The strategy seems simple: as a result of the difficulties in financing the Treasury Bills and the significant devaluation of the peso, the authorities decide from time to time to inject more money into the private and public system so that the adjusted liquidity does not create a bottleneck that prevent payment of commercial commitments. Could a monetary policy based on the precepts of Bitcoin could defraud the actors of the economy only on the basis that there is more or less liquidity? The liquidity problems had not been programmed precisely by those who obtain profits from loans or devaluationThat is, those who have advantages in the negotiation of assets at preferential rates or who are not affected by exchange controls?
In theory, the measure increases the amount of banknotes and circulating coins, taking into account the reserves of commercial banks and the Central Bank. But in practice, the goals are difficult to meet, because each quarterly adjustment is set based on an expectation on how they expect the economy to behave in a 90-day period.
The most debated factor at this point is the need for the government not to transgress Argentina's agreement with the International Monetary Fund, which I would only accept the 2.5% increase in the monetary base if it does not interfere with the credit program of the international organization. By the way, Christine Lagarde, former director of the IMF, said that without the intervention of the agency "the crisis in Argentina would be much worse." Obviously this judgment is built around the idea that it is the banks that sustain global economies. And if the banks fall we all fall. This is, at least, ironic.
Specifically, I have the impression that both the use of excessive credits imposed by the IMF to "save the economies" of medium-sized or low-income countries, and exchange controls and the contracting monetary policy of the Central Bank, are nothing but a cloth of warm water for a problem that is precisely in a model constituted to privatize profits and socialize losses.
The supply of money without limits
In general, the currencies of countries such as the United States, Venezuela, Zimbabwe had a sufficient supply at the time of their respective market launches. But emission policies without measure precipitated the value of each one, among other reasons because those who decide or regulate do not even contemplate the possibility that the distribution of value has been wrong from the beginning and do not admit that The purpose of the issue is to finance unscrupulous government spending.
Thus, the monetary base in Argentina has grown in the last four years, with the issuance of more money backed by debt or unrealizable expectations.
Since monetary inflation, in the context of speculative markets, is usually an eight-headed snake, governments have increased the supply of liquidity, with the aim of later blaming speculators and the market for crises. But the truth is that public spending, for example, could be financed in many countries based on taxes or self-management of resources. If governments were forced to use bitcoin, they could not devalue the currency on the grounds that more liquidity is needed.
What has happened in Argentina is the perfect formula to further erode the economy, because spending is financed through two fronts: IMF loans for banks and the issuance of more money. Obviously taxes are not very popular and the self-management of resources needs regulations and a culture that is not present in our societies for now. What has happened, as a consequence, is that it has created a culture of people who believe in an alternative model, based precisely on Bitcoin, which is an ideal cryptocurrency to avoid inflation and government controls.
Bitcoin monetary policy
The value of bitcoin is in the ability it has to face the status quo of the monetary policies that governments impose on citizens as a form of control. As Camilo Jorajuría suggests, "compared to Bitcoin, states are archaic entities," therefore, measuring the two systems would seem an outburst.
The paradigm shift has to go through this dichotomy of the value of money introduced by a new generation of platforms and methods to exchange money.
Bitcoin does not alter its monetary policy by personal or government decisions of any kind. The basis of the changes in the Bitcoin code is in the discussions of the community and the developers. And yet there are defined limits to regulate the amount of cryptocurrencies that enter the market. The measure is in the computing capacity of the network at a given time, because the difficulty of the Proof of Work is automatically adjusted according to the number of participants who contribute their tools to process transactions and prevent an attacker from modifying The history of such transactions.
A distinctive feature of Bitcoin is that any participant in the mining network has the possibility of obtaining cryptocurrencies issued as a reward for their willingness to contribute to the security of the transaction history. There is no single entity that decides on the issuance of cryptocurrencies because monetary policy is programmed and, as you know, it is only possible to issue 21 million units over a pre-established time. Satoshi Nakamoto commented in an email dated November 8, 2008 how he understood this proposal, including when the bitcoin inflation rate was 35% according to a user identified as Ray Dillinger, who argued that that figure would not change given the network conditions: the number of miners at that time and the nonexistent demand.
As computers become faster and the total power to generate bitcoins increases, the difficulty increases proportionally to keep the new total production constant. Therefore, it is known in advance how many new bitcoins will be created each year in the future.
The fact that new currencies are produced means that the money supply increases by a planned amount, but this does not necessarily result in inflation. If the money supply increases at the same rate as the number of people who use it increases, prices remain stable. If it does not increase as fast as demand, there will be deflation and the first money owners will see that its value increases.
Satoshi Nakamoto.
The frequency with which bitcoin enters the market still depends on numerous factors. For example, the need for each miner to exchange value or the long-term possibility that some traders accumulate more cryptocurrencies than others. But it is virtually impossible for the rate to increase, not even by accident, as it could have happened recently – if the protocol had allowed it for a flaw in programming – when the Bitcoin nodes prevented someone from inflating the market with 1,265 BTC.
The issuance model contemplates that distributed bitcoins be used as money is used in each of the human activities that require value exchange. But with the mitigating that no one, unless there is consensus, can modify the frequency at which the monetary base grows. Reason why, developers like Luke Dashjr insist that mechanisms have to be created to avoid the centralization of mining, although he knows that it is not something that cannot be "solved overnight."
A policy of scarcity seems to have added value to an asset whose demand grows over time. The rest, is already due to supply and demand. Some bitcoin addresses have more or less bitcoins. And as there are more users and the market diversifies, the competition between services that use bitcoin it could be the preamble to the competition between the currencies that governments issue and the distributed issuance of bitcoin.
Except that in that race fiat currencies, such as the Argentine peso, seem to be losing, because although there is more demand for bitcoin because it is useful and has more and more value, the demand for pesos has been imposed and more and more people consider that Loss of value does not justify its use.
Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias.
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