| It's tempting to compare today's crypto craze with the dot-com bubbles of the late 1990s. Then, as now, an investment phenomenon crossed from the world of finance into popular culture. In his newsletter Financial Insyghts, Peter Atwater noted there were stories about the latest market frenzy in just about every section of the New York Times last week—Style, Art, Science, Sports and Metro. (He also picked out a question on the cover of New York magazine that illustrates how digital finance is reshaping language itself: "Can I SPAC My Stonks With NFTs?") Dogecoin, surely, is the new Pets.com—a joke Internet meme coin, inspired by a Japanese dog breed, that hit a valuation of $50 billion or so a few days ago, roughly the size of Ford Motor Co.  This week in the New Economy At the turn of the century, Alan Greenspan, then the chair of the Federal Reserve, famously immortalized the internet euphoria sweeping the nation with the phrase "irrational exuberance." Yet something darker drives the current craziness. The context, of course, is the Covid-19 pandemic and the worst global crisis since World War II. And the fuel is almost limitless bailout and stimulus money from the Fed designed to rescue the U.S. economy from disaster. Even as day-traders blow their "stimmy" checks on Robinhood trades, though, one gets the impression that a lot of today's investors—stir-crazy from lockdowns—see the Big Crash coming, and that a sense of impending meltdown only exaggerates the market mania. The crypto exchange Coinbase went public last week at a valuation greater than the owners of the New York Stock Exchange and Nasdaq combined, for example.  Alan Greenspan Photographer: Zach Gibson/Bloomberg In contrast to the techno-optimism that drove what many believed would be an endless dot-com boom, the Bitcoin craze is inflected with an end-of-world hysteria—and not just at its zany fringes. The crypto crowd sees hyperinflation and a "dollar bonfire" on the near horizon. Large institutions, too, seem troubled: More and more are buying into Bitcoin as a hedge against a debased greenback. Bitcoin is now commonly referred to as "digital gold" (it's still up 80% since December in spite of a sell-off this week.) When MassMutual, the staid U.S. life insurer, invested $100 million in Bitcoin in December, the move only added to the doomsday mood. A similar pessimism underpins a growing belief that China's soon-to-be launched digital renminbi could dethrone the dollar as a global reserve currency. Right-wing venture capitalist Peter Thiel, who co-founded PayPal, created waves earlier this month by calling Bitcoin a "Chinese financial weapon." Clearly, there are good reasons to worry about a spike in inflation. Former U.S. Treasury Secretary Larry Summers (an adviser to the Bloomberg New Economy) has emerged as a prominent critic of President Joe Biden's $1.9 trillion Covid relief plan, accusing the administration of pursuing the "least responsible" macro economic policies in 40 years.  U.S. Treasury Secretary Janet Yellen Photographer: Bloomberg But the current Treasury Secretary and many other economists aren't losing any sleep over the prospect of rising prices. "The most significant risk we face is a workforce that is scarred by a long period of unemployment," Janet Yellen told ABC's This Week. "Is there a risk of inflation? I think there's a small risk. And I think it's manageable." In any case, there's almost zero prospect that the renminbi will dethrone the dollar as a reserve currency any time soon, with or without assistance from Bitcoin. When I asked Gita Gopinath, chief economist of the International Monetary Fund (and an adviser to Bloomberg New Economy) about Thiel's comments this week, she had this to say: "Oh, I strongly disagree. I just don't see how that is the case. No, Bitcoin is an example of a cryptocurrency that doesn't serve the role of money at all."  International Monetary Fund Chief Economist Gita Gopinath Photographer: Andrew Caballero-Reynolds/AFP Gopinath, like so many others, called it a "speculative investment class" and "gambling." It's also worth pointing out that just because the renminbi is going digital (it's supposed to be up-and-running in time for the February Winter Olympics in Beijing), that doesn't end its problems in becoming a potential store of value acceptable to central banks. Chief among them is capital controls, which could make it hard for investors to get their hands on renminbi in a crisis, along with relatively weak rule of law and a politicized regulatory framework. If "irrational exuberance" summed up the dot-com boom, perhaps the epithet for the crypto era will be its opposite: "Irrational gloom." __________________________________________________________ Like Turning Points? Subscribe to Bloomberg.com for unlimited access to trusted, data-driven journalism and gain expert analysis from exclusive subscriber-only newsletters. Bloomberg Green Summit: Join Bloomberg on April 26 and April 27 to hear from former U.S. Vice President Al Gore, climatologist Dr. Michael E. Mann and the CEOs of Dow and Ariel Investments as they discuss their commitment to a net-zero economy, how to rebuild after the pandemic and what they're doing to inspire and enact lasting change. Register here. Download the Bloomberg app: It's available for iOS and Android. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. | 
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