I wonder what high credit card fees you are talking about. As a consumer, I pay none of them. In fact, I get money back every time I purchase something with my credit card (in addition to getting a bunch of other benefits, like purchase protection, extended insurance/warranty, ability to charge back, etc).
As far as I know, none of this is available in the cryptocurrency world, and more importantly, all of the cryptocurrencies that I know of do charge a transaction fee, which cannot compete with $0 flat (not to mention cash back).
Crypto currencies have interesting features, but low transaction fees vs CC isn't one of them.
That's not how economics works. You are still paying.
"On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year."
"Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or "cash" ) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year."
I was going off of the information I've received from small business owners in the Seattle area who I've formed personal relationships with, and who have told me how they increased their prices specifically to offset the cost of credit card fees.
That's going to depend on market dynamics between buyers and sellers.
The long version is, read: https://en.wikipedia.org/wiki/Tax_incidence and replace "government" and "tax" with "VISA" and "transaction fees".
To be honest I don't know who "really" pays but I'm certain that "I don't see any fees on my bill and I paid the cash price" is not the right way to read the situation.
But as a consumer myself, leaving debt part of the equation aside (since it is irrelevant to the transaction itself), I pay zero transaction fees with my CC, whereas I'd have to pay a significant fee with a cryptocurrency.
More annoying is that the cryptocurrency fee would be charged every time I make a payment. Looking at my CC statement, I can see I & wife made about 50 CC transactions last month, which would result in a significant "monthly fee" if we had used Bitcoin for example (to pick the most "widely adopted" cryptocurrency).
Like I mentioned above, cryptocurrency has very specific key positive aspects, but low transaction fees aren't one of them.
Totally agree that on a practical basis it would be crazy to try and justify the utility of crypto to the average person based on "lower fees" since they are exorbitant for all but very large transactions.
My point with CC fees was, merchants "pay" but the open question is: are prices in a given market perhaps a bit (even just 1 or 2%) higher than they would be if card transactions were free? If so, exactly how much? Does this differ across different markets / product categories and how much? This is the kind of thing one would need to figure out to know who is "really" eating the fees.
My intuition is that whether the charges can be passed through to the consumer via higher prices is going to depend on the market (say supermarkets vs luxury goods) but I'm not aware of any research on this.
But yes, you're right. You would be paying twice, just like you're still paying once even if you pay with cash. This is a real problem, but it's not an inherent flaw in cryptocurrencies, IMO. Just a practical consequence of our existing financial system. That doesn't make it any less real, but it's "not Bitcoin's fault" so to speak.
Rationally one would think that if some cryptocoin did see large scale adoption then it would have the same effect as credit cards where the consumer doesn't actually see the transaction costs.
Cash pricing at gas stations is pretty rare in my experience and somewhat violates the merchant's credit card processing agreement.
Credit cards are the highest transaction fees and almost entirely due to the need to keep paying users to use them (ie all the rewards points and cash back).
Debit card transactions are much less (due to legislation).
And bank transfers are a dime.
Companies like Starbucks have brought the costs even lower by bundling up transactions.
LN doesn't really solve the energy problem because the incentive for miners to compete is still dominated by the mining reward rather than transaction costs. As long as there is competitive mining, the resources used for mining will approach the block reward.
Proof of stake is interesting but I don't think it's been used at scale yet has it?
You're right, it doesn't solve the energy problem. LN solves the fee problem. The energy problem is addressed by something like proof of stake.
> Proof of stake is interesting but I don't think it's been used at scale yet has it?
It's been used in a number of non-major cryptocurrencies. Its been analyzed quite a bit though, and there are high-value (in the sense of market cap - i.e. large bounty for someone to exploit it, if it were possible) working implementations out there.
No they aren't. See: Proof of stake, Lightning network.
> Bitcoin is real without knowing who issued it, so you need the digital equivalent of biting a gold coin to be sure it’s the real deal, and the costs of producing something that satisfies that test have to be high enough to discourage fraud.
This is a pretty wildly inaccurate analogy of why the Bitcoin network uses mining.
> Bear in mind that conventional money generally does its job quite well. Transaction costs are low.
To pay in cash, yes. To pay digitally? You're paying high credit card fees. So, no, not really.
> The purchasing power of a dollar a year from now is highly predictable – orders of magnitude more predictable than that of a Bitcoin.
Disingenuous argument. If the US dollar were invented 10 years ago, it'd be highly volatile today too. The fact that Bitcoin is volatile today is only relevant if you are going to argue that that volatility is inherent to cryptocurrencies. An argument which may be valid, but that Paul fails to make.
> Using a bank account means trusting a bank, but by and large banks justify that trust, far more so than the firms that hold cryptocurrency tokens.
Because using a cryptocurrency does not require trusting anyone.
> But gold does have real-world uses, both for jewelry and for things like filling teeth, that provide a weak but real tether to the real economy.
You mean the way darknet markets provide a weak but real tether to the real economy? You literally just enumerated Bitcoin's tether's to the real economy. Also, the idea that the gold market is in any way meaningfully tethered to its industrial usage is a complete joke.
There are really great arguments against Bitcoin and crypto-currencies. All of which Paul Krugman completely fails to make in this piece. The best of which he's positioned to make, too! Bitcoin is a deflationary asset - that's a real problem for anything trying to be a currency. That's a great case against it, and one close to Krugman's heart.
This article is seriously disappointing.