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El Salvador recognizes bitcoin as legal tender

 
 
Fri 11 Jun, 2021 07:19 am
When a person earns a dollar and does something with it other than spending it immediately (deposits it in his bank, hides it under his mattress, or simply leaves it in his wallet), he has a right to expect that a day later or a year later, that dollar will still be worth a dollar.

Technically and legally, governments are supposed to have the exclusive right to coin money: but when governments abuse that privilege, they run the risk of losing it. That is entirely similar to every other situation in life in which a privilege is abused. Governments abuse this privilege of having exclusive rights to coin money when they do things that are highly inflationary, particularly when they create money to buy votes or when they mess a nation's economy up so badly that all anybody can think of to do is mail out Bernanke-style helicvopter money in the form of checks to the general populace, which is the situation the United States is in now.

When governments engage in those kinds of activities they should anticipate that people will look for and find other mediums of Exchange. The el Salvadorans have at least grasped the general idea in the picture.

https://youtu.be/sLFMmecA1H4



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Type: Discussion • Score: 2 • Views: 340 • Replies: 9
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maxdancona
 
  1  
Fri 11 Jun, 2021 02:23 pm
@mommabear,
1. I don't get your point. The value of a dollar changes from year to year (saying that a dollar is always worth a dollar is circular doesn't mean anything).

2. Up to this point inflation has been very low in the US. Part of the reason that inflation is low is that the Federal Reserve has a big lever to control the economy (and has been doing a good job at least as far as inflation is concerned).

3. I am not sure if you know this, but this is why your post makes me laugh. El Salvador does not have currency of its own. The national currency of El Salvador is the US dollar.

The US dollar has been the official currency of El Salvador for the past 20 years.


maxdancona
 
  1  
Fri 11 Jun, 2021 02:27 pm
@mommabear,
My personal opinion is that bitcoin fails as a currency. Its only value is as an "investment"... and even as an investment it fails to provide stabilty. It is too volatile.

Worse, I suspect that at some point the bottom will fall out of bitcoin, and it will lose all of its value. Bitcoin is based on nothing, and when the fad ends, there will be no reason for people to spend real money on it.
mommabear
 
  1  
Sat 12 Jun, 2021 04:08 am
@maxdancona,
Quote:
My personal opinion is that bitcoin fails as a currency. Its only value is as an "investment"


Correct and that is the point the Salvadorans have missed. There are several reasons why Bitcoin doesn't work as a "people's money" or a 21'st century equiivalent of tally sticks. Aside from everything else, governments have too easy a time tracking bitcoin and could shut it down at will. As I understand it, the two cryptos that come closest to being able to serve as people's money are Monero and Pirate Chute.

But your claim that we don't need to worry about inflation at present is myopic. Have you tried to buy a house recently??
maxdancona
 
  1  
Sat 12 Jun, 2021 06:53 am
@mommabear,
1) How do you think governments track bitcoin? (I don't think they can).

2) What is different about Monero and Pirate Chute (I think they are the same game as bitcoin... and equally useless).

3) I didn't claim that we don't need to worry about inflation. I am saying that the Federal Reserve has a big lever that it can pull when inflation starts... and that modern economies are generally well-equiped to control inflation.

4) Inflation rate is a well known economic quantity. Housing cost is not the same as inflation.
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mommabear
 
  1  
Sat 12 Jun, 2021 07:47 am
Because of the anticipation and fear of major US dollar inflation, entities with major dollar holdings, particularly the Chinese, are in a mad race to get out of US dollars and convert those holdings to anything they can, particularly US real estate. There is Chinesxe money chasing every house that comes on the market in the US right now houses being bid up to half over or double the asking prices, sight unseen.

For Americans, that does two things, i.e. forces many into higher property tax brackets and tells younger Americans that they are out of the housing market, many or most, permanently.
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oralloy
 
  -1  
Sat 12 Jun, 2021 07:52 am
@maxdancona,
maxdancona wrote:
3. I am not sure if you know this, but this is why your post makes me laugh. El Salvador does not have currency of its own. The national currency of El Salvador is the US dollar.

I think he does. I think his point is to criticize US monetary policy, and praising El Salvador for providing an official alternative to the dollar is meant to emphasize that criticism of US monetary policy.
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oralloy
 
  -1  
Sat 12 Jun, 2021 07:56 am
@maxdancona,
maxdancona wrote:
My personal opinion is that bitcoin fails as a currency.

Why?


maxdancona wrote:
Its only value is as an "investment"... and even as an investment it fails to provide stabilty. It is too volatile.

Worse, I suspect that at some point the bottom will fall out of bitcoin, and it will lose all of its value. Bitcoin is based on nothing, and when the fad ends, there will be no reason for people to spend real money on it.

Well, I'll agree that if it fails as a currency it will be worth nothing, because its only possible source of value is as a currency.

But like I wrote above, I'm curious why you think it will fail as a currency.
mommabear
 
  1  
Sat 12 Jun, 2021 08:05 am
@oralloy,
The cost of any kind of a transaction with bitcoin is way too high for anybody to want to use it as currency, it is basically just an artificial gold.
0 Replies
 
maxdancona
 
  1  
Sat 12 Jun, 2021 08:54 am
@oralloy,
It fails as a currency because very few people are using it or accepting it (except as a gimmick).

Part of the problem is that it is so volatile... You never know what the value will be next week. The other problem is that credit cards and cash are so much easier to use.
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