Topic: Argentine leading candidate: Pro Bitcoin, anti CentralBank, wants dollarization - page 3. (Read 394 times)

I talked about it in another thread. A bit paradoxical that he is pro-Bitcoin and wants to put himself in the hands of the Fed. He could do like in El Salvador they have both USD and Bitcoin as legal tender but no, it seems that he only wants to use the USD which puts him in the hands of the FED and it is not a panacea either as d5000 explains.

Anyway, he has been given a lot of hype but we will have to see if he wins the October elections.

Argentina had already a period (1991-2001) when there was a de-facto dollarization during the Menem government via a currency board, an 1:1 peg to the US dollar.
The problem is that this period hadn't the expected outcome.

Triple digit inflation went away, but there were several years with double digit inflation, which made Argentine goods very expensive, and this led to the general Argentine crisis of 2001.
If Argentina adopts a similar policy again, this will probably be similar. Above all the industrial sector will suffer, there will be higher unemployment (now it's modest with ~7%).

Here a graph showing Argentina and Ecuador's economic growth 1984-today:



(Source: World Bank)

You can see that in both cases, Argentina and Ecuador, there was an initial boom after dollarization/currency board introduction. In Argentina, 1991, and in Ecuador, 2000. But then the growth went increasingly bumpy. Dollarization creates a higher dependency on external commerce and international financial events and gives in generall less flexibility. It's a gamble, you could have favourable outcome or not, depending on your economical structure. Argentina's post-currency-board history coincides with Ecuador's dollarization (~2000-2002) and after these years there is no clear "winner" between both if you look at economic growth.

With cryptos emerging as an alternative, a dollarized country could try to introduce altcoins as a way to stimulate growth if it thinks it needs to increase money supply. I'm less thinking about an independent currency (like ETH or LTC) but more of a kind of utility token. This could give the country flexibility again, so I'm currently a bit less against dollarization than I'd have been in 1992 or 2000.

I guess in Argentina BTC adoption is clearly benefitting from the current high-inflation scenario. It is already used more as an investment than as a currency, but has also the function to act as an intermediate step between the Peso and external currencies like the US dollar, as US dollar acquisition is restricted.

If the country was already dollarized, I think BTC adoption will grow slower. The country could go the way of El Salvador though, trying to force Bitcoin adoption to become at least a little bit less dependant on the USD cycles (at the cost obviously to have to support the high BTC volatility).

This news is already having a positive impact on the bitcoin market in Argentina. The high inflation in the country is making people turn to Bitcoin as a hedge. Adopting the dollar is a sound economic strategy to gain monetary stability but it comes with a price. Dollarization helped reduced corruption and stabilized the economy of Ecuador and Zimbabwe. One problem is that the Argentina monetary system will now depend on the monetary policy of the US central bank for monetary policy. And the US central bank might not consider Argentina when making its policies. The US will make policies that suit its economy.

If Javier Milei wins the presidential election on 22 October this year, Bitcoin might get the needed boast in Argentina.
I don't think Bitcoin will easily regain its traditional status as currency. If the price keeps accelerating more people will keep it as an investment because it will become more precious.

Ok, the tile of the link sounds stupid right now:

Bitcoin soars in Argentina as Javier Milei wins presidential primary
https://cointelegraph.com/news/bitcoin-hits-record-highs-in-argentina-as-javier-milei-wins-primary
but it's the other text that matters:


So, this is going to be a really mindfuck moment for a lot of users
- he likes Bitcoin
- wants to get rid of the central bank
- want to fully adopt the usd dollar, so ditching completely the pesos

Of course, there are some other bits about abortion and climate change and the fact that has already sent a big f word to China and her Brics but the whole thing is about on one side getting rid of the central bank and on the other of fully adopting the USD is really interesting as It would be the largest economy that has done this after Ecuador and it will just rise the number of countries that are either using the dollar directly or a currency pegged to it. So, that much for the so-called de-dollarization some nutcases still think it's happening.

The first impact will be clear, double and triple-digit inflation will go away, of course there will be some bad things happening as there will be no more money printing so the government will not be able to hand over the traditional socialist gifts that come to bite you in the ass 2 years later to get elected, but more importantly, how would this affect the perception of Bitcoin.
It's obviously seen as a way to escape spiraling inflation but with a real hard currency would it stop losing its currency flavor and be seen as more of an investment?