”
In a recent article, this writer pointed out that Bitcoin miners seek countries and regions where power is cheapest. The upshot of their quest is that over 65% of the world’s coins are produced in China, primarily by ASIC computers powered by coal, and another 8% are generated by oil-based products in Iran, a nation that’s courting miners because sanctions block it from exporting most of its petroleum production. To make matters worst, the gigantic jump in Bitcoin’s price will multiply the power used to produce it, and greatly increase its carbon footprint going forward. It’s remarkable that leading clean energy advocates such as Elon Musk are such ardent Bitcoin fans, while others such as Sachs abhor it.
Sachs “bigger” point is one this writer has never heard. “Bitcoin has bootstrapped to $1 trillion in market cap, almost like returns to counterfeiting,” says Sachs. “Where did the value come from? It came from all of us who hold Euros and dollars and other financial assets. Somehow, because somebody, declared that something that has no value has value.” The alchemist Sachs refers to is apparently Satoshi Nakamoto the pseudonym for Bitcoin’s creator, whose identity remains a mystery to this day.
The argument appears to be that generating Bitcoin dilutes the value of the world’s sovereign currencies. Hence the unusual comparison to “counterfeiting.” “Because of the fact that financial markets can be bubbles that give value in terms of exchangeability to dollars and Euros out of thin air, Bitcoin does have a value of $1 trillion that buys the goods that can compete for the same goods that you or I with our bank accounts or dollars can also compete with,” says Sachs. “If someone was just printing Euros, you’d object. You’d say, ‘That’s illegal, that’s counterfeiting.'”
Sachs posits that the world would be a better place had Bitcoin never been allowed to exist. “I wish our central banks had said from the beginning, ‘No thank you, because you don’t get to print money, you don’t get to issue a substitute currency.'” As for the view that Bitcoin represents a great innovation, Sachs isn’t buying. “[That] does not apply, because I see no value in this cryptocurrency other than possibly, possibly for tax evasion and for illicit purposes.”
For Sachs, Bitcoin is an environmental and financial blight born of sophisticated science. “I see no technical advantage compared to a digital Euro or digital dollar. The long and the short of it is that I regard not as social value, but value that has come at the cost of holders of traditional currencies.” Not to mention that all that extra CO2 spewing into the atmosphere from China and Iran as prospectors put more and more power into mining coins now selling for $60,000, but whose “social value,” for one of the world’s most renowned economists, is less than zero.
