Is it really the case that mining Bitcoins is still the most lucrative way to exploit El Salvador's volcanic energy?
Instead of mining Bitcoins, they could also simply have exported their electric energy, but apparently this is less profitable. But then I wonder, why don't we see more power plants all over the world doing the same thing with their generated electricity?
Now, if a real entrepreneur figured out how to capture excess electricity in El Salvador as green hydrogen and ship it, that would be a net positive for everyone involved.
They can export their electricity through industry. Exporting electricity to other countries is quite the political challenge. And El Salvador doesn’t have that rich or easy neighbors either.
Also, mining bitcoin can be considered as a form of energy export.
You have to admire El Salvador for at least trying something different to get out of its financial hole. Too many countries struggling with issues similar to it (crime, poverty, debt) end up using the same playbook (IMF/Worldbank loans) and dig themselves deeper and deeper into the poverty trap.
There are no easy paths for countries like El Salvador. This might be bad too, but at least its a different attempt.
A silly different attempt is still a silly one…the Bitcoins the country bought are now worth over 60% less than their purchase price [1]. A poor country has successfully thrown away tens of millions of dollars…such incompetence on display.
Whether they have thrown the money away depends how they deal with the bitcoins long term. As far as I know they are still adding to the position. There is grassroots adoption also happening in the nearby countries, maybe the story hasn't ended just yet.
And it's not just about the value of the Bitcoin they purchased. They also have presumably increased tourism and interest in their country at least some (their name is in the news more, and I know for a fact that Bitcoin fanatics have visited specifically because of this).
> From 1992 to 2005, foreign investment increased 316.9%, and India's gross domestic product (GDP) grew from $266 billion in 1991 to $2.3 trillion in 2018[6][7] According to one study, wages rose on the whole, as well as wages as the labor-to-capital relative share.[5]
> As an effect of the liberalisation in 1991, extreme poverty reduced from 36 percent in 1993-94 to 24.1 percent in 1999-2000.[8]
The question is, at what cost, and with what legitimacy?
Too often despots and their cronies get countries into economic trouble, countries that have been taken advantaged by Western interests for hundreds of years.
When the country collapses, the IMF and World Bank subjugate the country to Western interests further often to the destruction of the environment and detriment to upward mobility of the population.
Using statistics like reduction of extreme poverty or wage growth when not taking into account other factors like inflation or mortality for example does not help when discussing the complex topic of the IMF and the World Bank and if these institutions are a net benefit to the impoverished.
> Too often despots and their cronies get countries into economic trouble, countries that have been taken advantaged by Western interests for hundreds of years.
Agreed.
> When the country collapses, the IMF and World Bank subjugate the country to Western interests further often to the destruction of the environment and detriment to upward mobility of the population.
Can you give me any concrete examples of IMF reforms making a country worse off economically?
> Using statistics like reduction of extreme poverty or wage growth when not taking into account other factors like inflation or mortality for example
Okay, mortality in India has fallen steadily from 1% in 1991 to 0.7% in 2020. And inflation doesn’t have a clear pattern but it’s never returned to its 1991 peak of 13.5%.
I’m not just cherry-picking stats here! India has actually gotten way way better in the last few decades, and the rate of improvement rose dramatically after the 1991 reforms!
It also makes sense that this would happen. Despot takes loan from IMF, spends it on random crap that doesn't benefit the citizens. Despot gets thrown out. IMF still wants its money back. Cue austerity, making the citizens pay for what the despot did.
Argentina, maybe? Also I don't know if this is primarily the IMF but didn't Russia post-USSR-collapse implement the sudden market reforms everyone told it to, causing an economic collapse (since sort-of recovered), dramatic fall in life expectancy (now just above its 1986 levels) while setting in motion the events that led us to the war in Ukraine?
Note: I'm not the GP commenter and I'm not trying to start an argument or denounce the IMF, if there's good reasons why these aren't good examples that's totally OK :)
As an argentinian, I believe the IMF is not pushy enough with us.
"Here, have this big pile of money to pay for your more urgent and higher-interest-rate debts, and here are some policies for you to implement so you stop having inflation once and for all. But it's ok if you cook the books, or don't comply with the policies, you're a big economy anyways so we have to keep you going and not catastrophically fail anyways".
India had a gigantic domestic market, vast pools of human resources, and core infrastructure that wasn't completely crumbling. For all its ills, India already had nearly 50 years of relatively peaceful democratic transfer of power, compared to other post-colonial countries.
The fact that this core infrastructure - law, higher education, political systems - hasn't changed that much since 1991 (the best colleges in 1991 are still the best colleges today, for instance) is proof that India's foundations were solid.
You nitpicked an outlier. Most countries that undergone the IMF process have not been successful to put it lightly. Also, the passage does not prove that the growth was a consequence of implementing IMF policies. It might have happened in spite of that.
He didn't lose that much with Bitcoin, some other countries have lost x300% their currency value over the past 10 years with Fiat. Argentina for example, has lost x1900% the currency value over 23 years.
They have printed so many argentinian pesos that its value decreased notably. Right now, you need 360 pesos in the black market to acquire 1 dollar. 23 Years ago with 1 pesos you acquired 1 dollar.
I think it relates to exchange rates.
On 2001 1 US Dollar = 1 Argentinian Peso.
On 2023 1 US Dollar = 185 Argentinian Pesos.
In truth, thing is much worst, because you wont get 1 US dollar anywhere (nor banks, financial orgs, or privates will sell it for that price). On the market is close to
I’m just a sideliner with popcorn, but don’t they use Bitcoin as a currency? So it seems like in that context, they swapped some of their currency (fiat) for their other currency (Bitcoin), which subsequently lost 60% of its value.
In fiat terms, yes. The loss is only realised once you convert the Bitcoin back to fiat.
The reason it is "unrealised" until that point, is that you could instead simply hold until/if the price of Bitcoin (priced in fiat) rises past the level you bought it at, and still sell at a profit (in real terms if you account for inflation, or in nominal terms if you don't).
Then that would be a realised profit.
Hence the distinction between unrealised and realised.
This is a big deal for crypto. Once there's a legal framework around crypto people will be more likely to trust the infrastructure around it. The big test is whether El Salvador will be able to enforce the laws they pass. Right now it's a hard no. Corruption is rampant in El Salvador so it's hard to trust anything they do but maybe the President there can do something about it and turn things around.
But any way you look at it it's a plus for crypto since once one country does it other countries will follow just so they don't get left behind. I expect other small countries to move forward with legal crypto frameworks.
> Once there's a legal framework around crypto people will be more likely to trust the infrastructure around it.
I thought part of the value proposition of “crypto” was that it doesn’t require such legislation?
The ecosystem seems to (slowly, painfully) re-discover everything that is useful about fiat currencies.
It's rediscovering human nature. People can't be trusted if things are done in darkness. There will always be someone to negatively take advantage of the situation.
Without some regulation we will see a never ending cycle of fraud. FTX over and over again. The real shame is that Crypto was gaining a bit of respectability only to be brought down again. Also, how easily it was for a 30 yr old business neophyte had so many people fooled since there was no clarity on his dealings.
Blind trust has not worked and will never work as long as humans are involved.
> I thought part of the value proposition of “crypto” was that it doesn’t require such legislation?
In the case of Bitcoin and its Lightning Network, that remains true. It doesn't need legislation to continue operating. Has done so for 14 years without any interference or intervention from law makers, and will continue to operate just fine without their influence. However, legislation can help with trust and adoption though (depending on the legislation of course), because for better or worse, many people trust their governments and look to them for guidance on what's "safe".
And no, that's not the value proposition of Bitcoin. The value proposition of Bitcoin was stated clearly by Satoshi Nakamoto.
"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust."
That's the core value proposition. The issuance policy of Bitcoin has been rock solid for the last 14 years and all indications say that should continue to happen indefinitely. There's not a single fiat currency on Earth that can claim the same.
> The ecosystem seems to (slowly, painfully) re-discover everything that is useful about fiat currencies.
There's nothing "useful" about fiat currencies, at least not useful enough to counterbalance the tradeoffs.
Perhaps you're confusing "fiat" currency with the more general idea of state-issued money, which hasn't always been "fiat" in its implementation e.g. commodity monies like those minted from valued metals, or certificates backed by gold reserves. Legislation, institutions, processes, and businesses were built up around state-issued monies to help the financial plumbing and grease the wheels of the economy, but that has nothing to do with whether the nature of the money is "fiat" or not. Fiat just means "by decree" i.e. this money has value because we says it does. Commodity money has value because of its scarcity. The source of Bitcoin's value is similar to commodity money i.e. it's provably scarce.
Fiat is a relatively new phenomenon in the technology of money and probably a small blip in its ~5000 year history (so far). The question is how long will that blip be?
Fiat is not anything new.. neither is the concept of money. Earliest writings are for accounting and bookkeeping. People were representing commodities with tokens which can be exchanged. The idea that money was minted only from precious metals, notably gold and silver is false. Clay and bronze coins were common as IOUs.
