Elon Musk's Bitcoin Tweets Rile Crypto Faithful; Economists Struggle Comparing 2021 to 2020
CryptoCorner
Elon Musk is again twitting Bitcoin on Twitter, but this time his cryptic comments have drawn sharp criticism from crypto true believers.
His recent comments undercut the efforts of investors to establish Bitcoin as an asset class and may erode Musk's standing as leader of two major companies, Tesla and SpaceX.
In a recent comment, the Tesla CEO posted a breakup meme: a photo of a young couple sitting on a couch with arms crossed and looking in opposite directions. Above the miffed couple, Musk posted #Bitcoin and red broken-heart emoji.
Musk previously said Tesla hadn't sold any of its $1.5 billion stake in Bitcoin.
Bitcoin fell about 7% Friday after the tweets.
Aside from driving Tesla's shareholders wild, do Musk's tweets mean anything, or is he just having fun with the media at the expense of others who invested in Bitcoin?
Musk drove Bitcoin's price higher when he announced Tesla's investment in the cryptocurrency, and pushed it lower when the electric car company announced it would no longer accept Bitcoin as payment for its vehicles.
Never mind that both actions made sense: Bitcoin is a highly speculative bet on future price gains, but many experts say that it is too volatile to be used in commerce. In any case, the Federal Reserve Bank of St. Louis said in a research report that Ethereum – not Bitcoin – is better suited for commerce.
At least 25 other companies, including Tesla, that bet on Bitcoin have doubled their initial investment.
Nevertheless, some saw nothing funny in Musk's latest post about Bitcoin.
A man wearing a Guy Fawkes mask speaking in a digitally altered voice said in a video posted Saturday, "For the past several years you have enjoyed on of the most favorable reputations of anyone in the billionaire class because you have tapped into the desire that many of us have to live in a world with electric cars and space exploration. Recently... people are beginning to see you as another narcissistic rich due (probably a typo and intended to read "dude") who is desperate for attention."
In yet another odd Twitter twist—even odder than Musk's scattershot comments on Bitcoin—Fawkes has come to symbolize the heroic outsider.
Fawkes was convicted of treason and hanged for his unsuccessful plot in 1605 to blow up Westminster Palace in an attempt to kill King James I and members of Parliament for what he saw as increased persecution of Roman Catholics.
Musk is an entrepreneur and if electric cars replace gasoline- and diesel-powered vehicles, he's likely to become an exceedingly wealthy visionary.
Then there's Musk, space pioneer.
NASA awarded Musk's SpaceX a $2.9 billion contract to build spacecraft to land astronauts on the moon as soon as 2024. Musk beat competing bids from Blue Origin, owned by Amazon founder Jeff Bezos and defense contractor Dynetics.
But somehow, it all comes back to Musk's inability to know when to shut up.
He has also tweeted about Dogecoin, a parody of Bitcoin created in 2013 and intended as a joke, to plug his appearance on "Saturday Night Live." Musk playfully mused about Dogecoin becoming the world's currency and proclaimed himself "Dogefather." This twaddle drove the price higher, but it never rose above $1.
It's long past time for Musk to can the chatter on Bitcoin and other cryptos.
But he almost certainly won't.
Musk apparently gets a kick from watching the media scurry about in response to his latest tweets almost as much as he enjoys building innovative, world-class companies.
He certainly doesn't lack attention, and has no apparent reason to crave it. He has the good sense to hire top-notch engineers and managers rather than a hallelujah chorus singing his praises, as evidenced by the success of Tesla and SpaceX.
After Musk's latest bet on Bitcoin, he received what sounds like a threat: "You may think you are the smartest person in the room, but now you have met your match. We are Anonymous! We are legion. Expect us."
In response, Musk tweeted, "Don't kill what you hate, save what you love."
This suggests Musk could easily have a second career as a feel-good new age guru dispensing life-changing insights wrapped in clichés.
No doubt, a good chunk of the media would report every jot and tittle while trying to decode musings like "Don't apply mayonnaise and fog to postage stamps—or Dogecoin."
On Monday, Bitcoin took a hit from another prominent member of the Twittersphere.
In an interview with Stuart Varney on Fox Business Network, former President Donald Trump said, "Bitcoin, it just seems like a scam."
He called for tighter regulation, a move that appears well underway by regulators in the U.S., Europe and Asia.
"I don't like it because it's another currency competing against the dollar," Trump said. "I want the dollar to be the currency of the world."
In mid-day trading Monday, Bitcoin changed hands at $35,977.06, down 0.52% in the last 24 hours but up 23.47% for the year. The 24-hour range is $35,281.56 to $36,819.23 The all-time high is $64,829.14. The current market cap is $673.80 billion, CoinDesk reported.
MarketPulse
Economists face a basic problem: Does comparing economic growth in 2021 with 2020 overstate inflation?
Year-over-year comparisons are often used to gauge corporate growth, but that assumes the years are comparable. The economy shut down in 2020 as part of the effort to curb the spread of COVID-19 and demand collapsed, sending the economy into a tailspin.
Unemployment peaked in April 2020 at 14.8%—the highest rate since data collection began in 1948, the Congressional Research Service said. The unemployment rate was 3.5% in February 2020, the month before the pandemic hit. Comparing the unemployment rate in 2020 with 2021 reveals little about long-term trends in the job market.
A company's growth in 2021 may appear to be soaring when compared with 2020 when, in fact, it's on track if compared with the non-pandemic year of 2019.
Earnings per share for companies tracked in the S&P 500 were up about 225% in the first quarter of 2021 compared with a year ago.
But COVID-19 pounded the economy last year and this year's stellar growth rate reflects the strong recovery from an artificially low base—not an outbreak of wizardry in the corporate suites.
The pandemic skews many statistics from 2020, and using it as the base year and may exaggerate other comparisons, including inflation.
Calculating an accurate base presents a continuing challenge for the Federal Reserve, the nation's central bank, as it devises policy to back the recovery after supporting the economy during the downturn with record low interest rates and extensive bond buying.
The Consumer Price Index rose 4.2% in April from a year ago, or more than double the Fed's 2% inflation target. It was the sharpest gain in U.S. consumer prices in a 12-month period since 2008.
That appears ominous. However, the Fed said any increase in inflation will be "transitory." It expects inflation to exceed expectations this year and perhaps into next, but over time price increases will subside and return to the target range.
The optimistic view: Surging demand has run into supply chain problems in many sectors, reducing available goods and driving prices higher as consumers eager to spend dip into fat savings accounts that grew fatter during the COVID-19 shutdown.
It may be that while inflation is trending higher, it's not outside the pre-pandemic 10-year average. Or, rising inflation may be temporarily overstated, but the underlying pressure on prices is real and will continue.
Persistent inflation devastated President Jimmy Carter's administration in the late 1970s and made the Georgia peanut farmer a one-term president. It could have the same effect on President Joe Biden's reelection prospects.
"We worry that inflation will make a comeback just as the very role of government in the economy is undergoing its biggest shift in 40 years," David Folkerts-Landau, Chief Economist and Head of Research at Deutsche Bank, said in a research report. "That shift is most obvious in the desire of policymakers to prioritize social goals including climate change and economic and political inclusion. While such social goals are admirable and necessary, it is a scary thought that just as inflation is being deprioritized, fiscal and monetary policy is being coordinated in ways the world has never seen. Meanwhile, (COVID-19) has created a tremendous war chest of excess savings."
The U.S. Bureau of Labor Statistics will release May's Consumer Price Index report Wednesday. Most economists look for another sharp jump for the consumer price index in May but it's not likely to settle the debate over long-term inflation trends.
Here's a downbeat view:
"In the end, any social priorities will have to be set aside if inflation returns in earnest," Deutsche David Folkerts-Landau said. "Yet, once higher inflation eventually forces the hand of central bankers, the tighter policy response is likely to be abrupt. That could send developed economies into deep recessions, which will reverberate throughout the world. Higher inflation is coming and policymakers are about to face their toughest battle in 40 years."
