Bubble Wealth

Abstract

Americans now hold over $1 trillion in cryptocurrencies. Has $1 trillion in wealth been created? From the standpoint of economic theory, the answers is no. The wealth of a society consists of its real assets that produce consumable goods and services. Unless a cryptocurrency provides some type of convenience yield how could it create wealth? On the other hand, everyone who holds the currency thinks of its as wealth because it can be sold and converted into consumption. This short note takes a step in resolving the apparent paradox by presenting a very simple numerical example of the operation of what I call Bubble Wealth.