Understand the implications of Bitcoin's downfall in El Salvador. Learn about the failed economic bet and its impact on the country's financial stability.
Ok, can they sell it then? What’s the use of Bitcoin? Why are you valuing it in Dollars? Countries accumulate Dollars and other first world currencies to be able to import more (and in case of El Salvador, spend more domestically). Bitcoin is sitting there doing nothing.
Same applies to massive foreign exchange reserves like in the case of China. But still, atleast forex reserves can be quickly used to stabilize the exchange rates.
Also keep in mind even if they sell it and assuming there is enough liquidity, $300m one time isn’t a lot of money even for a country like El Salvador.
It’s commonly used as a store of value. When people invest in gold, what’s the use of that? They’re not going to actually use the gold for its physical properties.
I’m American and the unit of value that I’m most familiar with is dollars. We could convert it into any currency that you’d like. I could have also said simply that their investment had about doubled in value and roughly had the same initial value as about 10,000 economy cars.
If El Salvador had its own currency, they could tax and spend that instead. But no, they use US Dollars.
This is a legit criticism. It’s absolutely wild that these colonized states are completely monetarily subservient to empire. I think they go with bitcoin instead of their own currency, because bitcoin is much harder to destroy/manipulate.
Bitcoin is not different from the USD fiscal policy space wise. You use USD (which you obtain from trade, remitances, loans and capital inflows) to buy Bitcoin or use the same USD to buy ASICs to mine Bitcoin with. In the end you hope to sell it to someone else to get more USD than you started with.
Even if it’s not for conversion then would the population like to use a system where there is no physical cash form of bitcoin (El Salvador has large informal economy) fully dependent on internet, electricity and a smartphone. Would the Government make budget denominated in bitcoin? How will all the pricing be done? Why should El Salvador go through all these complications instead of adopting its own currency where it’ll have more fiscal space?
Bitcoin was never widely used in El Salvador outside small transfer payments which would’ve been converted to Dollars pretty quick anyways.
Having your own currency gives you power to manipulate exchange rate and employ domestic resources instead of having to borrow continously from the IMF.
Not saying that a sovereign currency alone is enough. Countries may not be able to enforce taxes enough or try pegging rates to the Dollar to prevent pass-through inflation and balance of payments issues. But it is a necessity.
What’s the point you’re trying to make here?
You seem mad about el salvador’s bitcoin experiment. They made a little of money on their little investment.
They make no money from the investment you mentioned unless they sell for Dollars. Your stock portfolio gets you no money in form of capital gains unless you liquidate it for Dollars. Same with gold.
Is El Salvador budget denominated in gold or bitcoin? No, it’s denominated in Dollars.
El Salvador should first stop using a foreign currency, the dollar. Then worry about trying to attract capital inflows.
Not really what I said. I said gold and all the commodities are denominated in Dollars.
You hold gold because you hope to sell it at a future date for more dollars. You hope China doesn’t find more gold or some country decides to release gold locked in vaults. In the end you want more dollars than you started with.
Same with bitcoin which is going up in price because of a flood of Dollars from ETFs and due to Trump’s potential policies. You want bitcoin to go up in price so you can sell it for more dollars.
Another thing to keep in mind is that Bitcoin has characteristics of a real asset, not a financial asset.
Dollars, you can give to the US Government for payment of taxes etc. There is a corrosponding liability at the Fed. That is not the case with “real” assets like Bitcoin, there is no corrosponding liability.
Ok, can they sell it then? What’s the use of Bitcoin? Why are you valuing it in Dollars? Countries accumulate Dollars and other first world currencies to be able to import more (and in case of El Salvador, spend more domestically). Bitcoin is sitting there doing nothing.
Same applies to massive foreign exchange reserves like in the case of China. But still, atleast forex reserves can be quickly used to stabilize the exchange rates.
Also keep in mind even if they sell it and assuming there is enough liquidity, $300m one time isn’t a lot of money even for a country like El Salvador.
The IMF is forcing them to sell it. They probably want it.
Edit: misinformation. They’re keeping it as a reserve. They’re just being forced to strike the language of legal tender
Yes, he could sell it.
It’s commonly used as a store of value. When people invest in gold, what’s the use of that? They’re not going to actually use the gold for its physical properties.
I’m American and the unit of value that I’m most familiar with is dollars. We could convert it into any currency that you’d like. I could have also said simply that their investment had about doubled in value and roughly had the same initial value as about 10,000 economy cars.
Sovereigns aren’t the same as individuals. For sovereign, at the macro level, spending drives consumption and creates employment of real resources.
If El Salvador had its own currency, they could tax and spend that instead. But no, they use US Dollars.
This is a legit criticism. It’s absolutely wild that these colonized states are completely monetarily subservient to empire. I think they go with bitcoin instead of their own currency, because bitcoin is much harder to destroy/manipulate.
Bitcoin is not different from the USD fiscal policy space wise. You use USD (which you obtain from trade, remitances, loans and capital inflows) to buy Bitcoin or use the same USD to buy ASICs to mine Bitcoin with. In the end you hope to sell it to someone else to get more USD than you started with.
Even if it’s not for conversion then would the population like to use a system where there is no physical cash form of bitcoin (El Salvador has large informal economy) fully dependent on internet, electricity and a smartphone. Would the Government make budget denominated in bitcoin? How will all the pricing be done? Why should El Salvador go through all these complications instead of adopting its own currency where it’ll have more fiscal space?
Bitcoin was never widely used in El Salvador outside small transfer payments which would’ve been converted to Dollars pretty quick anyways.
Having your own currency gives you power to manipulate exchange rate and employ domestic resources instead of having to borrow continously from the IMF.
Not saying that a sovereign currency alone is enough. Countries may not be able to enforce taxes enough or try pegging rates to the Dollar to prevent pass-through inflation and balance of payments issues. But it is a necessity.
What’s the point you’re trying to make here? You seem mad about el salvador’s bitcoin experiment. They made a little of money on their little investment.
They make no money from the investment you mentioned unless they sell for Dollars. Your stock portfolio gets you no money in form of capital gains unless you liquidate it for Dollars. Same with gold.
Is El Salvador budget denominated in gold or bitcoin? No, it’s denominated in Dollars.
El Salvador should first stop using a foreign currency, the dollar. Then worry about trying to attract capital inflows.
I agree. No currency or store of value has any true value until you go to spend or exchange it. It only has potential value.
You do realize that Dollars also are also constantly changing in value.
Not really what I said. I said gold and all the commodities are denominated in Dollars.
You hold gold because you hope to sell it at a future date for more dollars. You hope China doesn’t find more gold or some country decides to release gold locked in vaults. In the end you want more dollars than you started with.
Same with bitcoin which is going up in price because of a flood of Dollars from ETFs and due to Trump’s potential policies. You want bitcoin to go up in price so you can sell it for more dollars.
Another thing to keep in mind is that Bitcoin has characteristics of a real asset, not a financial asset.
Dollars, you can give to the US Government for payment of taxes etc. There is a corrosponding liability at the Fed. That is not the case with “real” assets like Bitcoin, there is no corrosponding liability.
This not really true and becoming less true every day, as most states realize that the petrol-dollar is not helping anybody.
What’s the etc here?
There is no actual liability since the petrol-dollar is just paper that they regularly print to prop up their constantly collapsing pyramid scheme.
All payments to the US Government, fees, fines and taxes.
Yes and every time they create dollars there is a corresponding liability at the fed.
I suggest this book