In a New York Times article, economist Paul Krugman highlighted comparisons between cryptocurrency and the 2008 subprime mortgage crisis. In his conflicting opinion posts, Krugman mentioned the over 50% drop in total market cap from November 2021 highs, claiming that uninformed players are suffering the most.
As a result, he compares the subprime mortgage crisis to digital currencies, using the opportunity to repeat contentious issues such as crypto’s role in money laundering and tax evasion. Krugman’s major argument is that “excluded groups” are placing themselves into dangerous financial circumstances for which they are not prepared or have the financial security to handle. But Krugman doesn’t understand why “excluded groups” are prepared to risk it all in the first place.
What was the subprime mortgage crisis?
The subprime mortgage crisis was the major factor that led to the 2008 global financial crisis. Several variables were also there, but the two most notable were the growth in subprime lending by banks and the collapse of the US housing bubble.
Here, the word “subprime” refers to a credit classification that is below average due to a poor or limited credit history. Borrowers in this group are deemed high-risk, therefore their interest rates are higher.
