Economist Paul Krugman compared cryptocurrencies to the mortgage crisis of the 2000s – Bits Media

American economist and Nobel laureate Paul Krugman drew a parallel between the current volatility of digital assets and the mortgage crisis of the late 2000s in the United States.

Paul Krugman (Paul Krugman) commented on the recent fall in the cryptocurrency market, at which "burned" more than $1 trillion. He declared, that when studying the current situation in the cryptocurrency market, he sees “disturbing echoes of the mortgage bubble” 15 years ago, which crashed the entire housing market and triggered the global financial crisis in 2007 year.

The mortgage crisis arose because, that banks gave people loans for housing, regardless of their solvency. Interest rates were low at the time, and real estate prices were rising rapidly. Given the further oversaturation of the real estate market, the emergence of a large number of loan offers and the inability of the population to repay their debts, creditors began to suffer huge losses.

The economist thinks, that cryptocurrencies will not cause a wider economic crisis. However, he is confident, that the bearish trend may affect more vulnerable users, lacking sufficient financial literacy.

“Many borrowers did not understand, what are they getting themselves into?. Cryptocurrency investors are also buying speculative financial products, without realizing the risks involved. Crypto assets are characterized by huge price fluctuations, that's why they are so risky, as far as possible for the asset class", - Krugman said.

Last year, Krugman called cryptocurrencies a scam., which “keeps afloat” only thanks to complex technical terms and assurances about the inevitable collapse of fiat currencies.