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Ecuador Turning to Virtual Currency

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Re: Ecuador Turning to Virtual Currency

#31

Post by rhino369 »

lucb1e wrote: post #29
EduardoBautista wrote: post #11

Earlier quoted context omitted.

Imagine you buy a house worth 100k one day in bitcoin. The next day, bitcoin increases its value 25%. That same house is now worth 75k, but you still owe 100k plus interest. This is one of the biggest flaws in bitcoin that people just can't seem to understand (or just don't _want_ to understand). You can't have a good loaning system with an unstable currency. Edit: I posted a better explanation below: "You take out a…

> The next day, bitcoin increases its value 25%. Yeah because the Dollar was perfectly stable when it was five years old and accessible to only a select percentage of the population (how many people are really able to use a wallet with the cryptic addresses? Not my parents at least). Besides, when many people buy their house in Bitcoin the market cap would be much higher and the price would not fluctuate 25% in one d…

That's not the ONLY reason bitcoin is less stable. The dollar is actively managed to be very stable over the short term.

Gold is pretty volatile compared to the dollar as well, and it's hugely traded.

Re: Ecuador Turning to Virtual Currency

#32

Post by dualogy »

evbogue wrote: post #9

Perhaps a smarter idea for Ecuador is to take all of the USD they're circulating and convert it into an existing and proven cryptocurrency. While becoming the best place in the world for a unhindered exchange of USD --> BTC, they'd also not have to worry about all of the problems of building and administering a centralized virtual currency from scratch.

> Perhaps a smarter idea for Ecuador is to take all of the USD they're circulating and convert it into an existing and proven cryptocurrency

Not sure how that would be smarter. They can spend these USDs (obtained via exchange into their EcuNewVirtualFiat) to pay back their USD debt, or to buy BTC or Dogecoin. Now, which one is immediately smarter?

"No fiat lives forever", true, but most well-managed fiat lives long enough for the former to be a feasible and indeed smart move.

Re: Ecuador Turning to Virtual Currency

#33

Post by bubbleRefuge »

My mom is Ecuadorian and I have lots of family there and happen to own property there.

Correa is a gr8 president, but coming from the perspective of someone like myself who is well read on the intricacies of modern monetary systems, sticking with the dollar for this long has been one of the few very bad policies. From a political perspective its understandable given Ecuador's history of currency devaluations. This move will very likely permit Ecuador to continue this economic miracle and transformation that has taken place(lifting many out of poverty, etc) . These changes should enable Ecuador to increase GDP , reduce unemployment further, continue to improve public infrastructure, increase standards of living, and become less dependent on exports to drive the economy. Hopefully, this will become a lesson to the entire world wherein electing leaders that are literate about economics and the functioning of the modern monetary system -Correa has U.S. PHD in Economics- , who don't use inapplicable house-hold analogies ( i.e. gov should run like house-hold) to pander to voters ( are you listening EU ? ) can make the kind of strides that policy makers talk about but never achieve.

Read 7 Deadly Innocent Frauds of economic policy[1] : 1) Government spending is limited by taxation and borrowing 2) With Government Debts we are leaving our debt burden to our children 3) Government budget deficits take away savings 4) Social Security is broken. 5) The trade deficit is an unsustainable imbalance that takes away jobs and output. 6)We need savings to provide the funds for investment. 7)It’s a bad thing that higher deficits today mean higher taxes tomorrow.

[1] From Mosler's book http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

Re: Ecuador Turning to Virtual Currency

#34

Post by superuser2 »

EduardoBautista wrote: post #11
evbogue wrote: post #9

Perhaps a smarter idea for Ecuador is to take all of the USD they're circulating and convert it into an existing and proven cryptocurrency. While becoming the best place in the world for a unhindered exchange of USD --> BTC, they'd also not have to worry about all of the problems of building and administering a centralized virtual currency from scratch.

Imagine you buy a house worth 100k one day in bitcoin. The next day, bitcoin increases its value 25%. That same house is now worth 75k, but you still owe 100k plus interest. This is one of the biggest flaws in bitcoin that people just can't seem to understand (or just don't _want_ to understand). You can't have a good loaning system with an unstable currency. Edit: I posted a better explanation below: "You take out a…

Lending and credit are fundamentally, irreconcilably opposite to anonymity. It doesn't make sense to talk about taking out a loan in a decentralized/anonymous cryptocurrency system.

A reputation system (credit reports/scores) only works because each human who borrows money can have at most one identity. In an anonymous/pseudonymous system that cryptocurrency advocates want, I could take out a loan, spend it, and then take out another loan with a new pseudonym (or Bitcoin address) minutes later.

There is no threat of inability to get credit in the future. Even if you had agents willing to commit violence to coerce people to pay their loans (or, if we're in civilization, a state that will do asset seizures and wage garnishment with some semblance of due process) you wouldn't know who in the real world to point them at. Why would anyone lend Bitcoin?

If you were going to do that, you would need to verify government-based identity and use government to recover your money from deadbeats. In which case, why are you using Bitcoin anyway? At that point you could just lend the local fiat currency so your debtors could use it to buy Bitcoin (or whatever else they wanted.)

Re: Ecuador Turning to Virtual Currency

#35

Post by imaginenore »

jordigh wrote: post #6

What's virtual about it? I can't tell from reading the article. Is it virtual merely because none of it will be coins or bills? Do other such "virtual" currencies exist, i.e. virtual merely because they only exist in ledgers and bank balances? I mean, other than the vast majority of US dollars and other traditional currencies. All this talk of virtual currencies reminds me of how Europeans viewed Chinese paper money…

Yes, most US dollars are "virtual" by their definition.

http://upload.wikimedia.org/wikipedia/en/5/58/MB%2C_M1_and_M...

http://en.wikipedia.org/wiki/Money_supply

Re: Ecuador Turning to Virtual Currency

#36

Post by gus_massa »

ddt wrote: post #10

Sounds like they're doing something closer to URVs [1] than Bitcoin. [1]: http://en.wikipedia.org/wiki/Unidade_real_de_valor

At the same time, here in Argentina we invented the Convertibility: "One Peso equal to One Dollar" http://en.wikipedia.org/wiki/Argentine_Currency_Board The main difference is that here the pesos were always "actual" bills, but the real started as "imaginary" bills.

It worked initially (better than I expected), but we have an inflation that was 1% or 2% over the dollar inflation. So after 10 years we have a 20% difference in price, but we maintained the "One Peso equal to One Dollar" until it exploded. IIRC in Brazil the transition from 1-1 to 1-X was softer.

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