cryptocurrencies

Please write an essay arguing that cryptocurrencies are good for the economy.
This is meant to be a slightly cheeky essay.

First read the first reference essay to understand the problems with excess savings and how they hurt the economy. Also read the attached essay about “House of Debt” to understand how debt hurts the economy. The other essays in the references section might be helpful to look over as well. The last essay provides the total size of the cryptocurrency market.

The essay is arguing that cryptocurrency is a way to absorb excess savings without increasing household debt or affecting the real economy in any way. So when the liquidity goes away no one is hurt.

Use this Essay Outline:
Crypto currencies are good for the economy
First, as many have pointed out, cryptos exist because of the global liquidity.
There’s been a huge savings glut of capital from wealth inequality (provide proof)
Savings rate has grown but investment rate has remained constant (provide proof)
So let’s be clear, all the crypto heads had nothing to do with the excess capital being available. So the excess savings would be around crypto bros or not.
And we know that savings > investment rate is bad for the economy
Worst thing that could happen would be more lending into household debt (as discussed in Atif Mian & Sufi’s House of Debt (attached)
What would be the best thing to do with those excess savings?
The best thing for the economy would be to store those excess savings in an asset with:
No ties to the real economy
Not financed by debt at all
Primarily held by wealthy or the discretionary income of the poor
This describes cryptocurrency!
So we were able to evaporate 1 trillion in a month and there was barely any effect
In fact, if the entire 2 trillion of crypto evaporated, it would be absorbed remarkably well by the rest of the economy – even the financial markets
That’s 2trn that didn’t go into subprime mortgages, college loans, auto loans or whatever
So the excess savings was going to be there anyways. It had to go somewhere
Crypto was the best possible place for it to go!

References:
https://scholar.harvard.edu/files/straub/files/mss_richsavingglut.pdf
https://www.brookings.edu/blog/ben-bernanke/2015/04/01/why-are-interest-rates-so-low-part-3-the-global-savings-glut/
https://www.ineteconomics.org/perspectives/blog/savings-glut-fables-and-international-trade-theory-an-autopsy
https://www.chicagofed.org/publications/economic-perspectives/2021/1

https://www.cnbc.com/2021/04/06/cryptocurrency-market-cap-tops-2-trillion-for-the-first-time.html

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