Larry Summers, former United States Treasury Secretary and economic advisor to President Obama, was candid in his viewpoints regarding the economy, the financial system and bitcoin in an interview with the Wall Street Journal on Wednesday.
He began the interview by labeling the current financial system as laden with “substantial inefficiency.” With the system depending on information technology, finance is now “ripe for disruption.”
Although he isn’t certain as to what will work or fail in the future, Summers conceded that he is confident the payments systems will look very different within the next two decades. Summers cited how “governments are determined to choke something off” because of the pricing volatility and online gambling restrictions.
Despite his cynicism regarding a virtual currency marketplace, Summers disparaged bitcoin critics by saying they are “on the wrong side of history.”
“The people who rejected the Internet as a curiosity for scientists were on the wrong side of history, the people who rejected digital photography as really an artificial thing were on the wrong side of history, and the people who felt that non-gimmicky tennis racquets were made with wood were on the wrong side of history,” said Summers. “So it seems to me that the people who confidently reject all the innovation here [in new payment and monetary systems] are on the wrong side of history.”
Reiterating what others have said before, Summers believes bitcoin will revolutionize the payments system as providing low-cost and fast transactions and it could definitely compete in a current infrastructure that comes with high costs to simply transfer money from person to person, whether they’re in the United States, the Philippines or Mexico.
In addition, the current system comes with immense investment in order to circumvent credit card fraud.
“I’m not ready to stand with those who are sure they have seen the future here, but it seems to me that it’s a serious mistake to write this off as either ill-conceived or illegitimate,” conclude Summers.
We reported earlier this year that the former Federal Reserve Chair candidate described bitcoin as maintaining “the potential to be a very, very important development.” His reasons were similar to his Wall Street Journal interview in that the today’s system presents high fees just to access their own money with their debit card.
“I am very mindful that there have been other things that came out of Silicon Valley that seemed very flakey to people on the outside and then proved to be an enormous deal,” said Summers.
“Very serious economists thought that the Internet was going to be no more important than the fax machine so I’m not willing to dismiss Bitcoin. At the same time, I do think it’s important to recognize that it can’t and won’t flourish as a way of avoiding legal protections.”
These comments are completely different from other mainstream establishment financial minds, including Warren Buffett, JPMorgan Chase CEO Jamie Dimon, former Federal Reserve Chair Alan Greenspan and Charlie Munger. All of these men have predicted the virtual currency’s demise.