Ben Bernanke is a prominent figure in the financial world. He took a post of a professor at Princeton University and chaired the department of economics there for six years, from 1996 to 2002. Afterwards he served two terms as chairman of the Federal Reserve, the world’s central bank.
He turned out to be in the center of attention in 2008 when the US financial system ruined with the bankruptcy of US investment bank Lehman Brothers as the last drop. The country witnessed the worst financial crisis since the Great Depression of the 1930s.
Bernanke issued a book “The Courage to Act” where he describes that experience. Besides he has published numerous academic journal articles revealing economic and political causes of the Great Depression.
Quartz has recently talked to Bernanke about financial issues and touched the problem of bitcoin. “Bitcoin is interesting from a technological point of view. We’re in a world where the payments system is evolving quickly and new approaches to managing payments are proliferating, and some of the ideas around bitcoin will no doubt be useful in doing that. But I think bitcoin itself has some serious problems. The first is that it hasn’t shown to be a stable source of value. Its price has been highly volatile and it hasn’t yet established itself as a widely accepted transactions medium”, said Bernanke.
Thus he just confirmed the widespread opinion expressed by many experts. Bitcoin does have a great potential but lacks some stability to become mainstream. Although bitcoin companies are becoming leaders of investment nowadays, the process is still on its way. Bitcoin hasn’t proved itself to be a secure and reliable currency.
Mr. Bernanke named anonymity as the most important problem of bitcoin: “Due to this feature bitcoin has become in some cases a vehicle for illicit transactions, drug selling or terrorist financing or whatever. And you know, governments are not happy to let that activity happen, so I suspect that there will be oversight of transactions done in bitcoin or similar currencies and that will reduce the appeal.”
Exactly two years ago Bernanke, at that time a chairman of the Federal Reserve, informed: “The Federal Reserve plans to work on electronic cash and related issues such as virtual currencies, as needed, for banking organizations. The Federal Reserve will continue to monitor developments as part of its broad interest in the safety and efficiency of the payment system. We also stand ready to cooperate with other agencies in fulfilling their mandates, as appropriate.”
During the present interview Bernanke covered also the importance of knowing financial history for successful development. Good policy maker should be interested in economic history as well as to know theories and models. In this sense history gives a much better overall framework.
“In the case of the financial crisis, what I knew about the depression and about financial panics prior to the depression was actually very helpful conceptually for thinking about this panic.” he said.