> ...the government had purchased nearly $25 million worth of bitcoin...
> ...a $800 million Eurobond repayment due in January 2023...
Dont think the losing of bitcoin value can be blamed in case of default
Dont think the losing of bitcoin value can be blamed in case of default
I don't think it's the price of Bitcoin so much as their going all-in on it and then seeing their gamble collapse out from under them. They've now lost money on all the "dip buys" their dictator was tweeting about - in English only - to show off to the laser-eyed.
Their issue is that they showed such poor judgement.
[edit] Further, of course, they're thumbing their nose at the IMF by refusing to roll back BTC-as-tender. No matter what you think of that demand or that policy decision, if the IMF is the only one lined up to bail you out, it's their way or the high way.
[1] https://www.boerse-frankfurt.de/bond/usp01012ca29-el-salvado...
I am not sure that emission scared investors, if anything, had someone showed up to buy them, it would have been free money fo the government.
[0] https://www.msn.com/en-us/money/markets/el-salvadors-bitcoin...
MSTR as a bitcoin proxy made sense at a time when you could not easily own bitcoins, but there are direct ways to do it now anyway (GBTC, BITO).
I am ignorant and I just don't know, but which regulation would forbid you from buying a bitcoin ETF but allow you to buy junk el salvador bonds?
I mean allowed in the sense that the investment guidelines set by the board allow it.
Source: I work at a pension fund where I think we are in precisely this situation.
It scared off the IMF [1]. Before that, their dollar bonds plummeted after the Bitcoin announcement [2].
[1] https://www.bloomberg.com/news/articles/2022-01-25/imf-board...
[2] https://www.bloomberg.com/news/articles/2021-11-22/bitcoin-b...
On the first session though. One of the first things the congress did was to change the Supreme Court and the Attorney General.
Did I say all that happened in just two hours, live, in a HD televised session with what I believe scripted dialogs. They even had crane cameras and rail cameras for cinematic effect.
Hard to explain. Just imagine C-SPAN turning from C-SPAN into a reality-show-contest production style. Laws (including your legal tender) being approved in 2 hours with no previous announcements. Sometimes at midnight too.
And let me get to the part when the interpretation of laws can change with a government's official tweet or tv appearance. Yes. Sometimes more than once a day. And sometimes the interpreted law being the opposite of the written law. Sometimes in a foreign language. Really. :)
Imagine living in a reality show where every major change in the plot is announced on Sunday at primetime. Except the reality show is your country. :)
Those changes started worrying bond investors. Many other things, good and bad, have happened ever since, too long to type in a comment.
In less than a year. The 2052 bonds went from an all time high to an all time low. [1]
[1] https://www.boerse-frankfurt.de/bond/usp01012cc84-el-salvado...
Would you have a link to the video by chance?
Sounds like a line from Snow Crash but its... real...
The "they" in your statement is solely the dictator, no?
El Salvador is a parlamentary Republic with independent political parties and an elected president.
[1] https://edition.cnn.com/2021/09/06/world/el-salvador-preside...
I was alluding to the time he brought the military into the legislature to force through his 'crime package.' [1]
Belorussian leader Alexander Lukashenko refers to himself as the "last dictator in Europe" and I don't think he "persecutes people like Pinochet." He was also elected.
[1] https://www.npr.org/2020/02/10/804407503/troops-occupy-el-sa...
I realize it happens outside of Central and South America, but it's suggestive that there's a specific word.
So you are irrational and want to punish your client because of what hobby they pursue in their private/free time.
If their hobby is expensive enough to have an impact, then it does concern you, but if it is just "$5$" then it is none of your business if they spend it on ice cream, a gym or gambling.
Further, you would be punishing him if he renounced his gambling addiction, but if he is still convinced that his gambling adventures is the right course of action to preserve and create wealth for his country then withholding fund is actually for his benefit.
> If the president wants to gamble his own wealth on bitcoin this is absolutely fine.
So, how would you fix El Salvador and give their people the best chance at a good life?
A lot of the anti-crypto sentiment on HN portrayed El Salvador's actions as a very bad and irresponsible move, but I'd say that the President of El Salvador is not only making the right move for his country, but personally has far more skin in the game than any democratically elected leader from most other countries. If his move doesn't work out in the long-run, he will likely eventually be violently removed from office. Hell, he risks assassination from other countries too merely for "stepping out of his lane", so to speak.
Why is it the right move for his country? How much of a gamble is any action when you don't have much to lose?
I don't want to disparage El Salvadoran people in any way: but the reality is that they're a very poor country with a very bad education system and not much industry and have had major crime problems, and many of their people who build up some success and resources in life still see their best path to success as finding a way to get into other countries. Their only real path out of this situation is either humanity inventing free energy and replicators to give them unlimited resources, or them taking a shot at being a friendly jurisdiction for the next major industry and technology before everybody else truly embraces it.
They're like a small-market NBA team with no real chance of winning a title without tanking. Everybody is going to rip them for tanking, but that's their only real path to win.
El Salvador is now in a non-zero position to be a wealthier country in the long run. That's much better than the basically 0 percent chance they had before their crypto actions.
What does a President having "skin in the game" mean? That is the kind of talk you would make when talking about an investment. From the perspective of a sovereign nation, it's currency is not an investment. The goal of a currency isn't to provide maximum returns for people who hold that currency. In fact, from the perspective of a sovereign nation, an ideal currency is one that depreciates in value in a controlled manner. The fact that cryptocons don't even understand this simple fact is remarkable.
The NBA is a zero sum organization. There can only be 1 winner, and everyone else will be a loser. 1 team getting better than the others strictly means that the other teams are worse off. Nations and the world economy do not operate in a zero sum environment. Ukraine being attacked by Russia means nearly every country that relies on its produce and output are worse off. This is unlike the NBA where if suddenly every player in the Warrior's lineup got injured today, every other team would have a better chance of winning.
> 0 percent chance they had before their crypto actions.
Citation needed really really badly. There's a million things countries can do to improve their wealth. The one thing that is not gonna help them is investing in a speculative and highly volatile asset like crypto currencies.
As a Salvadoran it really hurts to read you describing everything we have there "not much to lose".
I mean. We are in the middle of most statistics in the world. It's not like we are in the bottom for everything. Perhaps crime, but that's been improving for the past 5 years.
2) If I understand this right, a short time ago in this very thread, you posted that El Salvador lost Visa Free Travel to the UK due to 17x increase in asylum requests. Again, I'm not trying to be insulting, but that's the kind of data point that tells a lot of the story about the state and direction of a country.
3) Let me add that I genuinely want El Salvador to do well: it's in your country's and my own best interest.
4) Nobody can 100% predict the future, but I think your president has given your people the absolute best chance they have at prospering, even if it will take some time to materialize. Even if Bitcoin never truly moons, establishing your country as a crypto friendly jurisdiction seems like a far-sighted move that most people won't really understand the long-term benefits until a long time later.
5) I'm sure you understand El Salvador far better than most people. If I've said any facts you think are incorrect, I always invite correction or clarification. I'd definitely be interested on what specific things you think your country can do to improve the long-term outlook other than providing generic platitudes about doing better in crime or education.
Me too.
> Establishing your country as a crypto friendly jurisdiction seems like a far-sighted move that most people won't really understand the long-term benefits until a long time later.
I don't work directly with law, but El Salvador is becoming an an increasingly complicated jurisdiction to work in.
There have been more than a handful contradictions between written law, tweets, and government official declarations.
Doing business, in a country with conflicting interpretations of law is complicated, wether plain old business or crypto.
Laws changing on Sunday evenings, optimized for social media engagement instead of business hours. Or laws coming onto force before they are officially published.
Tweets or government official declarations used as an official 'interpretation' of law. Sometimes the interpretation being close to the opposite of what the law states. Who to believe? The interview, the tweet, the written law, the supreme court?
This confusion permeates everything. From complex stuff:
Like for the past months, a big pension reform has been announced. No drafts available of course. Will the individual pension accounts be nationalized? (Equivalent to the US IRA/401k/Employer contributions) There's no public info about that.
To the day to day stuff:
If the police detains someone and posts their picture on and convicts you for 20 years in prison in twitter. Is the tweet a valid conviction or not? I don't know. Judgement via social media?
Can police stop someone and check their phone? Yes
Have people been sent to prison for not carrying a phone? Yes
Have people been sent to prison for a 20 second TikTok video using the 'wrong' background song? Yes.
Can a business be taken over by the government? Yes, it happened at least once. It didn't even follow a normal law process and was a very confusing procedure with conflicting official declarations.
Can the police force the door open while a couple is in a 'love hotel' with your gf/bf and post their picture in social media, in underwear, your car, license plate, or your ID card? It has happened before too. Security checks.
Will having the wrong local rap song in the Spotify history send someone to prison? Probably.
That being said, is some of this justice system stuff being worked on? I think your president was focusing on crime issues in addition to the crypto stuff, but I don't really follow all of the El Salvador news too closely.
Unfortunately hey have happened, I'll provide citations to most of them:
> That being said, is some of this justice system stuff being worked on?
I would say they have increased with the current administration, or just did not happen (as often) before.
Citations:
Laws changing on Sunday evenings. Not actually on Sunday, but for example Bitcoin law was approved at midnight on a weekday.
https://www.cnbc.com/2021/06/09/el-salvador-proposes-law-to-...
The interpretation being close to the opposite of what the law states, for example the reinterpretation of the constitution regarding consecutive reelection:
https://www.wola.org/2021/09/el-salvador-president-reelectio...
Pension reform has been announced. No drafts available:
https://www.swissinfo.ch/spa/el-salvador-pensiones_gobierno-...
Someone sent to prison for not carrying a phone:
https://m.elsalvador.com/noticias/nacional/operativos-polici...
20 second TikTok sending someone to prison:
https://m.elsalvador.com/noticias/nacional/regimen-de-excepc...
Business being taken over by the government without any formal procedure:
https://m.elsalvador.com/noticias/nacional/abogados-consider...
Police at love hotels:
https://diario.elmundo.sv/nacionales/pnc-realiza-intervencio...
But you were the one that introduced the analogy that depended on this difference not breaking it.
There is nothing contradictory in using an analogy to illustrate a specific point (in this case, how a lender may be hesitant to lend something to a borrower even if the borrower acted unwisely with a small part of the money that was lent to them), and pointing out that the analogy is not the same as the actual situation.
If you don't believe that loaning to a human is analogous to loaning to a country, you really shouldn't be the one introducing it as an analogy!
The purpose of an analogy is to more clearly convey a dynamic, not muddle understanding by reference to a case with the opposite implications.
In the likely event that it still isn't clear what's wrong with ak_111's points, let's review.
"People are obviously going to be reluctant to lend to <country> because <country> is behaving like a human who spent his money frivolously after borrowing your money again. Because you would not continue to lend to that human, you can see why others would not lend to <country>."
"Okay, you misunderstood my analogy. You can't conclude anything about countries based on how you would handle a human. The situations are completely unrelated, to the point that it is impossible to reason about one from knowledge of the other."
Am I the one who doesn't understand analogies, or is ak_111?
The whole point was that it was explicitly said that it was not an addiction! Yet, you still want to punish.
> Dont think the losing of bitcoin value can be blamed in case of default
Volatility makes it difficult to represent the true economic impact of this situation. From scarce and needlessly secret information, their bitcoin holdings were worth over $100M earlier this year[0], a consequential portion of the repayment. More importantly, while they have historically claimed that they would always “buy the dip”, there is no indication of when they sold, and a few indications that they have turned a loss on the investment so far.
Meanwhile, the payments are due at fixed periods, which may force them to sell unfavourably. A year after the 2018 high, it was at a fourth of its high value. What they now consider “dips” may well be seen as highs then.
Plus, their policies have an effect on the rest. In short, they don’t have a strong case on finding financing apart from their crypto bet[1]:
> The downgrade of El Salvador's rating is driven in good part by the lack of a credible financing plan
which they would need, to cover their worsening position[2]:
> The government faces only USD305 million in external debt amortizations in 2022, but faces close to USD1.2 billion in 2023
> El Salvador will likely face a funding gap of about 1% of GDP
[0]: https://www.bloomberg.com/news/articles/2022-01-12/bitcoin-t...
[1]: https://www.moodys.com/research/--PR_464838
[2]: https://www.fitchratings.com/research/sovereigns/fitch-downg...
The amount Bukele bought is tiny. Bitcoin and crypto are a threat to the IMF system. They aren’t going to like it when you do that. To survive without the IMF, you would have to go all in at a generational bottom. That did not happen.
In the large scale, El Salvador's BTC fund is not that big.
I mean, El Salvador has more IMF shares than Bitcoins in their fund.
- El Salvador Bitcoin: 74 million USD [2]
- El Salvador IMF shares: 402 million USD (207 million SDRs) [1]
[1] https://www.imf.org/en/About/executive-board/members-quotas
Can you elaborate on this?
I see this conspiracy theory thrown somewhat often, but it has the same substance than any qanon-type "they" story.
Meanwhile, supporters of this conspiracy theory fail to explain why adopting a highly volatile and manipulation-prone asset as a nation's legal tender is not a completely brain-dead belief, as it fails any of the basic properties of money.
Another detail that btc conspiracy theorists fail to mention is how every single concern expressed by the IMF regarding El Salvador's Bitcoin push was already proven right.
But crypto-bros hand-wave around the subject and it never ceases to be fool-proof.
https://apnews.com/article/caribbean-el-salvador-a08341e3810...
A 2% speculative investment in an emerging technology is a drop in the bucket compared to what El Salvador has been through in the past 30 years, with multiple past presidents arrested or fleeing the country following corruption charges. By multiple verifiable metrics(homicide rate, covid response, gdp growth) El Salvador is in a far better place now than it's been in decades.
That's an extremely generous and charitable interpretation.
El Salvador's investment in btc is hardly relevant with regards to it's nominal cost. It is however significant in the impact it has on El Salvador being able to refinance it's sovereign debt and earn trust in the country's institutions.
Trying to argue that today's sad state of affairs is not that bad because some point in the past the state of affairs was also sad is not a path forward.
All of those cases were discovered and judged thanks to:
a) The separation of the Executive/Legislative/Judicial powers
b) The Public Access Information Law.
c) The help of independent journalism
I don't agree with removing the checks and balances that helped discovered these cases in the first place.
The first two a) and b) have been dismantled by the current administration in the past year.
The third, c), independent journalism, is constantly under attack from government and allied media outlets and influencers.
Just a couple of weeks ago, the Head of Congress told the independent press "to go away". This happened live, on the podium, while presiding a session.
Quoting what the Head of Congress said:
"Ask for asylum. Get asylum and go way Go away. You don't contribute anything here.... We don't need you. Go away. "
Video:
https://twitter.com/CronistaOscar/status/1516602424672280579
This was around about the same time when congress approved a law that punishes (with prison) certain kinds of reporting about gangs.
Literally, like just two hours ago, we lost Visa Free Travel to the UK, due to a 17x fold increase in asylum requests in 2021 [1]
Is this a sign of the country being in a better place?
[1] https://twitter.com/UKinElSalvador/status/152440993677563494...
This problem is widespread these days.
The headline wasn't "El Salvador expected to default as Hacker News readers bicker about wording", even if that would have been equally true (and relevant?).
"El mercado augura que El Salvador entrará en impago por haber convertido el bitcoin en moneda legal" https://elpais.com/america/economia/2022-05-09/el-mercado-au...
If you consider the price of gold today vs. where it was at its lowest point over the previous 10 years (USD had most value, just before Trump took office) then gold has gone up 42.76% (meaning the USD has lost considerable value since 2016). You can look at the charts and see when the trade war started with China and see when the Pandemic hit. Even so, since Biden has been in office the USD has been gaining in value (as measured by gold) and given the action of the Fed last week it will gain even more value (in fact that's been the financial news the past few weeks - the USD gaining value). Again this doesn't support the claim that fiat currencies are rapidly losing value.
I'm getting my information on the price of gold here - https://goldprice.org/gold-price-history.html
So, we had at least 4% pre pandemic and now closer to 10-11% (real CPI as reported on shadowstats, is always about 2% higher than the fake BLS numbers) per year though it looks like it will diminish.
That's not a crash, that's more-or-less by design. Currency, i.e. money, is engineered to be inflationary and economists consider the optimum inflation rate to be 2%-4% per year. For the past 20 years we've been on the high side of that target, but we're on target. Inflationary currency encourages investment and spending. Saving currency in the bank is not producing value (there's even a parable about this).
Society would have a lot to gain from a government that didn't default on it's obligation of "money as a store of value". there's a large need for store of value, especially with the aging population.