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> Mandating BTC as legal tender is an awesome move. To me the most important benefit is that the 70% of the population which was excluded from banking and releg

> Mandating BTC as legal tender is an awesome move. To me the most important benefit is that the 70% of the population which was excluded from banking and relegated to use physical currency will now be included. If the economy is an engine and money is the oil, El Salvador, which had only some drops of oil, will now get a complete oil change with synthetic on top of that. You are 100% incorrect. Bitcoin is wildly deflationary. Therefore it does not encourage an economy to function, it encourages people to hold onto it with white knuckles. It's not oil for the economy, it's sand. > This means that the government now has to provide connectivity to all citizens and teach them. And when they don't provide connectivity and teach citizens?

rawtxapp 5y ago
> You are 100% incorrect. Bitcoin is wildly deflationary. Therefore it does not encourage an economy to function, it encourages people to hold onto it with white knuckles. It's not oil for the economy, it's sand. In my opinion, that's the biggest lie that people have been made to believe to justify constant stealing of their purchasing power over time. People will always spend money for things they need, they will also spend money for things they want, our current system is forcing them to spend it for the sake of spending it causing unnecessary over-consumerism. It doesn't matter how much Bitcoin price will appreciate in 5 years. If I need to eat, I'll have to spend today, if I want to buy a house, I'll have to spend too. Instead, I will think twice on upgrading to the shiny new iPhone every year, maybe doing it once every 2-3 years, which is a good thing.
- GhostVII 5y ago
  It also encourages them to invest their money. The choice isn't either spend money on over-consumerism or lose it, the choice is either spend it or invest it so someone else can allocate more resources to what they are doing.
  - rawtxapp 5y ago
    For sure, but then you have to understand and research what you're investing in. We also end up with sky high (in my opinion unjustified) P/E ratios just because money doesn't have elsewhere to go and it creates all kinds of wild inaccurate pricing imo. In this world where the currency doesn't depreciate like ~95% over a 100 year period, only investments which make sense will get money thrown at them.
    - NicoJuicy 5y ago
      Depends on the forward P/E, how much market share the company can take and the position they are in. If the P/E is high, it mostly has to do with what i mentioned and your are late to the "party". But high p/e stocks != Fiat money as the op mentioned.
  - jollybean 5y ago
    This is not about incentives to spend or invest - it's about having a functioning basic unit of economic measure that is 1) stable 2) has integrity and 3) hopefully under the control over the government. BTC isn't good for any of that. USD is good for 1 and 2. The gov. can move to re-establish it's currency and have 3 as well.
    - beckingz 5y ago
      Looks like USD may be losing qualities 1 or 2 depending on how you define stability or integrity.
      - jollybean 5y ago
        Just the opposite, during difficult times people rush to USD which bolsters 1 and 2. That it's used widely and fungible is what gives it value. If your own currency is destroyed, you use the one that has the most integrity that's relative to your country. For most nations the default would be USD. For Vietnam probably RMB. For Belarus either Euro or Rouble. Then you develop integrity in governance and switch to a national currency. A nations currency is actually a vert good measure of the competence and integrity of the leadership class.
  - saurik 5y ago
    This is why there is so much VC money that people build "disruptive" companies whose primary trick is "let's lose money until all our competitors who don't understand revenue is boring are out of business" :(.
- pocoloco 5y ago
  Yes, and this is exactly what Jeff Booth explains in this podcast way better that I ever could: How Inflation Is Stealing Your Wealth | Jeff Booth | Pomp Podcast #572 https://www.youtube.com/watch?v=RuCqFjU9Wi4 https://www.youtube.com/watch?v=RuCqFjU9Wi4
  - fnord123 5y ago
    This is presented in a conspiratorial manner. "Who wants their money to be worth less?" "Governments don't want you to know..." It's very simple. 100 euros in your hand right now is worth more than a possible/probable 100 euros in your hand next week. And Jeff Booth is arguing that we are trapped in a mental prison because we agree with this obvious fact.
    - saurik 5y ago
      Inflation is a different problem: a bird in the hand is worth two in the bush, but if you have a bird in your hand you are better off trading it for a table because somehow a table in the hand depreciates less than a bird?
      - fnord123 5y ago
        I mean, yes? Are we explaining investing from first principles?
        lowkey 5y ago
        I think the argument is that we are discussing the difference between the: A) time value of money B) inflationary aspects of fiat currency vs hard currency
- NicoJuicy 5y ago
  Euh... HODL ? :) I mean, it's literally the #1 meme for cryptocurrency.
  - rawtxapp 5y ago
    I mean, of course hodl, but not at the cost of dying of starvation or missing out on having your dream home, etc. Bitcoin subreddit is full of stories of people buying their first homes or cars, I've seen many people start their small businesses with their gains. Life is short, you enjoy/spend what you have while you're here.
    - ethanbond 5y ago
      But currency needs to move in order to be, you know, a currency. The lack of upward price movement of e.g. the US dollar means that there is no advantage to sitting on it. Invest it, spend it, or lose it. Inversely, with BTC, you would want to spend as little as humanly possible. Make whatever philosophical arguments you want: this is not adding oil to the engine. This is adding sand.
      - emptysongglass 5y ago
        > Inversely, with BTC, you would want to spend as little as humanly possible. Sign me up. Hyper-consumerism has laid waste to our planet, commoditized every human interaction, and polluted our minds with its drivel. Behold Denmark and its glorious decision to punish its citizenry for saving any amount of money at all. Hope you weren't thinking of saving your pennies for a ticket out of the renter's racket, Denmark would prefer you stuff it in stocks and pay them their cut. It's time we seized control of the engine and refashioned it into a tool that serves our welfare.
        perl4ever 5y ago
        >Hyper-consumerism has laid waste to our planet If you don't want to consume, then you can just...not consume. Why buy bitcoin in order to not sell it, ever?
- reader_mode 5y ago
  Yeah that's all fine and dandy until you need to take out a loan and on top of high interest you also need to account for deflation - good luck getting a house mortgage and falling wages. Deflation puta pressure on price of work as well - but people don't like pay cuts.
  - maneesh 5y ago
    When you're one of the 70% of people who are unbanked in el salvador, there are no needs for loans or interest -- the concept barely exists.
    - technotony 5y ago
      It's very counterintuitive, but actually the more unbanked you are the more you needs loans/savings and the more complicated your personal financial balance sheet is. I'd recommend the book 'the poor and their money'[1] for the details on this, but essentially if you haven't got savings you are constantly borrowing and lending informally with your community to meet life needs like a new roof or school fees. [1] https://www.amazon.com/Their-Money-Oxford-India-Paperbacks/dp/019565790X https://www.amazon.com/Their-Money-Oxford-India-Paperbacks/d...
      - lupire 5y ago
        That's having a tightly knit society where people take care of each other instead of ignoring the poor people to die alone.
  - rawtxapp 5y ago
    You know what happens then? House prices will fall because they won't have access to cheap money, so they'll end up being priced at their true value. Housing would stop being an investment, instead it would serve it's true purpose of providing lodging.
    - reader_mode 5y ago
      So you're going to end up paying more in real terms (since deflation), for a house that's going to be worth less, you're making less and you have to pay interest. Sounds like an amazing deal, would vote for bitcoin tomorrow !
- willmadden 5y ago
  Correct. Keynesian economics is a fraud we're taught to disguise the fact that we're being robbed. You don't need an inflationary currency for a currency to work. Gold and silver worked just fine for thousands of years, and only ran into problems when corrupt governments and banks printed more paper receipts than they had reserves. Central banking just legalized this practice for private profit, and then the peg to gold and silver was eliminated once they had monopoly control.
  - boxed 5y ago
    Those years when "it worked fine" were also when the entire world lived in squalor and horrible conditions. Including kings. I don't think we should call the past horrors "fine" in any way. I'm not saying the gold had anything to do with it. But you shouldn't say that world was OK. The US gold standard collapsed. That's a fact of history.
  - jml7c5 5y ago
    Gold is inflationary. Mining increased amount available by ~2% each year.
- Growling_owl 5y ago
  > People will always spend money for things they need, they will also spend money for things they want, our current system is forcing them to spend it for the sake of spending it causing unnecessary over-consumerism. The worrying aspect is that the one thing that people want more than anything is to be the most rich and relevant person in a given area, hence the inflationary system to avoid people hoarding in order to reach this goal of theirs. If you transition to an deflationary system and people fall in love with it....well there is a whole lot of room to go on the downside. First people start giving up vacations, then dinners, then cars, that Netflix subscription, then the smartphone purchase, then the app purchase.. all in the name of hoarding. Pretty soon the entire economy becomes a giant game of mental posturing to see who can go the distance without spending. Paradoxically in this scenario the most rational thing to do is to spend like there is no tomorrow because society would be headed into chaos, so when the fecal matter hits the fan , at least you'll have good memories
- api 5y ago
  People would spend very conservatively and nothing particularly interesting would happen. It would be virtually impossible to raise money for new businesses.
- NicoJuicy 5y ago
  The crypto holders have an irrational fear/hate about inflation and forget that it's a requirement for people to spend their money and supporting the economy.
Empact 5y ago
Is it really so difficult to imagine a world where people spent less conspicuously, and invested more prudently? In a sound currency world, interest rates are set by the relative availability of funds for investment - that is, they are counter-cyclically market-determined: if there is little investment, rates will be low, if the economy is booming, rates will naturally rise. Secondly, the rate of deflation is determined by the rate of increase in the economy: if the economy is shrinking over time, there is no deflationary incentive to hold - so here again the currency is counter-cyclical, discouraging rapid growth while allowing for measured growth. Is that sand? Or sanity?
- jollybean 5y ago
  It's 'definitely not sane' to fix the amount of currency in circulation, either fiat or gold or crypto, arbitrarily. It would be like saying 'we're going to fix the amount of roads we have' and 'people will be forced to use the roads more sensibly!'. The only reason for 'fixing' currency would be to prevent bad actors from running the printing press. Now - this is actually a very real problem historically - however, it's a pretty crude solution. The smart thing to do is manage your currency smartly - literally like everything else in civilization. You need good Public Health Policy, you need good Monetary Policy.
  - Empact 5y ago
    Infinitely divisible money is an unit with unlimited ability to scale to the circumstances - if more is needed, simply add another zero. You err in comparing this to roads, which are necessarily in proportion to the amount of traffic over them. Money needs only to be able to represent value, and the relative value of different things. Good monetary policy may be practicable by angels or saints, but not by men, who stand at the gates of unimaginable wealth that emanates from the printing press. Literal trillions of dollars - who can even conceive of that value, let alone decline the exercise thereof? Better to take it out of our hands.
    - jollybean 5y ago
      No, this is not true. If there was no elasticity in the monetary supply, then in both 2009 and 2021 the entire US economy would have collapsed probably taking down the world with in 2008, and most nations would have been wiped out in 2021 as well. Also, most major currencies are managed well enough. If you don't like your local fiat units, then don't hold on to them. Exchange them for anything else you value more and use local currency on as that - currency. Currency was never meant to be a long term store of value.
baybal2 5y ago
> You are 100% incorrect. Bitcoin is wildly deflationary. Therefore it does not encourage an economy to function That a widely, blindly believed economist mantra without much basis. People now don't want to spend money even at the time when interest rates are near negative. The few countries still with relatively high rates, and credible economy are the ones which register growth.
jerry1979 5y ago
People in El Salvador will simply have the free choice to put their money into BTC. If people in El Salvador make or lose a bit of money because they diversify their exposure, will they not have contributed to the overall price signal process of the free market? Why is it bad to give people options?
- clpm4j 5y ago
  I wonder what percentage of people in El Salvador have enough money to "put into BTC". Wouldn't most of the poor population be living essentially hand to mouth and spending their meager amount of money on daily food and shelter?
  - thehappypm 5y ago
    Yep, impoverished people can't acquire BTC to begin with. This doesn't help at all.
    - season2episode3 5y ago
      On the question of principles vs practicals... the principles sound great and all. I also appreciate that this takes advantage of the large number of mobile devices already out there, and encourages the development of rural internet. But, I predict that the practicals are not going to be good. Bitcoin transaction fees are high. If anything, this is a gift to large criminal organizations with a large footprint in the country which will be far more able to make use of their BTC. The law enforcement arm of this will not be ready or able to deal with it. There is a role for cryptocurrency in helping the underserved gain access to banking. This plan does not sound like the right one to me.
ItsMonkk 5y ago
> Bitcoin is wildly deflationary. Therefore it does not encourage an economy to function With the rapid increase of the Money Supply of the USD, this is no different than any other Asset, especially Buyback driven stocks(where the supply diminishes over time!). To store value you also need to hold onto them with white knuckles. It also does not encourage an economy to function, hence why our GDP growth has slowed to a halt.

rawtxapp 5y ago

> You are 100% incorrect. Bitcoin is wildly deflationary. Therefore it does not encourage an economy to function, it encourages people to hold onto it with white knuckles. It's not oil for the economy, it's sand. In my opinion, that's the biggest lie that people have been made to believe to justify constant stealing of their purchasing power over time. People will always spend money for things they need, they will also spend money for things they want, our current system is forcing them to spend it for the sake of spending it causing unnecessary over-consumerism. It doesn't matter how much Bitcoin price will appreciate in 5 years. If I need to eat, I'll have to spend today, if I want to buy a house, I'll have to spend too. Instead, I will think twice on upgrading to the shiny new iPhone every year, maybe doing it once every 2-3 years, which is a good thing.

GhostVII 5y ago
It also encourages them to invest their money. The choice isn't either spend money on over-consumerism or lose it, the choice is either spend it or invest it so someone else can allocate more resources to what they are doing.
- rawtxapp 5y ago
  For sure, but then you have to understand and research what you're investing in. We also end up with sky high (in my opinion unjustified) P/E ratios just because money doesn't have elsewhere to go and it creates all kinds of wild inaccurate pricing imo. In this world where the currency doesn't depreciate like ~95% over a 100 year period, only investments which make sense will get money thrown at them.
  - NicoJuicy 5y ago
    Depends on the forward P/E, how much market share the company can take and the position they are in. If the P/E is high, it mostly has to do with what i mentioned and your are late to the "party". But high p/e stocks != Fiat money as the op mentioned.
- jollybean 5y ago
  This is not about incentives to spend or invest - it's about having a functioning basic unit of economic measure that is 1) stable 2) has integrity and 3) hopefully under the control over the government. BTC isn't good for any of that. USD is good for 1 and 2. The gov. can move to re-establish it's currency and have 3 as well.
  - beckingz 5y ago
    Looks like USD may be losing qualities 1 or 2 depending on how you define stability or integrity.
    - jollybean 5y ago
      Just the opposite, during difficult times people rush to USD which bolsters 1 and 2. That it's used widely and fungible is what gives it value. If your own currency is destroyed, you use the one that has the most integrity that's relative to your country. For most nations the default would be USD. For Vietnam probably RMB. For Belarus either Euro or Rouble. Then you develop integrity in governance and switch to a national currency. A nations currency is actually a vert good measure of the competence and integrity of the leadership class.
- saurik 5y ago
  This is why there is so much VC money that people build "disruptive" companies whose primary trick is "let's lose money until all our competitors who don't understand revenue is boring are out of business" :(.
pocoloco 5y ago
Yes, and this is exactly what Jeff Booth explains in this podcast way better that I ever could: How Inflation Is Stealing Your Wealth | Jeff Booth | Pomp Podcast #572 https://www.youtube.com/watch?v=RuCqFjU9Wi4 https://www.youtube.com/watch?v=RuCqFjU9Wi4
- fnord123 5y ago
  This is presented in a conspiratorial manner. "Who wants their money to be worth less?" "Governments don't want you to know..." It's very simple. 100 euros in your hand right now is worth more than a possible/probable 100 euros in your hand next week. And Jeff Booth is arguing that we are trapped in a mental prison because we agree with this obvious fact.
  - saurik 5y ago
    Inflation is a different problem: a bird in the hand is worth two in the bush, but if you have a bird in your hand you are better off trading it for a table because somehow a table in the hand depreciates less than a bird?
    - fnord123 5y ago
      I mean, yes? Are we explaining investing from first principles?
      - lowkey 5y ago
        I think the argument is that we are discussing the difference between the: A) time value of money B) inflationary aspects of fiat currency vs hard currency
NicoJuicy 5y ago
Euh... HODL ? :) I mean, it's literally the #1 meme for cryptocurrency.
- rawtxapp 5y ago
  I mean, of course hodl, but not at the cost of dying of starvation or missing out on having your dream home, etc. Bitcoin subreddit is full of stories of people buying their first homes or cars, I've seen many people start their small businesses with their gains. Life is short, you enjoy/spend what you have while you're here.
  - ethanbond 5y ago
    But currency needs to move in order to be, you know, a currency. The lack of upward price movement of e.g. the US dollar means that there is no advantage to sitting on it. Invest it, spend it, or lose it. Inversely, with BTC, you would want to spend as little as humanly possible. Make whatever philosophical arguments you want: this is not adding oil to the engine. This is adding sand.
    - emptysongglass 5y ago
      > Inversely, with BTC, you would want to spend as little as humanly possible. Sign me up. Hyper-consumerism has laid waste to our planet, commoditized every human interaction, and polluted our minds with its drivel. Behold Denmark and its glorious decision to punish its citizenry for saving any amount of money at all. Hope you weren't thinking of saving your pennies for a ticket out of the renter's racket, Denmark would prefer you stuff it in stocks and pay them their cut. It's time we seized control of the engine and refashioned it into a tool that serves our welfare.
      - perl4ever 5y ago
        >Hyper-consumerism has laid waste to our planet If you don't want to consume, then you can just...not consume. Why buy bitcoin in order to not sell it, ever?
reader_mode 5y ago
Yeah that's all fine and dandy until you need to take out a loan and on top of high interest you also need to account for deflation - good luck getting a house mortgage and falling wages. Deflation puta pressure on price of work as well - but people don't like pay cuts.
- maneesh 5y ago
  When you're one of the 70% of people who are unbanked in el salvador, there are no needs for loans or interest -- the concept barely exists.
  - technotony 5y ago
    It's very counterintuitive, but actually the more unbanked you are the more you needs loans/savings and the more complicated your personal financial balance sheet is. I'd recommend the book 'the poor and their money'[1] for the details on this, but essentially if you haven't got savings you are constantly borrowing and lending informally with your community to meet life needs like a new roof or school fees. [1] https://www.amazon.com/Their-Money-Oxford-India-Paperbacks/dp/019565790X https://www.amazon.com/Their-Money-Oxford-India-Paperbacks/d...
    - lupire 5y ago
      That's having a tightly knit society where people take care of each other instead of ignoring the poor people to die alone.
- rawtxapp 5y ago
  You know what happens then? House prices will fall because they won't have access to cheap money, so they'll end up being priced at their true value. Housing would stop being an investment, instead it would serve it's true purpose of providing lodging.
  - reader_mode 5y ago
    So you're going to end up paying more in real terms (since deflation), for a house that's going to be worth less, you're making less and you have to pay interest. Sounds like an amazing deal, would vote for bitcoin tomorrow !
willmadden 5y ago
Correct. Keynesian economics is a fraud we're taught to disguise the fact that we're being robbed. You don't need an inflationary currency for a currency to work. Gold and silver worked just fine for thousands of years, and only ran into problems when corrupt governments and banks printed more paper receipts than they had reserves. Central banking just legalized this practice for private profit, and then the peg to gold and silver was eliminated once they had monopoly control.
- boxed 5y ago
  Those years when "it worked fine" were also when the entire world lived in squalor and horrible conditions. Including kings. I don't think we should call the past horrors "fine" in any way. I'm not saying the gold had anything to do with it. But you shouldn't say that world was OK. The US gold standard collapsed. That's a fact of history.
- jml7c5 5y ago
  Gold is inflationary. Mining increased amount available by ~2% each year.
Growling_owl 5y ago
> People will always spend money for things they need, they will also spend money for things they want, our current system is forcing them to spend it for the sake of spending it causing unnecessary over-consumerism. The worrying aspect is that the one thing that people want more than anything is to be the most rich and relevant person in a given area, hence the inflationary system to avoid people hoarding in order to reach this goal of theirs. If you transition to an deflationary system and people fall in love with it....well there is a whole lot of room to go on the downside. First people start giving up vacations, then dinners, then cars, that Netflix subscription, then the smartphone purchase, then the app purchase.. all in the name of hoarding. Pretty soon the entire economy becomes a giant game of mental posturing to see who can go the distance without spending. Paradoxically in this scenario the most rational thing to do is to spend like there is no tomorrow because society would be headed into chaos, so when the fecal matter hits the fan , at least you'll have good memories
api 5y ago
People would spend very conservatively and nothing particularly interesting would happen. It would be virtually impossible to raise money for new businesses.
NicoJuicy 5y ago
The crypto holders have an irrational fear/hate about inflation and forget that it's a requirement for people to spend their money and supporting the economy.

Empact 5y ago

Is it really so difficult to imagine a world where people spent less conspicuously, and invested more prudently? In a sound currency world, interest rates are set by the relative availability of funds for investment - that is, they are counter-cyclically market-determined: if there is little investment, rates will be low, if the economy is booming, rates will naturally rise. Secondly, the rate of deflation is determined by the rate of increase in the economy: if the economy is shrinking over time, there is no deflationary incentive to hold - so here again the currency is counter-cyclical, discouraging rapid growth while allowing for measured growth. Is that sand? Or sanity?

jollybean 5y ago
It's 'definitely not sane' to fix the amount of currency in circulation, either fiat or gold or crypto, arbitrarily. It would be like saying 'we're going to fix the amount of roads we have' and 'people will be forced to use the roads more sensibly!'. The only reason for 'fixing' currency would be to prevent bad actors from running the printing press. Now - this is actually a very real problem historically - however, it's a pretty crude solution. The smart thing to do is manage your currency smartly - literally like everything else in civilization. You need good Public Health Policy, you need good Monetary Policy.
- Empact 5y ago
  Infinitely divisible money is an unit with unlimited ability to scale to the circumstances - if more is needed, simply add another zero. You err in comparing this to roads, which are necessarily in proportion to the amount of traffic over them. Money needs only to be able to represent value, and the relative value of different things. Good monetary policy may be practicable by angels or saints, but not by men, who stand at the gates of unimaginable wealth that emanates from the printing press. Literal trillions of dollars - who can even conceive of that value, let alone decline the exercise thereof? Better to take it out of our hands.
  - jollybean 5y ago
    No, this is not true. If there was no elasticity in the monetary supply, then in both 2009 and 2021 the entire US economy would have collapsed probably taking down the world with in 2008, and most nations would have been wiped out in 2021 as well. Also, most major currencies are managed well enough. If you don't like your local fiat units, then don't hold on to them. Exchange them for anything else you value more and use local currency on as that - currency. Currency was never meant to be a long term store of value.

baybal2 5y ago

> You are 100% incorrect. Bitcoin is wildly deflationary. Therefore it does not encourage an economy to function That a widely, blindly believed economist mantra without much basis. People now don't want to spend money even at the time when interest rates are near negative. The few countries still with relatively high rates, and credible economy are the ones which register growth.

jerry1979 5y ago

People in El Salvador will simply have the free choice to put their money into BTC. If people in El Salvador make or lose a bit of money because they diversify their exposure, will they not have contributed to the overall price signal process of the free market? Why is it bad to give people options?

clpm4j 5y ago
I wonder what percentage of people in El Salvador have enough money to "put into BTC". Wouldn't most of the poor population be living essentially hand to mouth and spending their meager amount of money on daily food and shelter?
- thehappypm 5y ago
  Yep, impoverished people can't acquire BTC to begin with. This doesn't help at all.
  - season2episode3 5y ago
    On the question of principles vs practicals... the principles sound great and all. I also appreciate that this takes advantage of the large number of mobile devices already out there, and encourages the development of rural internet. But, I predict that the practicals are not going to be good. Bitcoin transaction fees are high. If anything, this is a gift to large criminal organizations with a large footprint in the country which will be far more able to make use of their BTC. The law enforcement arm of this will not be ready or able to deal with it. There is a role for cryptocurrency in helping the underserved gain access to banking. This plan does not sound like the right one to me.

ItsMonkk 5y ago

> Bitcoin is wildly deflationary. Therefore it does not encourage an economy to function With the rapid increase of the Money Supply of the USD, this is no different than any other Asset, especially Buyback driven stocks(where the supply diminishes over time!). To store value you also need to hold onto them with white knuckles. It also does not encourage an economy to function, hence why our GDP growth has slowed to a halt.