Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin
foreignpolicy.com
foreignpolicy.com
There’s a kernel of neat tech innovation and a reasonable argument about monetary policy obliterated by an avalanche of greed, hype, fraud, and magical thinking.
And I don't see fiat that way because:
1. I use if every day. It's widely usable as currency, it's inflationary, and its value doesn't fluctuate wildly.
2. Fiat only ever promised to fix the problems with gold, and it did that (in the US and Europe at least). It didn't ride a wave of hype that it couldn't live up to.
3. No one's hobby is talking about fiat. They don't harass me when I say I don't think it's interesting. They don't talk about the world falling apart and fiat plucking us from the ashes.
Fiat, The Fed, and active monetary policy are certainly criticized from all angles. I never said otherwise.
Stock is ownership of a company and entitlement to its profits. If you gamble on an unprofitable company with no assets, then sure, your stock could be worth very little. But even then, the company likely has cashflow or something in its financials that's valuable.
Companies selling stock are also analyzed to death and publish their audited financials.
I thought I was an early adopter for having 1.4 ETH.
FTFY
"Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.
"Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
- John Maynard Keynes (ironically)
Technically he was talking about short term high inflation, but there is no mechanistic reason why this would be false for long-term low inflation, and it is exactly what we are seeing after 50 years of secular inflation as a policy.
I was with you until this point. There are absolutely reasons why there is a difference.
Time is directional and irreversible and human life is exceedingly finite. Thus there will always be a higher value placed on money you get today versus money you get in the future. Given that money, itself, is not a productive or useful asset at rest, inflation at a rate consistent with the gradual increase of aggregate wealth is a natural and healthy outcome of the system.
Yeah, that SHOULD be the case because "money you get in the future" should be subject to existential risk. If you want to artificially "mobilize money" then you are going to get all sorts of fucked up things like environmental destruction in the service of thoughtless consumption ("spending on crappy shit from china is good for the economy!!1"), ponzi schemes, incentivised malinvestment, and cheating labor out of their wages:
https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
"it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."
Think about it this way: If we did not inflate the money, increased productivity (e.g. through technological efficiency gains) would result in everyone reaping the benefits, capitalism would be a rising tide that lifts all boats. Instead, we funnel those societal gains to the most privileged in our society, i.e. bankers and people who are good at writing government grants and good at getting awarded contracts.
I'm not interested in the trade itself, I just don't see the metaverse as really properly established yet so where is this taking place? Maybe I'm out of touch.
https://market.decentraland.org/contracts/0xf87e31492faf9a91...
1) nobody actually wants to pay this, though; the whole set of pre-existing arguments against micropayments apply, too many to list here. My fave one is "micropayments enable microfraud", though. And if you think cookie banners are annoying wait until you see the cryptobanners.
2) you definitely can't scale this on a blockchain, and any scalable system you build to do it will be Not A Blockchain. How many web pages does the world view in the time of a single bitcoin block? Would you say it was more or less than ten million?
2) That true. but it doesn't have to be a blockchain in fact there is already proposed protocols to do micropayment on global scale its called Interledger Protocol (ILP). Its a protocol like TCP/IP it scales the same way. And as the name suggest it can be used with multiple ledgers including blockchains but it doesn't have to be one.
The "pro" app equivalent is existing paywalls, NYT-style.
> micropayment is far move fraud resistant because all the bots pretending to be humans and clicking ads do not work anymore
But different sorts of fraud are imaginable, especially if you don't confirm every single payment. If you do confirm every single payment that's probably unacceptable user friction. Or the copyright problem already seen with NFTs and content farms: copy someone else's pages, charge for access to them.
Micropayment make it possible that I can pay without subscription without giving my personal data and without some absurd premium price that is justified by the fact that I could consume other stuff for the rest of the month/year which I likely dont want.
>But different sorts of fraud are imaginable
Sure and we find solutions for these. Unlike with ads everyone should be onboard blocking and fighting the fraud. with ads however thous who dont commit it can still profit from it.
>If you do confirm every single payment that's probably unacceptable
But there are solutions for these problems. Lets say you want to watch a youtube video, it could be free for the first 10% and then ask you to confirm payment. Then it steams payment as you watch so if you stop halfway trough you only paid half the price.
>Or the copyright problem already seen with NFTs
There is no such NFT copyright problem its made up nonsense. People just dont understand what they buy usually a public price of art. So its already released when sold and people can copy or store it however they want. Its worthless just like an MP3 file of a radio hit is worthless the rights on that track however may not be worthless if the owner know how to make money from it.
>copy someone else's pages, charge for access to them.
Already possible now. Micropayments does not change anything here. People steal stuff and "sell" it. There is no technical solution for this problem.
1) Most people do not value written content and news the same as other forms of entertainment. 2) There's too much decision friction and it gets worse when you have to decide per article. 3) Ads subsidize far more than most people could afford to pay for directly.
Crypto doesn't solve any of these human behavior or budget problems.
Also who said content has to be written? If the demand for written paid content is low there is no way to fix this. Demand for stuff changes over time and certain business go obsolete. This has nothing to do with the topic, those who dont adapt die out. No one claims that somehow crypto would magically make people earn money with stuff no one want to pay for.
>3) Ads subsidize far more than most people could afford to pay for directly.
That is mathematically impossible every ad is paid by thous who buy the product. Thous who just see ads but never buy factually dont pay and dont ad any value at all they just force thous who buy to pay more.
There are many people who dont use ad-blockers because they think its the morally right thing to do, to support the content creators through ads. They make this logic mistake all the time. There is nothing morally right about raising the product pirce for others so ad companies get more revenue and a tiny but also goes to the content creator. Its a best Robin Hood like moral gymnastics, it does not ad value to the system and you dont pay for the content you consumes.
Most of us aren't trading millions at a time, and these spreads seem fairly insignificant compared to fees extracted by banks, credit card networks, etc, so is this really an issue?
While you might claim that BUSD isn't real money, you can just immediately withdraw it as fiat in your bank account, as long as Binance remains solvent.
Or if you're still uncomfortable with BUSD for whatever reason, just trade e.g. SOL/USD on Coinbase.
What is the depth of SOL against USD? Not against USDT, not against BUSD, but against actual-money dollars?
Again, there's hundreds of thousands in orders within a $0.25 spread - plenty of liquidity if you're not moving millions.
ScamCoin maybe?
If its implemented trough internet mega corps instead of banks they get even more power than they already have + they will take a cut too + they will fight it to ever become a thing because it directly destroys their business model. On top of that comes privacy concerts and all that. It would be horrible. We dont know anything other than crypto that would globally work and isn't controlled by a single authority.
Also within 10 years they will all be bought up by the largest 2-3 players creating another mega corp oligopoly that makes everything worse for everyone. Wait until they exchange their "no-fly lists" and a AI gets to ruin peoples life because of statistically anomalies or something.
If you dont want that you should root for crypto even if today crypto is mostly garbage and scams the tech can be used to do better.
The countries are next to each other and are similar in many ways. But one difference is that Guatemala, has their own stable local currency (Quetzal/GTQ), and the exchange rate margins charged by banks are the highest from any Central American Country. And also unofficial USD currency exchange can easily cost about 25% of the transaction.
WhatsApp is so widespread in Central America that FB has a big potential of doing what El Salvador has attempted to do with Chivo/Bitcoin.
This reminds me of the old stories of how Facebook choose which universities to allow sign up from. It was by choosing the universities close to others that had Facebook competitors.
wrote this up here: https://davidgerard.co.uk/blockchain/2021/11/02/facebooks-no...
I'd be amazed if the new Novi-in-WhatsApp thing didn't work the same way.
It's the best possible way to use the blockchain: say "blockchain" in the press release, absolutely do not touch the thing with your system.
Thank you for sharing that link. I'm a reader of yours and never imagined you replying one of my comments.
By the way thank you for the coverage in English you do about my country which summarizes many of the things that are happening here. And specially for reporting about the political context in which all of these is happening. As this is something not covered much by other news outlets.
I was curious about Novi/WhatsApp because the potential it has for becoming a new widespread payment method due to the market share of WhatsApp in these countries. Not much about the underlying technology.
So many transactions here involve sharing screenshots of bank payments confirmations or photos of bank deposit slips via WhatsApp messages. From small stuff to even loans, that Whatsapp could easily move from sending screenshots to sending payments by adding a "pay" button on their app.
If they get the end user experience right, and regulatory approvals which is a bigger challenge by itself. I don't think the end users will think much about the underlying technology.
This doesn't need crypto. This can be done with something like Paypal.
> How badly does this torpedo googles ad biz?
A solution based on spite is a bad solution.
There was also a product called TipJar that they similarly launched and killed that solve the first and second opportunity.
In both cases, Google had a huge structural advantage of already having so many cards on file and publishers with their banks hooked up and still couldn’t cross the chasm.
Somebody would need to solve these issues — not sure it’s a question of centralization
I’ve heard that various cryptocurrencies are going to revolutionize the web economy and even replace AWS. Maybe I’m dumb. But it sounds like profound nonsense.
And I mined Bitcoin when you could still do it profitably with a GPU. I bought a new computer in March 2021 for $1,900 and used it to mine over $2,300 in ETH so far. I understand cryptocurrency fairly well but I just don’t get it.
Google itself offered this very product. A system for micropayments that would eliminate all of the ads. Nobody used it.
* 3% interest should be paid on savings accounts (like 1900 - 1980). ~0% today is a rigged economy
* Many other examples of the financial system being the root of the rigged economy (2008 Mortgage crisis, Libor rigged, front running trades, etc.).
Crypto brings the freedom to compete. We need to fix the rigged financial system by using competition.
> 3% interest should be paid on savings accounts
By whom? I'm quite happy with my 1.2% mortgage, why do you want to impoverish me by driving that up? What's the interest rate on a 25 year mortgage in Bitcoin again?
2% annual inflation over a 40 year career amounts to 40% less earnings. Inflation is theft. Bitcoin fixes this. No one has ever explained a better solution to inflation than Bitcoin.
Fiat money printing is a scam that lets politicians spend more money without directly raising taxes. Bitcoin is honest sound money with a fixed inflation policy forever that cannot be manipulated by any central actors.
It is an idea who’s time has come, given the inflationary realities of today.
Does anyone seriously claim that Bitcoin is currently solving inflation? I've heard some claims that it will eventually be the case, but claiming it is already a "solution to inflation" sounds like a stretch even for bitcoin supporters.
Bitcoin was apparently at 30kUSD some time in July this year after reaching 60kUSD in June, while it is now at 48kUSD. I don't see how this indicates that bitcoin is any protection against inflation. Or if it is and you're fine with this kind of volatility, I wonder why you discarded other investments such as stocks.
But the world isn't a computer simulation on a desktop PC and that scenario doesn't and wont ever exist.
2) Lightning already offers fast AND cheap payments at nation-state scale. The future is already here, it just isn't evenly distributed yet.
But imagine it was. We'd see inflation apply evenly everywhere. So wages would rise too. Inflation would not eat into your earnings in any compounding fashion.
For a given level of money velocity, what other factors cause inflation - other than money printing? Clearly money printing is the most obvious cause of artificial manipulation of the money supply and in my understanding the primary cause of inflation. What am I missing?
Many economists consider that view a myth by the way: https://blogs.cfainstitute.org/investor/2021/04/19/myth-bust...
- be no inflation, then
- inflation would be mild, then
- inflation would be transitory, then
- inflation isn't really a problem
Still, I'm waiting for your response on what causes inflation, other than money printing. If we look at correlation, money printing appears to be related to inflation. What am I missing?
The central authority that controls the money supply might not be perfect, but I trust it vastly more than a currency with no brakes that's mostly used for speculation.
That, and I can buy a hotdog with money. Peer to peer, without it being logged into a permanent record tied to my pseudonym.
Also, last I checked, the price of essential good in Bitcoin, assuming the contra-factual that it were possible to buy such things with Bitcoin, hasn’t exactly been constant for 40 years.
TL;DR your solution works for the most in-demand workers in society but it causes greater and greater income inequality over time leading those who are most vulnerable to fall further and further behind.
For more details, see https://wtfhappenedin1971.com/
Gold bugs like to say that “value” is what gold is worth, but if you look at the real value of gold over time—in terms of its ability to be exchanged for things that you might, you know, want—it’s anything but: https://www.macrotrends.net/1333/historical-gold-prices-100-.... Over a number of multi-decade ranges in the last century, a purchase of gold at the start of the period would leave the buyer the poorer at the end of it.
In reality, there just isn’t such a thing as a single “real” definition of “value.” Prices—of commodities, of securities, and, yes, of both fiat and cryptocurrencies fluctuate. A saver who wants to put money away to spend in the future must, unfortunately, make some sort of bet. (Even if such a magical instrument existed, savers who bought it would still be making a bet that the opportunity cost of avoiding growth investments does not outweigh the value of stability!)
Keeping all your savings in crypto—or in fiat, or in gold, or in your employer’s stock—isn’t a fantastic idea. But that’s not because someone is scamming you; it’s because there just isn’t such a thing as “the one true value”, and no asset that allows you to safely track it. That’s life.
If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.
I don’t think I am being entitled to believe that this option should exist for those who wish to take advantage of it. Forcing everyone into the stock or real estate markets just to stay ahead of inflation is a crime against the people.
> A saver who wants to put money away to spend in the future must, unfortunately, make some sort of bet.
This is only true because of the fradulent fractional reserve fiat money system we have been subjected to which allows the central bankers to steal from the populace to enrich their banker friends. If it were not for money printing, the saver would not have to risk their savings just to preserve purchasing power.
Hmm. How would that work?
If the central bankers couldn’t print money you could beat inflation with any bank account.
See here for details on UST (Anchor protocol) https://www.anchorprotocol.com/docs/anchor-v1.1.pdf
Per https://docs.anchorprotocol.com/protocol/money-market#borrow..., it seems like there'd be zero risk as long as the LTV is >= 1.0, but that sort of defeats the point of loans. ;)
These are OVER-collateralized loans.
Like any other collateral backed loan, if the value of the collateral falls to a point where there may be a risk of the collateral value being less than the loan amount, then the borrower must either put up more collateral or their existing collateral is liquidated to pay off the loan, leaving no outstanding balance.
It’s not really much different from a mortgage or another asset-backed loan, except that the borrower must send the collateral to an account controlled by the lender and the lender can instantly liquidate the collateral if the LTV falls below a threshold.
If you think about it, crypto such as Bitcoin or Ethereum are really the most perfect form of capital for a lender to accept as collateral for a loan. Unlike a home mortgage or a car loan the lendor takes full custody of collateral valued greater than the loan. The crypto assets are volatile but they are marked to market in real-time 24/7. At any time if the value of the collateral falls below som safe threshold, the borrower is notified that their collateral is at risk of liquidation and given the opportunity to add collateral. If the LTV ratio isn’t corrected and the market reduces the value of the collateral further, then the lender can instantly liquidate the collateral and unwind the loan.
However, I suspect the market for such loans is rather small.
As the sister comment pointed out, it is currently a $50 Billion industry and it didn’t exist a couple years ago. In fact, DeFi is probably the fastest growing industry in the history of fast growing industries. You would be wise to have a curious mind in this field instead of being closed to the possibilities.
I've yet to understand where you got that idea from, or what it has to do with all of your nonsensical followup comments.
Which of my comments do you find non-sensical, specifically?
> original claim was “If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.”
Let me lay out my logic:
- If not for central bankers, artificially printing money and putting it in circulation, there would be no inflation. No printing by central bankers = No dilution of the purchasing power of everyone's money -> therefore no inflation.
- In a no inflation environment, any nominal gains are real-gains because there is no inflation to worry about
- In a no inflation environment, for a banker to attract deposits from savers, they would have to offer savers a nominal rate of savings in order to attract those deposits
- In a no inflation environment, any nominal rate paid on savings is a real return, since there is no inflation
- In an FDIC insured savings account savings are insured, therefore not risk
- Unfortunately in our current environment where the Fed is printing money at 25-40% increases in M2 y/y, and CPI reaching 6.8% at last reading, and bank savings accounts paying 0.1%, it is hard to appreciate that a bank account could ever pay a real rate on savings, net of inflation. However, in a world without central bank money printers this is exactly what we would enjoy.
Help me see what I am missing, what is the point of loans that is defeated by requiring an LTV >= 1.0?
To my knowledge all collateral backed lending is based on the principal that the collateral value must always be greater than the value of the loan in order to remain solvent. Since crypto is a volatile asset, you would expect lenders to require higher relative LTV than vs real-estate, which for the most part they do.
More to the earlier point, though, this is really not how most lending works, so the idea that this somehow means that "absent central bankers, we'd all make 2% APY risk-free on bank deposits" is just silly. The global equity market is $50T, the global corporate bond market something like $100T. Total cash-equivalents (M2) in the US is $21T.
Even if "pledging shitcoins as collateral for speculating on coinbase" were zero-risk--which of course it isn't--the market for such loans is, unfortunately, too small for all of us to retire risk-free.
Luckily we don’t need their support for Bitcoin to work. Bitcoin operates on the game theory that offers individuals a choice to save in a currency that cannot be manipulated. Over time, more and more individuals will choose the better money.
Try living with deflation. To paraphrase Churchill: an inflationary regime is the worst monetary system, except for all the others that have been tried.
> Bitcoin is honest sound money with a fixed inflation policy forever that cannot be manipulated by any central actors.
Not being able to manipulate the money system is bad thing, as the Great Depression showed. Bitcoin is basically a digital form of gold, which was moved away from for good reasons:
* https://www.theatlantic.com/business/archive/2012/08/why-the...
The first chart claims to show how CPI fluctuated wildly on the gold standard, except if you read the * and footnote in the article you will see it discloses that the US actually went off the gold standard at the same time as the increase in inflation.
The second chart aims to show how low and stable CPI has been under the current fiat standard not backed by gold. However the chart is old and doesn’t include the recent CPI readings of 6.4% and 6.8% annualized inflation that were reported in the most recent 2 months by the BLS. In other words if chart 2 were continued to today they would include spikes of 3x, not exactly the narrative someone arguing in favor of the current system would want to show.
I don’t buy your argument that allowing a handful of central bankers to manipulate the money supply and print money out of thin air, is a good thing.
…it says:
> These restrictions on gold exports continued until June 1919, at which point we returned to the full gold standard. I have started from this last date, because there is no question that we were operating under the gold standard at this point.
So the gyrations were occurring when the gold standard was full-on.
See also:
* https://www.vox.com/2014/7/16/5900297/case-against-gold-stan...
> However the chart is old and doesn’t include the recent CPI readings of 6.4% and 6.8% annualized inflation that were reported in the most recent 2 months by the BLS.
The chart is "old" because the article was written in 2012. It was written during a period when QE was going on and there was much tearing of garments about 'money printing':
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
* https://economics21.org/html/open-letter-ben-bernanke-287.ht...
And for the next decade the CPI was doing not a whole lot. So much for Friedman's "always a monetary phenomenon"—which he was wrong about even in the 1980s when Volcker was doing his thing.
Further a spike in inflation was expected and predicted, and that a number of folks said it could last a year, like happened during the Korean War:
* https://www.piie.com/blogs/realtime-economic-issues-watch/in...
In the fact last month's numbers were not surprising because of their value, but because they so closely matched predictions:
> The consumer price index increased 0.8% last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a 0.7% advance.
* https://www.marketwatch.com/story/coming-up-u-s-consumer-pri...
* https://www.reuters.com/business/biden-says-inflation-data-d...
> you will see it discloses that the US actually went off the gold standard
Being "on" the gold standard will take as much political will as not printing money. Probably more, because of the economic suffering that deflation causes… as was seen Greece in the 2010s (Gold Dawn), and Japan and Germany in the late 1930s.
> I don’t buy your argument that allowing a handful of central bankers to manipulate the money supply and print money out of thin air, is a good thing.
Not being able to print money when it is needed in the economy can cause depressions:
* https://www.nber.org/books-and-chapters/financial-markets-an...
And the folks who like the gold standard tend to also like balanced budgets and austerity, which is another bad idea:
* https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da...
It should be noted that historically 'printing money' has mostly not the cause of (hyper)inflation, but rather printing money was the effect of something else:
* https://clintballinger.com/2021/01/12/the-myth-of-hyperinfla...
> In this paper I will argue why the common misconception that “inflation is always and everywhere a monetary phenomenon” cannot be used to explain most historical hyperinflations. I will argue that “money printing” is often the response to exogenous and unusual events and not the direct cause of the hyperinflation.
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102
Further, "printing money" isn't what people think it is:
> This paper provides a general understanding of the workings of the modern fiat monetary system in the United States within the context of the global economy. The work is primarily descriptive in nature and takes an operational perspective of the monetary system using the understandings of Monetary Realism.
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
If anyone is still thinking about bank reserves and multipliers then they are severely out of date. Tobin described this as the "Old View" in 1963:
* https://cowles.yale.edu/sites/default/files/files/pub/d01/d0...
Further, I see that you don’t share my concerns about increasing inflation. In your eyes, if economists can predict inflation we don’t actually need to prevent or stop inflation.
In my mind inflation is theft by central powers, stealing the most from those with the least leverage (aka the poor and middle class). A 2% annual rate of inflation over a 40 year career will steal 40% of the purchasing power of the wage-earner. We are currently experiencing 6.4% inflation based on official data.
Nope. I generally lean more towards Krugman (whose not too hot on MMT):
* https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wo...
> Further, I see that you don’t share my concerns about increasing inflation.
I've been hearing people yammer on about inflation for a while now (at least 2009). The constant droning on about it is becoming like background tinnitus. It's not that it doesn't matter when it gets "too high", but given the modern secular stagnation we've been seeing in the developed world, little growth and deflation seems like a higher probability. Japan has had a bank rate of <1% since April 1995 and has printed money and… nothing.
> In your eyes, if economists can predict inflation we don’t actually need to prevent or stop inflation.
In my eyes economists see inflation in the context of the time that is (or is not) occurring. They can work towards preventing it, stopping it, encouraging it, or letting it run for a while depending on the situation.
Annualized inflation was -0.36 in 2009, was that a good thing?
* https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
If they can predict inflation then it implies they have a decent understanding of what various policies are doing / will do. It allows them to tailor those policies towards various objectives: the current objective could be that they want to get people employed again, and as the unemployment number decreases (or the participation rate increases) they can scale back the program(s). At least in the US, remember that the central bank has a dual mandate:
* https://twitter.com/ritholtz/status/1468924345703706631
> In my mind inflation is theft by central powers, stealing the most from those with the least leverage (aka the poor and middle class).
Contra:
> Inflation redistributes from creditors to debtors — not exactly a burden on the bottom half of the income distribution 2/
* https://twitter.com/paulkrugman/status/1469728251643838467
A good portion of people have debt, the largest portion of which is often their mortgage.
> A 2% annual rate of inflation over a 40 year career will steal 40% of the purchasing power of the wage-earner.
Assuming that wages don't rise. Fight for inflation-indexed minimum wage (at state and federal levels), and fight for unions. Having 0 or negative inflation (deflation) is worse from the reading I've done (see 1930s).
> We are currently experiencing 6.4% inflation based on official data.
And we'll see what it is over the next year. I'll go with the prediction of a spike over the course of 12-18 months (probably ending late-2022):
* https://www.piie.com/blogs/realtime-economic-issues-watch/in...
Do you also support Krugman’s position that the internet would never be more valuable to society than the fax machine? [2] I have no doubt you concur with his repeatedly articulated position that Bitcoin is also worthless? Perhaps as worthless as the internet vs the illustrious fax machine?
As for the rest of your comments, I’ll summarize them as follows:
1. Inflation is not a problem as long as economists can predict it because, reasons.
2. Inflation isn’t really a problem for regular people because they can just go and get an over-sized mortgage at an interest rate below inflation and get free money without consequence.
3. Inflation will be over soon, which ignores the trillions in new money recently injected into the economy, and people maybe won’t notice or won’t mind the new higher prices for things as prices magically stabilize in 12-18 months? - despite the fact that the money printer isn’t likely to stop printing money in that timeframe.
[1] https://www.businessinsider.com/paul-krugman-modern-monetary...
[2] https://www.businessinsider.com/paul-krugman-responds-to-int...
The media is about to go full court press on this guy, BTC is just one angle they'll use.
What I've seen is that those who recently bought Bitcoin, didn't want to spend their Bitcoin if they had USD.
At least last month, when Bitcoin price was going up, they preferred to spend USD instead of Bitcoin.
Can't believe this is the issue that shows me the HN bubble I've heard so much about, but seemed impossible
"El Salvador’s Bitcoin experiment has been a relative success to date – the country became the first in the world to adopt Bitcoin as legal tender; a larger proportion of the population has a Chivo digital asset wallet than a bank account"
[0]https://old.reddit.com/r/Buttcoin/comments/nwblbp/podcast_pr...
[1]https://www.csmonitor.com/Business/2021/0611/In-El-Salvador-...
[2]http://blocktribune.com/david-gerard-can-get-long-way-just-b...
[3] https://old.reddit.com/r/ethereum/comments/6dkc8w/why_do_we_...
Are people allowed to have opinions any more, allowed to draw conclusions and take a side?
As if Albert Einstein authored anti-quantum hit-pieces, had a classical physics agenda (or choose any other contentious issue in history where people had divided opinions).
If only people applied the same media criticism to crypto trade publications, which are awash in conflicts of interest.
That's the bullshit asymmetry principle in action. Let's go ahead and fact-check the first claim in the article.
>More than 91 percent of Salvadorans want dollars, not bitcoins.
Following the source, we see this quote (google-translated from Spanish):
>University indicates that, when presenting the option of both currencies, 91.4% of Salvadorans favor the dollar, 4.9% for Bitcoin and 3.7% do not. answered.
We also see:
>However, when asked about the decision to adopt Bitcoin as a currency, 35% said they were in favor and 40% against.
These both make perfect sense. Since my landlord won't accept bitcoin as rent payment, I would rather have dollars than be homeless. But in the future, maybe my landlord will accept bitcoin? If the poll is to be believed, 35% of the country wants that future, 40% do not, and 25% are undecided. I think that's a pretty amazing level of public support, accomplished in only a few months, especially in a country where 70% of people don't even have a bank account.
However you feel about it, I don't think a 35%-40% split in the polls is enough to call the president a con artist and declare it a failure one week after the law passes. The author's bias is clear.
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I'll leave the rest of the article as an exercise for the reader, since (1) no one would take the time to read a fact check of the whole article, and (2) I don't have the time to write one. See also: bullshit asymmetry principle.
> but industrial rates in El Salvador are US13¢ to US15¢ per kilowatt-hour. In one four-day period, the Berlín operation mined $US269 of bitcoin — and was estimated to have spent at least $US4672 worth of electricity doing so
because if it's not bullshit, the economics of this are firmly in the scam territory.
If you haven’t noticed, HN hates crypto. Its why posts like these rise up every other week. Its a losing battle trying to argue the value and merits of crypto, when most have made up their mind and will downvote you anyways or parrot memes.
The real shame is that if the article were less biased, it would never have made it this high on the front page.
And then proceeds to cite over 10 outside sources. Why don't you just point out why you think the piece is wrong?
I wouldn't dismiss it as a hit piece. He's obviously spending a lot of time researching what's happening in El Salvador with the Chivo wallet.
As far as i checked/found, all the information he gave, is factually correct. But yes, he is very critical of the usage of Crypto for many use-cases, but that's no reason to dismiss his research. For me personally, i like it as an alternative view of what the crypto/defi proponents are claiming.
Eg. Mentioning that it's nuts to mine BTC while they could have used the geothermal energy to lower electricity costs in the country ( since they import 20%), makes more economic sense for it's citizens.
If you want additional facts about all the hacks that are happening, you should check out https://rekt.news . You'll be surpised about the amount of hacks in Defi/Cryto land.
> (I must note that Alexander and I know each other a bit, and don’t have a high opinion of each other — so read this post with a dash of salt. I won’t use his surname here, ‘cos this post isn’t really about him. Though Alexander is a slight crypto fan.) [LessWrong]
https://davidgerard.co.uk/blockchain/2020/07/03/coindesks-ne...
I think the point is that crypto mining finances the building of power generation in areas where it was not profitable to do so due to lack of electricity transportation infrastructure. This is great for very poor countries that cannot develop low-hanging fruit power generation opportunities due to their nonexistent grid, no paying customers, etc.
It turns out you can't just arbitrarily declare "we're setting up geothermal here", as Bukele did - it's complex and susceptible to dangerous screwups.
e.g. the LaGeo plant mentioned in the piece opened a new 95 megawatt well in June. That was the result of years of careful planning, and there's already concerns that it's screwing up the local groundwater - a serious concern, given a lot of the local villages around Berlin don't have running water and rely on the groundwater.
What does this mean? They have dollarized, they don't have a currency.
I like what this guy is doing. Sure it could fail. But obviously the SOP has already failed. Good for him and good for the people of El Salvador.
> More than 91 percent of Salvadorans want dollars, not bitcoins. The official Chivo payment system was unreliable at launch in September—the kiss of death for a new system. Users joined for the $30 signup bonus, spent it or cashed it out, then didn’t use Chivo again.
In a country where only 30% of the population have bank accounts - and that's with a national ID card, and you can get a basic bank account for the asking with your ID - a government-backed electronic payment system that was reliable and trustworthy could have been a game-changer.
Instead, they got a dysfunctional system written by political cronies and plagued with fraud.
It is possible they'll fix Chivo. But that's the bit I talked about as a failure, 'cos it is. When your system is so bad that people start setting fire to stuff in the streets, I'd be hard put to call that a success.
(The headline was written by the editor, but I'd agree that bitcoin has failed with the populace. Anyone asserting "it's early days yet!" has to account for what's happened so far, and explain why this volatile nonsense would work as actual currency, and not just for the few local Chivo bitcoin day-traders.)
IMF loaned the El Salvador government 389 million during the pandemic
https://www.imf.org/en/News/Articles/2020/04/14/pr20155-el-s...
Sure, other currencies have problems as well, that’s why it’s probably better to use the dominant open standard that has already shown that it can’t be easily inflated…it just makes sense.
That the most possible answer is that...
Someone from the government tweeted or said that they had to do it on a tv interview, otherwise they would officially face fines or perhaps closures.
I notice that earn is also reporting way way too high numbers. The fact is you can send 1sat/vbyte right now and it will confirm. 7 cents. Anyone actually using BTC will agree with me here.
Look at the mempool. If it’s empty, BTC is super cheap. It is empty right now and frequently is on weekends.
1,7$ at the moment, which isn't much. I used to remember it much higher.
But for me, a wire transfer is free though ( Belgium - European transfers, also suppliers swallow transaction fees)
BTC fees does not include the conversion from currency1 -> btc acc 1-> btc acc 2-> currency 2. Where conversion from 1 currency to another would be more expensive than the BTC fees itselve.
From which currency to which currency did you transfer?
I would rather remit funds by BTC any day, but not everyone at the other end has the competency to handle this yet. One day.
Also, it took days to clear. Most of that time was waiting on the local side for cash to clear. BTC settles every 10 minutes, with a 60 min window for 6 confirmations for security. The markets are 24/7. For countries where withdrawals from exchanges hit the bank account quickly, it can be in the order of days faster…
2. They’re not cheaper than other methods. They’re more expensive.
Currency has a gigantic network effect and this is seeding the network.
It’s not about the remittance per se.
Exactly my point.
What I've seen is that Salvadorans in the U.S., that have bought or sent bitcoin using their U.S. credit/cards with the Chivo Wallet App based in El Salvador, is that have been hit by 1%-3% foreign transaction fees or cash advance fees from their U.S. banks.
So for some larger amounts it may end up being more expensive than a normal remittance.
I mostly think of Chivo as a real wasted opportunity as a payments system. A government-backed electronic dollar system that worked well, and which subsidised remittances from the US, could have been excellent for El Salvador. Instead they came up with semifunctional rubbish with a massive fraud scandal.
I believe the previous Chivo developers have been fired and a new team is being hired (based on LinkedIn job ads). Trying to find out more about this.
Seems legit.
For normal people this bond doesn't make sense (except for the residence that they get), but regulated institutions may want a piece of it. We'll see.
The thing is, when Bitcoin City fails, it won't make cryptocurrency advocates question their assumptions (like basing your planning on your ROI being 2000%, or that it is perfectly fine to entrust the running of major components vital to its success to convicted fraudsters), it'll make them feel more victimised by the "global elite" conspiracy theories and more aggressive in pursuing future schemes, as happened with the The Crypto-Currency Seasteaders (https://news.ycombinator.com/item?id=28441794).
Can't see how this can end well for the people of El Salvador, and there do seem to be some parallels with Albania in 1997.
And i'm no fan of bitcoin by any stretch, but what exactly is the problem?Still better than hyping up and industry and then becoming broke, like venezuela; though i recognize that particular example(which is relevant given the geopolitics here) triggers many.I've personally heard a lot of common people(think shop owners) that at least think this move was a good idea.
There is an argument to be made that the reason we don't have pervasive green energy is that a) we don't need (demand) enough of power to force investment in renewables, and b) energy prices are too low to drive green tech innovation in the sector. These two points are essentially the same argument, but nobody is building geothermal plants on volcanos in El Salvador to run smelters, so you need real demand to make those plants happen. Cryptocurrencies create demand for cost efficient power generation that just wasn't there before.
Environmentalists should be happy about the increased demand for electricity instead of complaining about its carbon and climate effects, as the only thing that is going to drive the real technological change and the innovation required to reduce carbon is demand for existing resources at higher levels and prices.
Cryptocurrencies are a big part of solving the environmental problems activists identify. People for whom climate is really just a proxy for arbitrary narrative and for progress toward total centralization probably aren't happy about having the problem they're leveraging solved, but making geothermal and renewables viable by connecting their production directly to infinite demand from the velocity of money itself is how we can drive technology changes that shift us to renewables in a single lifetime.
Necessity is the mother of invention, and if I had to bet on people responding to a crisis narrative vs. having clear incentives to innovate on renewables, I would bet huge on the latter.
No, they’re not and it’s shameful to try to promote proof-of-waste under the guise of environmentalism rather than just acknowledging that you are trying to find buyers.
There’s no shortage of useful applications for green power. Having constant competition to waste that power has incentivized keeping dirty power online and delays conversion by keeping the prices artificially high. Cryptocurrency mining operations can move quickly so they’ll soak up the cheapest green power which might otherwise encourage industrial users to relocate or accelerate personal electrification by people in the area.
Since cryptocurrency expensively doesn’t solve any real problems, that’s pure waste and obstruction at a time we cannot afford it.
Making geothermal plants economical by leveraging demand from crypto mining that scales directly in real time to respond to real economic transactions is probably the most elegant and efficient economic system ever conceived of.
The challenge with energy is economic transmission and storage, but by tying currency to it, you don't store or transmit energy, you store and transmit demand for energy in the currency, and this facilitates efficient economic energy production on demand at the time of a transaction for any business conducted in it.
If the ideas in these comments are indeed new, someone should inform the Nobel committee. I don't think they are, but a geothermal energy currency solves a lot of problems.
How do you exhaust a renewable? By driving up its price, which creates higher rewards on innovation that brings it down. So you don't exhaust it. Carbon taxes were a farce invented and promoted by academic managerialists with no understanding of human desire, as a way to sell their managerialism, and by politicians too meek to stand on their own and so they deferred to con artist experts.
The only reason miners are using coal and nuclear is because it is available, subsidized, and it scales. It's a legacy tech of the past. Geothermal technology isn't available as widely yet, and it requires demand to scale. Miners are that demand.
I wonder what The Boring Company is doing these days, as I think I might have a project.
This is a naive position: geothermal, like hydropower, have only a few locations where they can be feasibly tapped. If that power is used by cryptocurrency miners, that will drive up the price until it's no longer cheaper than the alternatives and that region will not be attractive to relocating industrial operations.
That could be excusable if cryptocurrency was useful but since over a decade and billions of dollars have yet to find a productive application, there's no way it's worth taking capacity away from useful activities. There's no shortage of demand, so anyone who makes a cheap non-carbon electricity source will have customers even without being subsidized by proof-of-waste speculators.
If I have a hydroelectric dam or geothermal plant in a little remote mining town, and I put the output of whole thing towards miners for proof of work/waste/sacrificial block processing, that means the processors are taking something that is local there (hydro power) and refining it into value (blocks that facilitate economic transactions), and exports the value instantly via satellite uplink to the global economy (completed blocks, proofs, etc).
This means we don't have to transmit electricity hundreds of miles/km and lose it. We just refine electricity into compute processing, and export its service value as processed transactions right there. Since most of the renewable electricity is being used and isn't being transmitted, it doesn't effect broader energy market prices, and creates further incentives to innovate to optimize power use in the region.
I get the sense that most of the objections to cryptocurrencies are because the low bar to entry and decentralized nature makes them the wrong kind of Keynesianism, where instead of government printing money to pay hole diggers and hole fillers, we're using the same proof-of-waste algorithm, but on machines instead of people.
Speculators as a bugbear aren't a thing when you are building something either, so I'm not sure that's a material argument.
It's not clear to me that this is how supply and demand work. While increasing demand may increase investment in new capacity, it also should drive up the price of electricity. And since in some markets renewables are cheaper than carbon sources, one would expect that increasing the price per KWH will increase the production of the costlier, more polluting carbon sources.
More speculatively, due to the high volatility of cryptocurrency, I'm skeptical that major power infrastructure investments would be driven by the (presumably) extremely elastic demand of cryptocurrency mining. If I'm investing in energy infra, I'm going to invest in markets of increased consumer and industrial demand, which have fairly inelastic demand curves. Investing more to supply electricity to Bitcoin miners requires me to effectively take a bet on the future price of Bitcoin.
I think there is a solid argument that cryptocurrency mining provides high demand for excess capacity, and thus might provide a sort of credible floor for infrastructure investment returns, but that only makes sense if traditional demand are unreliable.
Energy production plants aren't public infrastructure, they're productive capital that has been mismanaged as infrastructure for the last 100 years. When you build a geothermal plant to mine coins, you are making it economically viable at every price, and you can collect or divert surplus electricity to use it to power a city. Governments could even compel power generators mining coins to send a percentage of their electricity usage into the grid as a "tax." I'm suddenly optimistic about this.
Ultimately, though, the goal from a climate change perspective isn't "lower unit cost" or "energy innovation" per se; it's "reduced GHG emissions."
If Bitcoin mining were, say, +50% net demand, I could buy the argument that it will lead to innovations in supply. But it's more like +0.5% demand, so it seems much more likely that it's just driving up prices a small amount, keeping some production sources alive which would otherwise not be. And in at least some cases, those sources are going to be high carbon impact.
https://en.wikipedia.org/wiki/Wag_the_Dog
https://en.wikipedia.org/wiki/Nayib_Bukele
I applaud Pres Bukele's ingenuity. Lacking the resources for any military adventures, or illicit cash (narco, petro) to fund terrorism, or a readily available ethnic minority to persecute (pogroms), Bukele cleverly seized and weaponized some fancy jargon.
Huh. I wonder if Bukele's next gig will be on Sand Hill Road. He's gotta do something with his pilfered wealth. There are worse options.
The new economy needs a mix of both.
And regular folks are just trying to survive - they heavily depend on USD from relatives, but they pay massive fees to corrupt institutions. They are trying to work around that using BTC, but it also has high fees, and brutal volatility on top of that. If your monthly income is $500 and you risk losing 20-30% of that to fees & volatility, you're screwed. No wonder people protest in the streets.
What they really need right now it a stablecoin on cheap network. It's not gonna change the world, but it's gonna solve their biggest problems right now.
That, and we could link the El Salvador and U.S. bank transfer ACH networks to make sending and receiving money cheaper. Considering 2.5 million Salvadorans live in the U.S.
Mexico and Panama have already done that.
TLDR: Chile attempts to escape economic slavery from the US, is subjected to manufactured dissent and ultimately overthrown by a military coup that is funded by and supports the West. 100,000 die from Pinochet’s subsequent war crimes.
Is this Bitcoin's fault?