I have had and am continuing to have a dialogue with smart technologists who are very high on BitCoin β but when I try to get them to explain to me why BitCoin is a reliable store of value, they always seem to come back with explanations about how itβs a terrific medium of exchange.
My friend, you fall under this critique. While the middle-class can make transactions if it chooses using Bitcoin, it has to deal with its huge volatility - a 'store of value' problem. You cannot have just a 'medium of exchange', like the song "You can't have one, without the other".
I believe that unmanaged (fire-and-forget type) store of value is a fiction to begin with. Most if not all thing depreciate in time for wear and tear or plain obsolence. Managed assets such as a business you're controlling or your own set of talents and skills can appreciate over time. Scarce assets such as gold or real estate appreciate, however not due to their inherent value, but only due to the "greater fool" dynamic; it's unstable, and unpredictably so.
So what we have is governemnt creating an illusion of unmanaged store of value through financial engineering. It's is somewhat artificial, so I suspect it's not stable either. Consider that financial bubbles are caused by excess of capital relative to production needs, and the glut of capital was accumulated strictly due to people trying to preserve value of their savings. There is a mismatch between amount of value people are trying to preserve and cumulative size of viable investment opportunities.
The Krugman's problem is, that he is used to certain definition of "money", and then when something else comes, he compares it to that definition. For example, the original paper from Satoshi didn't mention the term "store of value". Given the ambiguity of the word "reliable", we can say nowadays that bitcoin is not "reliable store of value". But who said it is? It must not necessarily have the same attributes as fiat money does.
Anyway, I think the root of the problem with those mainstream journalists is that they do not distinguish between Bitcoin as an unit of account (like, I have 0.5 BTC, or this item cost 0.1 BTC), and a Bitcoin as a technology (peer-to-peer trustless network with all the wonderful attributes it has). Their mind mangles those two things into one, and they then see Bitcoins as only some virtual numbers, which are moving from one wallet to another. Starting from this perspective, they can't conclude anything useful, and can't see the intrinsic value of Bitcoin the technology.
My friend, you fall under this critique. While the middle-class can make transactions if it chooses using Bitcoin, it has to deal with its huge volatility - a 'store of value' problem. You cannot have just a 'medium of exchange', like the song "You can't have one, without the other".