An Entire Country Switched to Bitcoin and Now Its Economy Is Floundering
futurism.com
futurism.com
This is an unsurprising turn of events. Yet somehow some people will still be surprised.
These were always obviously false. Why did anyone believe the claims?
Which is why the Bitcoin industry now pushes it as an investment, which would require it to have diametrically opposed properties than as a currency.
The only question remaining is whether there is some genuine use for Bitcoin, but the original marketing of Bitcoin is indisputably false at this point.
Bitcoin as a currency works even if "number don't go up".
This is like talking about the Pony Express in relation to USPS.
Simply put, put BTC against any other asset over the past 10 years and your better off.
Pandemic is almost over now.
PS. Almost no one had BTC 10 years ago, that's why it rose...
>cheap
>easy
Sorry for being skeptical, could you tell us more about what you do with it?
The headline implies that the "country" (El Salvador) "switched" to Bitcoin, but this isn't what happened. They passed a law that allows BTC to be used as a legal tender, and apparently 46% of the country now has a BTC wallet[1]. As far as I can tell, USD is still accepted there (I've been to SA but not El Salvador so I don't have first hand experience, let alone recent experience given the pandemic). Also worth noting that "as of 2017, only 29 percent of Salvadorans had bank accounts."
TFA goes on to meander about on how El Salvador's bond situation is bad, is asking for an IMF loan, and the BTC price is volatile. Day that in the English language ends in "y" I suppose.
Anyway, I'm still bullish on crypto for a couple of reasons but this from the wiki about their BTC law caught my eye:
>In the early hours after the law took effect and the official launch of new technologies to deal with a major change to the national currency infrastructure, the government had to take its bitcoin e-wallet, Chivo, offline due to excessive load. The Bukele government increased server capacity and brought the e-wallet back online by mid-day.
I've wondered before about how in order for BTC to properly function ... (setting aside the inevitable and boring arguments about "is it a currency?" or "no it's a store of value!") you need to have modern and robust internet infrastructure. That really seems to be a bottleneck for adoption here that in my mind keeps BTC and other crypto gate-kept behind the physical infrastructure that exists in your country. I don't know, maybe that gets governments to invest in modernizing their networks but I'm skeptical. Suddenly if modernizing your internet infrastructure means your citizens start rejecting your sovereign currency ... that presents some, well, problems. Unless you fully embrace it, which is what Bukele seems to be doing with this experiment.
The above sentence is nearly impossible to parse, it has so many commas and clauses.
I agree that the financial decisions of the current administration of El Salvador are unwise- but saying the president of El Salvador is ‘cringe’ is so low effort it’s insulting.
I know you mean this coming from a mental image that you (and most of us) have of a head of state.
But really, have a look at the guy and his behavior. Cringe is a perfectly apt adjective.
If having a bad leader means we can’t comment on other presidents, and all countries have had rich powerful people and organizations abuse their monetary power, how is it consistent to be okay criticizing external rich and powerful organizations but not leaders?
Get out, I was reading hacker news on one meal a day years ago.
No prejudice.
The IMF bailout and the forced economic reforms of 1991 are responsible for the decades of growth, development and poverty alleviation that India experienced.
Greece was especially bad for example and at the state out was then, it should have never been allowed in the EU either.
The IMF helped in return for reforms which Greece didn't really liked and isn't visible in the short term.
But it is a long term vision and not a short term one.
Greece is an example that there's no difference between the west and others. The IMF, is believe, makes no difference.
( Just my opinion)
“Global capitalist class” not “west”.
'cringe' is great as it injects some emotion to an otherwise very dry and long sentence.
Your real complaint should not have been about the construction of this sentence, but at the complete failure of the article to connect bitcoin to this latest economic disaster. In fact some points of the article highlight the irrelevance. I didn't read the source article this one points to, which might actually connect the dots. This one, though, is pure clickbait.
Saying the president of El Salvador is ‘cringe’ is so low effort it’s insulting.
So you're reading a would-be BuzzFeed clone site called "Futurism" and you're surprised to find your intelligence insulted?
Some of the implied conclusions are intellectually dishonest, so it's quite a clickbait article, so really just skip to the last paragraph:
> The heavily indebted nation is seeking a $1 billion loan from the IMF and also courting aid from the World Bank. But Bukele's getting nowhere with both, and the IMF has strongly criticized his crusade to create the first Bitcoin-powered economy. In late November, Bukele unveiled his nuttiest idea yet, a plan to build a Bitcoin City on the Gulf of Fonseca, funded by a $1 billion bond offering, $500 million of which would be deployed to speculate in Bitcoins! Practically overnight, the price of sovereign bonds dropped from 75 cents to 63 cents of their par value, on its way to its current level of 36 cents. "El Salvador now has the most distressed sovereign debt in the world, and it's because of the Bitcoin folly," says Hanke. "The markets think that Bukele's gone mad, and he has."
Obvious money grab (wealth transfer) is seen as obvious. News at 11! The bitcoin aspect of all this is a bit of a ruse. It's the device, not the cause. Great for clicks.
That was the fundamental problem.
There are certain solutions to that problem that can involve devaluing your currency, which can make it much cheaper to manage the problem. And the EU could have done that, but because the EU was strongly opposed to fiscal measures at the time (that has thankfully changed since the pandemic, which has made the EU a much more useful organization), they didn't.
So a lot of people got mad at the EU about it and pretended that Greece would have been better off with their own currency to depreciate. However, there are 2 major problems with that alternate scenario:
1) If Greece was still on the Drachma, it's highly unlikely that Greece would have been borrowing money on the Drachma. They would have most likely have borrowed money in Dollars, or maybe Euros, because the Drachma was simply not powerful enough. So devaluing their currency would not have helped them with their international borrowing which was the problem in the first place (it would only have made those loans even more expensive).
2) If Greece was still on the Drachma, it's highly likely the Drachma would have collapsed, and Greece would have faced dramatic inflation, the likes of which are ruining countries like Turkey and Pakistan right now.
Think about it this way. The vast majority of wealth every Greek person in Greece would have been in Drachma. But if the value of the Drachma fell by 25%, that would mean that in one fell swoop, every Greek person lost 25% of their wealth. And currency inflation is even worse than having 95% of your net worth in your house, and seeing its price crash by 25%, because currency is what you conduct your day to day transactions in. At least with the house, assuming you don't have to pay the mortgage or you do have enough to pay the mortgage, you don't need to liquidate it at those reduced values. But if you want to buy food, you need to use currency, and so you need to realize the lowered value of your wealth immediately.
By being on the Euro, however, thanks to the fact that the value of the Euro was largely derived from other more stable countries, the Greek people did not actually lose their own personal wealth, since the Euro did not depreciate much.
Printing money/inflation is a tax.
That aside, I fully agree with you. Don't use currencies for your economy if you can't exert at least some control on them. *Especially* not crypto currencies that are essentially controlled by noone.
Using another states currency at least gives you some set of guarantees because they don't want to blow their own economy, but with crypto that isn't really the case.
Compare with what is going on in St. Kitts with a similar crypto rollout.
Yet they are asking the IMF for a billion dollar loan.