2 minutes
Editorial Invest in Slovakia
Juraj Karpiš is a well-known Slovak economist. He deals with the issues of crises and bad money. He is a co-founder of the Institute of Economic and Social Analysis INESS. We talked about the real estate market, Bitcoin and gold.
He sees his craft as an exploration of money, not in terms of how to make it, but what it is and what function it fulfils in society, how it is evolving and what lies ahead in the field of money. He works at INESS and tries to increase financial literacy in Slovakia.
What is bad money?
It was a book he wrote after the financial crisis. We can't choose the money, we have to use some political money that we are going to use on the ground. That money is centrally controlled and is often used for lobbying, politics, etc. In the book, he offered an excursus of what happens when money gets into the "wrong hands" and what happens to it. It is cryptocurrencies that are private and provide a competing solution to the problem. We can thus choose "better money" in the form of, for example, Bitcoin.
Will some monetary apocalypse catch up with us?
He thinks a collapse is relatively likely. We see this also with respect to the pandemic. Politicians manage the money and take it from the private sector so they don't have to use taxation. Well, reserves can be spent. That's the possible end of "bad money". Undoubtedly, there is a risk of further potential crises.
What is the ideal state of the economy?
The best case scenario is that the economy is going, prices are not rising too much and unemployment is low. The fear is that prices will rise, unemployment will rise and the economy will not do so well.
What is monetary money?
Monetary illusion leads to investment and consumption error. Monetary money induces a boom or rapid growth in some parts of the economy. But it is also followed by the bursting of bubbles, and that is not so good. Let's see if we see something similar in the future.
What does he think of gold and its value?
He sees gold as optimal money. He calls it "money for unbelievers". If he accepts, for example, the Czech crown, he must believe that the Czech government will always exist, that it guarantees the spending of that money, can cover it, etc. With gold, one only has to believe that what was valid 6000 years ago is valid. There is no third-party risk - fiscal risk or exchange rate risk, etc. That's why gold is doing well.
How is Bitcoin perceived?
It has a similar function in a portfolio to gold, it is seen as an alternative to the "bad money". It is not physical, I can move it across borders, on the other hand it needs an internet connection to verify the transaction. He is neither a proponent of cryptocurrencies nor gold. A rational person, in his view, uses all financial instruments.
What literature does he recommend?
Any book by Carl Gustav Jung, who pointed out the unconscious processes in people that have an impact on what they do.
What was the worst investment of his life?
The house he builds. He justifies it by saying it's consumption. I guess you can't look at real estate any other way. He has lost various amounts of money on various investments, but he takes it as a paid lesson on which to learn.
What was the best investment he made in his life?
In 1998, he paid for the internet, connected by phone and was able to educate himself.
What would he like to achieve in his life?
Understand that money even better. What's going to happen the next few years is a research project for him and to contribute to that.
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