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Bitcoin Is Disrupting the Argentine Economy
HughPickens.com writes: Nathaniel Popper writes in the NYT that with its volatile currency and dysfunctional banks, Argentina is the perfect place to experiment with a new digital currency. The number of Bitcoin users in Argentina is relatively small; it barely registers on most charts of global Bitcoin usage. But Argentina has been quietly gaining renown in technology circles as the first, and almost only, place where Bitcoins are being regularly used by ordinary people for real commercial transactions. For example, BitPagos is selling bitcoins in over 8,000 Argentine convenience stores and is helping more than 200 hotels, both cheap and boutique, take credit-card payments from foreign tourists. The money brought to Argentina using Bitcoin circumvents the onerous government restrictions on receiving money from abroad
The Rock Hostel is one of hundreds of hotels in the country using BitPagos to collect credit-card payments from foreign customers. If owner Rodriguez Pons accepted credit-card payments from American customers through the usual financial channels, customers would be billed in dollars, and when those dollars came to Pons's Argentine bank account, they would be converted at the official rate, about 30 percent lower than the black-market rate. It would also take 20 days for Pons to get her pesos. BitPagos helped counter these drawbacks by taking the credit-card payment in the United States and then using the dollars to buy Bitcoins, generally from Coinbase, before sending them to Pons immediately.
Bitcoin proponents like to say that the currency first became popular in the places that needed it least, like Europe and the United States, given how smoothly the currencies and financial services work there. It makes sense that a place like Argentina would be fertile ground for a virtual currency. Inflation is constant: At the end of 2014, for example, the peso was worth 25 percent less than it was at the beginning of the year. And that adversity pales in comparison with past bouts of hyperinflation, defaults on national debts and currency revaluations. "In the long run, Bitcoin will be very disruptive to the developed world," says Dan Morehead, a former Goldman Sachs executive who now runs a hedge fund focused on Bitcoin. Things are happening sooner in Argentina, he says, because its financial system creates hassles for the people there. But, he added, "Argentina is just a more extreme example of the situation in every country."
The Rock Hostel is one of hundreds of hotels in the country using BitPagos to collect credit-card payments from foreign customers. If owner Rodriguez Pons accepted credit-card payments from American customers through the usual financial channels, customers would be billed in dollars, and when those dollars came to Pons's Argentine bank account, they would be converted at the official rate, about 30 percent lower than the black-market rate. It would also take 20 days for Pons to get her pesos. BitPagos helped counter these drawbacks by taking the credit-card payment in the United States and then using the dollars to buy Bitcoins, generally from Coinbase, before sending them to Pons immediately.
Bitcoin proponents like to say that the currency first became popular in the places that needed it least, like Europe and the United States, given how smoothly the currencies and financial services work there. It makes sense that a place like Argentina would be fertile ground for a virtual currency. Inflation is constant: At the end of 2014, for example, the peso was worth 25 percent less than it was at the beginning of the year. And that adversity pales in comparison with past bouts of hyperinflation, defaults on national debts and currency revaluations. "In the long run, Bitcoin will be very disruptive to the developed world," says Dan Morehead, a former Goldman Sachs executive who now runs a hedge fund focused on Bitcoin. Things are happening sooner in Argentina, he says, because its financial system creates hassles for the people there. But, he added, "Argentina is just a more extreme example of the situation in every country."
As usual, if you can't understand that you can't screw your users without losing them, you merit losing ground to new technologies.
Get free satoshi (Bitcoin) and Dogecoins
Technological marvel and portent of things to come or not, it's really quite sad that Argentina's is so messed up that it makes Bitcoin look good.
Don't cry for me, Argentina, cry for yourselves.
The World Wide Web is dying. Soon, we shall have only the Internet.
Losing 25% year on year in the Peso looks like kid's stuff in the devaluation game. They need a *real* currency to lock in year on year decreases of more than 50%. And that's why they've turned to Bitcoin!
4/15/2014 = $496
4/15/2015 = $223
It's not as fun as lighting cigars with $100 bills, but it's just as productive!
Is it just my observation, or are there way too many stupid people in the world?
"But Argentina has been quietly gaining renown[...]" No kidding... Ill say "extremely quietly". As a tech savvy Argentinean that has been living in Argentina for the last 33 years (that is all my life), I never heard of BitPagos, Rock Hostel or all those 8000 convenience stores apparently accepting BitCoins. I guess I should really get out more. The inflation is real though. And it sucks.
"I'm from Buenos Aires, and I say kill 'em all!"
The Argentine economy has hyperinflation and unreasonably burdensome government controls. Bitcoin hasn't "disrupted" the Argentine economy, it has made daily life possible for the average Argentinian.
Yes, from the perspective of the government, Bitcoin has made their self-destructive policies moot. It has given the populace an alternative to their collapsing fiat currency. Fortunately, however, the government doesn't get to define "the economy" - The participants in the economy do, and Argentinians have said "no thanks!" to the local Peso.
Argentina doesn't highlight the problems with Bitcoin, it exemplifies the entire raison d'etre for it!
They've hardly missed the boat. If Bitcoin really disrupts things in Argentina, then that means Argentinians holding Bitcoins instead of holding pesos or dollars. That would imply they hold a number of Bitcoins worth some vaguely similar amount to what their current cash holdings are worth. Given that there are about $50B USD worth of pesos, and only $3B USD worth of Bitcoins, then either the price goes up a bunch or Bitcoin isn't actually being all that disruptive.
Bitcoin Is Disrupting the Argentine Economy
The number of Bitcoin users in Argentina is relatively small; it barely registers on most charts of global Bitcoin usage.
So it's disrupting the Argentine Economy... but only in a way that's so small as to be imperceptible. Gotcha.
That would imply they hold a number of Bitcoins worth some vaguely similar amount to what their current cash holdings are worth.
No it would not. Bitcoin would need to be a reliable store of value for the above to be true. And "store of value" is the currency characteristic where bitcoin fails the hardest.
Bitcoin is very useful as a payment technology. But holding bitcoins is an absolute risk. Which is why most merchants who accept bitcoins for payment never actually see or touch a bitcoin. Their merchant exchange immediately converts to fiat upon receipt and the merchant receives only this fiat currency.
Now could the Argentine Peso also be a poor store of value, thats plausible. The US Dollar or Euro, these are likely to be reasonable stores of value. Going from one risky to another risky, peso to bitcoin, does not make sense compared to going peso to dollar or euro, unless people are prevented from doing so. If prevented from going to dollar or euro then a move to bitcoin would seem more an act of desperation.
..which, from TFA it is - an act of economic desperation. Their currency loses 25% per year and trying to convert it to dollars takes time and huge fees - losing roughly 30%. If bitcoin provides a better, faster arbitrage, then it is, in this case, a more "reliable store of value."
I think it's more of a damning comment on Argentinian currency rather than a spotlight on the quality and fungibility of bitcoins.
Who put this thing together? Me, that's who.
Argentina already went through this headache when the US Dollar became the defacto standard for awhile while the Argentine Peso was pegged by law to the US Dollar and contracts were drafted using the Dollar, not the Peso, as the unit of currency. This became a problem when Argentina wanted to decouple from the Dollar; it meant that Argentines, earning money in Pesos, would be entirely dependent on the exchange rate at the moment to pay back their debts. I expect that's why the currency exchange laws were passed, to make the transition back to their own currency and thus their own monetary policy possible.
Bitcoin, if it gets too big, destabilizes this again, as now people do not look to their own national currency, and their already weak national currency grows even weaker. If you want an example of the effects of a nation not being able to control monetary policy, look at Greece as a constituent of the EU; they can't control monetary policy through the usual means (ie, controlling access to new money) so they can't devalue the currency when necessary to keep the economy flowing.
I expect that the laws will be interpreted to mean that Bitcoin users are in violation, or else new laws will be written to force Bitcoin exchange to follow the same rules as any other currency exchange. Argentina has struggled with their money for too long to let something destabilize the government like this.
Do not look into laser with remaining eye.
..which, from TFA it is - an act of economic desperation. Their currency loses 25% per year and trying to convert it to dollars takes time and huge fees - losing roughly 30%. If bitcoin provides a better, faster arbitrage, then it is, in this case, a more "reliable store of value."
I think it's more of a damning comment on Argentinian currency rather than a spotlight on the quality and fungibility of bitcoins.
Or it could be seen also as a spotlight of bitcoins as a tool to preserve wealth in a free-falling economy.
Their currency loses 25% per year ...
Bitcoin recently lost 75% in a year.
Argentina already went through this headache when the US Dollar became the defacto standard
Tying the peso to the dollar was a good policy, and gave Argentina a huge opportunity to borrow at much lower costs to invest for the future. Instead they went deep into debt while squandering the money on unaffordable social programs and cheap imports. Much like what Greece did when they switched to the euro. But, unlike Greece, nobody is willing to give Argentina a bail out.
People want to know why the rich keep getting richer? It is because they don't deal in currency, they deal in assets. Currency is only used when converting one asset for another. Most Currency is inflationary, meaning if you hold it, you lose. This is such a little known fact of life. BitCoin, should it survive will ultimately be deflationary currency, meaning it gains value the longer you hold it.
Think of it this way, you work hard, when you're young, you can retire if you save anything, because deflationary currency becomes an asset. But that doesn't bode well for the rich n powerful, or politicians who need a dependent class of people to take care of.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
Or it could be seen also as a spotlight of bitcoins as a tool to preserve wealth in a free-falling economy.
In the last year or so bitcoin prices have been in freefall too. Its somewhat stabilized at the moment but bitcoin prices are still speculation driven. One negative policy decision from the Chinese government regarding bitcoin and it could easily be in freefall again.
As a payment method bitcoin is great. But as a store of value its "tulips", at least for now while its dominated by speculators.
>> At the end of 2014, for example, the peso was worth 25 percent less than it was at the beginning of the year.
Even as someone who believed in Bitcoin enough to spend significant $ on mining hardware, I know bitcoin has been far more volatile and has devalued far more than that in the same period.
"..which, from TFA it is - an act of economic desperation."
And blatantly illegal. From TFA (note is mine): "The money brought to Argentina using Bitcoin circumvents the onerous government restrictions on receiving money from abroad"
So what they found is that it's easier for Argentinians -at least some of them, to support a black market on bitcoins than dollars (which has been the standard in the past).
"I think it's more of a damning comment on Argentinian currency"
Not so much about Argentinian currency as Argentinian economy (which the former is tied to).
If you just want to avoid the poor bank exchange rate, the stability of bitcoin isn't a problem. Instead of accepting dollars, and trading them for pesos, you now accept bitcoin and trade them for pesos.
I live in Argentina and I haven't heard of any of this. Neiher BitPagos, nor any of the other things mentioned above. Here in Argentina bitcoins are, like most enywhere else, a marginal things only some nerds know.
"Much like what Greece did when they switched to the euro."
Oh, so the problem with Greece was that they "squandered the money on unaffordable social programs and cheap imports", not that a corrupted elite gamed the system in their favour and then got the helpful aid from Goldman Sachs to hide the tracks.
Oh, so the problem with Greece was that they "squandered the money on unaffordable social programs and cheap imports"
Basically, yes. Greeks retire at 60, or even earlier, with generous pensions, and then expect the Germans, who work till 67, to bail them out.
... not that a corrupted elite gamed the system in their favour and then got the helpful aid from Goldman Sachs to hide the tracks.
Nope. The loans from Goldman Sachs were mostly squandered on the same unaffordable social programs, and generous pensions. What happened in Greece should have been obvious to anyone decades before it finally imploded. Do you also believe that "corrupted elite" elected Syriza?
Actually, they got in trouble by *not* printing money, but instead by borrowing. They were working hard to keep inflation down for awhile in the 1990's and that meant that they borrowed to cover their work on building infrastructure. This actually worked fairly well... for awhile.
When the global financial crisis hit in the early 2000's it left Argentina unable to service debts. Argentina had to deal with huge unemployment and political instability. That resulted in the largest default on sovereign debt ever. No bueno.
Argentina is still a "pariah" but was doing a little better until recently. Some people are blaming new populist policies for having put Argentina back in trouble with a shrinking economy again.
Argentina is just chock full of corruption, as well. That means that unless things are peachy keen and there's enough money for everyone, like in the 1990s, people don't want to touch Argentina with a 10 foot pole. That hurts their ability to recover where less corrupt countries might bounce back faster.
"Basically, yes. Greeks retire at 60, or even earlier, with generous pensions, and then expect the Germans, who work till 67, to bail them out."
Except that, as per OCDE data, Germans and Greeks retire at the same effective age of about 62 year old. Given that the official retirement age is, yes, higher at Germany than Greece, this also should tell you something about retirement conditions in both countries.
And then, poverty rates among older-than-65 y.o. in Germany is about 11% while in Greece it's about 16%, median financial wealth in the 65-74 y.o. group is about 16.000â in Greece and 58.000â in Germany and the enhancing rent effect of public services in Greece vs Germany is 15.000â vs 20.000â, again, all taken from OCDE data.
So, all in all, Germany provides higher rents and services for their elders than Greece by a significant margin. But, hey, don't let data interfere with your political visions.
"The loans from Goldman Sachs were mostly squandered"
It's not Goldman Sachs' loans what this is about but how Goldan Sachs lied when auditing Greek economy before the crisis in order to preserve the statu quo, if even for a while, both for them and a selected elite.