They did this to receive a loan from the IMF. The IMF was withholding the loan because of BTC and would not disburse it until they got rid of its status as legal tender.
Presumably they require their loan to be repaid in fiat because of their internal charter. If Bitcoin adoption eventually removes El Salvador's ability to issue fiat, their loan can't be repaid.
https://www.imf.org/en/Blogs/Articles/2021/07/26/blog-crypto...
To me it looks more like my bank mandating I carry certain kinds of insurance in the terms of my mortgage than a political bias, but I am not an expert.
US dollars are also not legal tender outside the US, with a few exceptions (I think including both El Salvador and Ecuador.)
Actually I can't think of any fiat currency that hasn't at least halved in value?
You can also offset the risks of sudden devaluation through matching assets and liabilities, trading derivatives and so on.
I'd much prefer a small amount of deflation to the massive inflation that USD is currently undergoing. And furthermore I think our economic system which encourages young people to take on debt in order to have niceties such as housing and transportation is massively exploitative and unsustainable.
Deflation will kill that. Your loan will cost more over time instead of less. The assumption with inflation is loans will follow it. With deflation and loans not following then people who bought into the system might be well off but those who are not yet in are worse. Same thing with inflation and loans not following as is happening now.
So I'd assume a small amount of predictable deflation would shrink an economy.
Anyone know more about this?
High inflation effectively front loaded loans that had fixed repayments (such as mortgage repayments) and the high interest rates that went with them (they move togeter - its called the Fisher Effect - https://moneyterms.co.uk/fisher-effect/ ) meant lenders were willing to lend a much lower multiple or income.
In most places (and definitely in the UK) house prices were much lower relative to incomes when we had 10% annual inflation.
So how many IMF bailout loans must be dispersed, without condition of course, before this BTC economy will magically work?
The "massive risk" the IMF sees is that without central banks or even less influential central banks the IMF existence would be threatened.
Bitcoin's supply doesn't become inflationary or deflationary "structurally" based on the growth of x or y economies. The word inflation is used for both concepts but, structurally, Bitcoin will remain an inflationary system until around year 2140... then block subsidies are going to to stop, no new bitcoins are going to be emitted and then you (or more likely our descendants) can call Bitcoin a structurally deflationary money. Hence the use of the word disinflationary, it currently is in the process of becoming a deflationary system by progressively reducing the inflation of its own money supply (through "halvings" approx. every 4 years).