I’m sure most have either watch the senate hearing or have been “lucky” enough to witness the insult hurling happening on twitter. If you have no idea what I’m talking about, that means that you have been hiding under a rock a little bit in the past few weeks.

Who is Professor Nouriel Roubini?

Born in Iran to a jewish family, Professor Roubini has lived in many countries before coming to the US and becoming an american citizen. In all fairness Professor Roubini is a well traveled economist who started his career as a teacher in Yale and then moved on to work for the Federal Reserve, The world Bank, and the Bank of Israel.

He’s an author, a somewhat controversial figure and no doubt someone who has no quarrels about speaking his mind.

It’s obvious that his diplomatic skills for communication are unpolished, but in all fairness, at this point he’s just defending himself from the waves of people who are insulting him after he voiced his negative opinions on the infamous senate hearing.

If you are like me and don’t mind doing the research, I would encourage you to watch it entirely. But really try to leave your biases to the side as much as possible. It seems like his remarks evoke too much anger in most, and in my opinion, they should not, everyone is entitled to speak their mind.

To his credit

He has been right before about world economies, and he was one of the voices who predicted the now historic crash of 2008. So, it makes sense that his voice has some weight and that the Senate would value his opinions.

He’s also worked for the American government, having served some time under the Clinton Administration, first as a senior economist in the White House Council of Economic Advisers and then moved to the Treasury department.

All this to say that he is experienced, and that has been effective in his field for as long as he’s been active. Because of his usual approach of calling for the end of economies, crashes and what have you, he’s been dubbed before as “Dr Doom”, which is a little comical, but seems to ring true.

Does his opinion on Cryptos matter?

To me the answer is complex and quite nuanced. It matters because we get to hear the opinion that many people who oppose cryptocurrencies but hold positions in the government won’t actually come out and say. In other words, he can say all he wants and the political costs for him would be close to nothing, which of course is not the case for the Senators that were posing the questions.

That being said, I don’t think his opinion is surprising or scary at all, and not because he’s ignorant of facts as some people like to claim, but because he is literally coming from a completely different world, and thus sees no value to what cryptocurrencies are trying to accomplish. As much as I may disagree, once again, it’s his right to state his opinions publicly.

But to continue to break this down, to see if we should heed his warning, let’s ask some questions and see where we end up.

Is Professor Roubini a successful Investor?

I was wondering about this very question myself. After listening to his disdain for speculative assets, I had to ask myself, if he was the type to take little to no risks in life. Now, this is not to say that’s a bad thing, of course not, but I’m trying to outline a particular psychological profile.

People who are very frugal, and very risk adverse, would never want to participate of not just cryptocurrencies, but any speculative asset. In order to have cognitive consistency, it could not be that Professor Roubini hates cryptocurrencies, but loves Wall Street. Why you say? Because some of his critiques about cryptocurrency are very much present on the traditional markets.

I did some digging, and found a very interesting quote of his.

“I regularly save about 30% of my income. Apart from my mortgage, I don’t have any other debts. The credit crunch hasn’t affected me much. . . . I’ve always lived within my means and, luckily, have never been out of work. I would say I’m a frugal person—I don’t have very expensive tastes. . . . You don’t need to spend a lot to enjoy things.” – 2009 Interview

He was also asked about the stock market investments.

“Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%. . . . I don’t believe in picking individual stocks or assets. . . . Never invest your money as though you are gambling at the casino. Buying and selling individual stocks is a waste of time.”

My suspicions then turned out to be true. Can we really see his opinion as one with a lot of weight when it comes to investing and free markets? Again, I’m not trying to say he doesn’t understand things or insult him like many do, I find that behavior to be unproductive. My point is simply that he is being consistent here, he thinks you should just put the money in the bank and save it, don’t invest, just save it.

Conflicts of Interest?

Well this one is even easier to dig up, and it should not surprise any of us. The answer is of course yes, yes there is. If having worked for the Federal Reserve should probably be enough for us to raise an eyebrow, but of course he is no longer there, so maybe it’s not too relevant at the moment.

No doubt that school, so to speak, has had a big influence in his way of thinking exchange of value, creation of value and what have you, but maybe we can’t pin it all to that historic employment record. But, What could it be?

As it turns out Professor Roubini works for the National Bureau of Economic Research a nonprofit founded over a century ago. You might think this doesn’t say much, and I would not blame you, I thought so myself, but again the devil is in the details.

One study showed that NBER was ranked as the second most influential domestic economic policy think tank. What does this mean you say? Well Think Tanks are a collection of talented professionals who can make a case for any opinion needed, I say any, because it’s always been a problem since their creation. In other words, where the money comes from to finance them, influence their opinions a lot, and this is nothing that should make anyone surprised. I mean, Imagine a Think Tank that doesn’t conclude what we need to hear? Why would we “donate” to it?

Should we care?

In my opinion yes and no. It’s important that all of us know what the people who stand in opposition of cryptocurrencies are saying. It’s important that we understand the challenges that are ahead of us, and possibly learn how to combat the misinformation being shared, possibly.

But where I draw the line is in the whole twitter fights/debates that are currently happening. I see absolutely nothing productive coming out of it, and if I’m to be honest, some of the opinions of crypto enthusiasts sound cultist to say the least, as if someone just insulted our religion.

We need to be cool headed, leave our ego aside and realize that “these debates” are important but will not shape the final outcome of anything. In the end the markets will decide, and if he’s right he will probably write a new book, if he’s wrong he will go down in history in the same way that the economists who said the internet was just a fad.

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  1. CryptosDecrypted

    Measured, important article. I find much of what Mr Roubini has to say about crypto – cherry picked nonsense ($60 fees on BTC etc.) However, he has more than earned the right to speak and there’s nothing to be gained by insulting him. An educated investor needs to be able to ‘entertain’ other perspectives and ideally learn from them even while often ultimately rejecting them. Your own research ‘taught’ you as you didn’t simply embrace or reject an opinion that contradicted yours, but instead through legwork ‘contextualized’ that opinion. Great post.