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6.22.21 - Why Bitcoin Won't Replace US Dollar

Gold last traded at $1,781 an ounce. Silver at $25.83 an ounce.

NEWS SUMMARY: Precious metal prices steadied Tuesday amid mild profit-taking and a firmer dollar. U.S. stocks traded flat as investors noted Bitcoin - the world’s largest crypto currency - turned negative on the year.

Gold stages rebound as U.S. yields, dollar slips -CNBC

"Gold prices rebounded more than 1% on Monday after their biggest weekly fall in percentage terms since March 2020, with demand bolstered by a drop in U.S. Treasury yields and a pause in the dollar’s rally....

'The reversal in some of the strong gains we saw in bond yields last week has supported the market. Adding to that the dollar is trading a tad softer after the recent strength,' said Ole Hansen, head of commodities strategy at Saxo Bank.

'We’ll see some consolidation here and correction to the upside. Gold needs to break at least above $1,800 and the real battle is probably more around the $1,820 level.'....

'Over the next few months, if inflation readings do come higher consistently, and if we continue to see this progress in the labor market, too, then definitely markets will start pricing in a possible rate hike in 2022,' said Metals Focus research consultant Harshal Barot."

cliff Congress barrels toward debt cliff -The Hill

"Congress is barreling toward a fight as soon as next month over raising the debt ceiling, creating a huge challenge for President Biden and Democratic leaders in Congress.

Under a 2019 deal during the Trump administration, Congress agreed to let the government borrow through July 31. The Treasury Department at that point can take what’s known as extraordinary measures to keep the government solvent, but it’s unclear how long it will be able to do this.

In the Senate, raising the debt ceiling is subject to the filibuster, meaning Democrats will need GOP support. But GOP senators say they don’t expect their caucus to provide the 10 votes needed to hike the borrowing limit, which would set up a high-profile financial showdown with dramatic implications for the world’s economy....

Rep. Jim Banks (R-Ind.), the chairman of the House Republican Study Committee, sent a memo to his members outlining demands they could make in exchange for raising the debt limit later this year.

'Given the worsening fiscal outlook for the federal government and at least three-and-a-half more years of President Biden proposing trillions and trillions of dollars of deficit-financed spending, it is more important than ever for conservatives to reclaim the debt limit as a tool to highlight and force action on our nation’s spending problem,' Banks wrote.

The options outlined by Banks include rejecting suspending the debt limit; trying to prevent a debt hike from being linked to a spending package — a tactic frequently taken by leadership to try to make it harder to vote "no"; or trying to require spending offsets....

The Bipartisan Policy Center is estimating that the so-called X date, or the point at which the U.S. government will be unable to fully meet its financial obligations on time, to arrive at some point in the fall, based on Treasury’s announcement about what its cash on hand will be Aug. 1."

Bitcoin Won’t Replace The Dollar Because Its Creator(s) Don’t Know What’s Wrong With The Dollar -Forbes

"Bitcoin’s not about to replace the dollar, or any other broadly circulated money form. While there’s much to dislike about the dollar, Bitcoin’s creator(s) don’t know why the greenback is disliked.

To the reflexively libertarian in our midst who aren’t quite sure why they’re libertarian, Bitcoin is logically superior because it’s not 'government money.' Fair enough, at first glance. Except that the lack of trust in the dollar is not because it’s government money; rather more than a few disdain the greenback because it lacks stability as a measure. More than that, they hate when the dollar is devalued. Stop and think about it.

Money isn’t wealth. Money is an agreement about value that facilitates the movement of wealth. I’ll pay you $10 for your HoneyCrisp apples, and you’ll sell them to me because you eye the butcher’s ribeye longingly. Money well predates government simply because money is as old as trade is....

Gold eventually became 'money par excellence' (Marx) because it was so price constant. When gold moves, it’s a consequence of the currencies in which it’s priced moving up and down. Which is why currencies have so long been defined in terms of gold. The connection between gold and money for thousands of years hasn’t been some randomly arrived at association as much as it was a logical market conclusion: an agreement about value facilitates the most trade among producers if its value is viewed as constant. The golden constant was married to money, and trade logically took off.

Money hasn’t had a stable definition since the early 1970s. Keynesians, monetarists and mercantilists to varying degrees fell for the fantasy that a 'floating' or shrunken measure would boost prosperity....

Bitcoin’s volatility as a measure makes the dollar appear rather rigid by comparison. Put another way, Bitcoin magnifies the dollar’s worst qualities many times over. And it’s not going to get better.

Indeed, when it comes to 'money,' the focus can either be on price stability or supply; never both. Bitcoin’s creator(s) have made plain that supply will not be elastic, which means its price will be much more than elastic. The previous truth no doubt pleases the monetary cranks in our midst who think 'inflation' a phenomenon of rising 'money supply' as opposed to it being a logical consequence of currency devaluation (two very different phenomena), but with Bitcoin being a supply-limited concept, it can logically never exist as money. What’s a speculation, and Bitcoin is a speculation, rarely does."

As pandemic subsides, businesses push Congress for one more bailout -POLITICO

"The U.S. economy is surging back from Covid-19, but restaurants, hotels and other industries hit hardest by the pandemic are telling Congress they still need tens of billions of dollars in new government funds to stay afloat.

The growing list of trade associations lobbying for a new round of pandemic aid - also representing gyms, amusement parks, travel agents and horse shows - say they suffered massive, unrecoverable financial losses because of social distancing restrictions and still face uncertainties as the economy recovers.

The plea comes even after Congress appropriated more than $1 trillion over the past year to support smaller employers through forgivable loans and grants. The Paycheck Protection Program alone delivered nearly $800 billion in short-term aid to 11.8 million businesses during the pandemic, with economists divided on the extent to which it really saved jobs....

Though restaurant hiring is ramping up, the National Restaurant Association says the industry lost $290 billion in revenue during the pandemic and some areas still have capacity limits. Many restaurant owners are in debt and will soon owe back rent, advocates say....

Lobbyists admit it will be a challenge to convince lawmakers to spend billions of dollars more on businesses that have survived the pandemic this long.

With a majority of adults fully vaccinated and safety restrictions easing, the biggest concerns about the economy are that it may overheat and that there are simply not enough workers and materials to go around."

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6.21.21 - Fed Plans to Raise Rates ... Years from Now

Gold last traded at $1,782 an ounce. Silver at $25.98 an ounce.

NEWS SUMMARY: Precious metal prices rebounded Monday on bargain-hunting and a weaker dollar. U.S. stocks traded higher as the market attempted to rebound from the Dow Jones Industrial Average’s worst week since October.

Gold prices fall sharply. Should you start buying now? -LiveMint

"According to the commodity experts, weakness in the yellow metal price is due to the US Fed's announcement to hike interest rates twice in 2023 and the US Dollar gaining strength against major global currencies. However, they maintained that the precious metal price crash is temporary and gold investors should see this dip as a buying opportunity. The bullion experts went on to add that gold price will soon rebound....

Speaking on the reason for gold price crash Anuj Gupta, Vice President - Commodity & Currency Trade at IIFL Securities said, 'This gold price crash can be attributed to two major reasons - US Fed announcement to hike interest rates twice in 2023 and the USD gaining strength against the major global currencies....

Asked about gold price outlook Amit Sajeja, Vice President - Research at Motilal Oswal said, 'Decline in yellow metal due to the US Fed announcement to hike interest rate is temporary. I am expecting trend reversal in next three to four trade sessions. USD was trading sideways for the last few weeks and this Fed announcement worked as a trigger for the US bond yield and USD rise. This sentimental rise in bond yield and USD is expected to calm down in next three to four days....

Amit said that sharp decline in the gold price should be seen as an investment opportunity by gold investors citing, ' the international market the yellow metal has support at $1750 per ounce. One should wait for the next three to four days as gold price is expected to make its bottom again."

The Fed The Fed Plans to Raise Interest Rates - Years from Now -Mises

"Last Wednesday, the Federal Reserve’s Federal Open Market Committee voted to continue with a target federal funds rate of 0.25 percent, and to continue with large-scale asset purchases....

This statement might be summarized best as 'more of the same,' and in spite of whatever other statements might be made about Fed officials or about how the economy is relatively strong or improving, the fact is Fed policymakers voted unanimously on Wednesday against tapering of any kind, and in favor of continued extremely accommodative policy.

In other words, at the Fed there is no appetite at all for ever testing the waters to see just how fragile this current economy is in spite of all we hear about a 'V-shaped recovery' and GDP numbers showing an economy roaring back....

Nevertheless, the 'big news' coming out of the Fed - at least as far as many news outlets were concerned - is the fact that many FOMC members expect the Fed to raise the benchmark rate 'as soon as 2023' based on the so-called dot plot....In Washington terms, this means nothing at all. This wasn't a commitment from FOMC members to actually raise the rate two years from now. This was simply an opinion....

So, now when we hear that the Fed will be tapering in 2023, we should read this as something that is possible, of course, but '2023' could just as easily mean 2025 or 2028. At least, that’s certainly what experience suggests, especially as our jobless recovery continues.

And speaking of 'normalizing' things, the Fed during the Yellen years had long also hinted at scaling back its portfolio. This, of course, never happened....In the real world, however, none of this tells us anything at all about what the Fed actually plans to do in 2023.

Yet markets are so shaky and so dependent on easy money from the Fed that once the Fed sent the message it might have to act on inflation at some point a few years from now, the Dow Jones crashed by more than 300 points.

This further illustrates what some Fed observers are now saying about the state of the US economy: the Fed isn’t here to take away the punch bowl anymore. The Fed is the punch bowl. Even the mildest suggestion that it might raise rates years from now sends panic through the ranks."

The World Relies on One Chip Maker in Taiwan, Leaving Everyone Vulnerable -Wall Street Journal

"Taiwan Semiconductor Manufacturing Co ’s chips are everywhere, though most consumers don’t know it.

The company makes almost all of the world’s most sophisticated chips, and many of the simpler ones, too. They’re in billions of products with built-in electronics, including iPhones, personal computers and cars - all without any obvious sign they came from TSMC, which does the manufacturing for better-known companies that design them, like Apple Inc. and Qualcomm Inc.

TSMC has emerged over the past several years as the world’s most important semiconductor company, with enormous influence over the global economy. With a market cap of around $550 billion, it ranks as the world’s 11th most valuable company.

Its dominance leaves the world in a vulnerable position, however. As more technologies require chips of mind-boggling complexity, more are coming from this one company, on an island that’s a focal point of tensions between the U.S. and China, which claims Taiwan as its own.

Analysts say it will be difficult for other manufacturers to catch up in an industry that requires hefty capital investments. And TSMC can’t make enough chips to satisfy everyone - a fact that has become even clearer amid a global shortage, adding to the chaos of supply bottlenecks, higher prices for consumers and furloughed workers, especially in the auto industry....

Its technology is so advanced, Capital Economics said, that it now makes around 92% of the world’s most sophisticated chips, which have transistors that are less than one-thousandth the width of a human hair. Samsung Electronics Co. makes the rest. Most of the roughly 1.4 billion smartphone processors world-wide are made by TSMC....

The U.S., Europe and China are scrambling to cut their reliance on Taiwanese chips. While the U.S. still leads the world in chip design and intellectual property with homegrown giants like Intel Corp. , Nvidia Corp. and Qualcomm, it now accounts for only 12% of the world’s chip manufacturing, down from 37% in 1990, according to Boston Consulting Group."

The Moment Janet Yellen Moved for 'Greasing the Wheels' With Inflation -New York Sun

"The next time you hear a Federal Reserve official intone about the central bank’s commitment to 'price stability,' you might take a moment to reflect on how that goal came to be defined as 2% inflation.

The 2% number is so ingrained that our monetary policymakers routinely get away with issuing post-meeting press releases, as the Fed did on Wednesday, that include vacuous terminology about aiming to achieve inflation that 'moderately' exceeds 2% for 'some' time....

Why, though, do we accept a definition of 'price stability' that amounts to deliberate reduction of the purchasing power of our nation’s monetary unit of account?....Turns out, a lively debate on this matter did take place in the boardroom of the Federal Reserve some 25 years ago. Alan Greenspan was chairman at the time; Janet Yellen was a Fed governor....

Mr. Greenspan opens the discussion, 'are we talking about price stability or are we talking about zero inflation?' Ms. Yellen proceeds to make the scholarly case for 2 % inflation as the preferred target based on what she describes as a 'greasing-the-wheels' argument....

'I think we are dealing here with a very deep-rooted property of the human psyche,' Ms. Yellen noted. She proceeded to tell Mr. Greenspan and her colleagues around the table about a survey posed to a random sample of Americans by Yale economist Robert Shiller to measure their aversion to inflation.

The survey asked respondents whether they agreed with the statement: 'I think that if my pay went up, I would feel more satisfaction in my job, more sense of fulfillment, even if prices went up just as much.' Ms. Yellen reported that 28 % fully agreed and another 21% partially agreed. 'Only 27 percent completely disagreed,' she observed....

The transcript notes parenthetically that this last aside prompted laughter in the Fed boardroom. Get it? Economists don’t fall for that inflation ruse - only ignorant workers....It’s evident who won the fateful debate that day. The rest of us have been losing ever since."

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6.18.21 - Fed Explores Remaking the Dollar

Gold last traded at $1,771 an ounce. Silver at $25.89 an ounce.

NEWS SUMMARY: Precious metal prices rose Friday as savvy investors bought the dip despite a firmer dollar. U.S. stocks extended losses with the Dow on pace to post its worst week since January after the Fed pushed up its rate-hike schedule.

Is this time to buy? Gold price down 4% as investors panic -State Street Global Advisors/Kitco

"The Federal Reserve has created some panic selling in the precious metal markets after its economic projections Wednesday showed the potential for two rate hikes in 2023. However, one market strategist said that investors are overreacting to the estimates.

George Milling-Stanley, chief gold strategist at State Street Global Advisors, said investors have nothing to fear from the Federal Reserve and shouldn't pay too much attention to projections that are two years away.

Federal Reserve Chair Jerome Powell also warned markets and investors that the forecasts should be taken with a significant grain of salt during his press conference.

'I'm looking at the gold market right now and I think this could prove to be a good time to buy,' Milling-Stanley said. 'I see a lot of panic selling and I don't think that can last much longer. Basically, the markets saw higher inflation and higher interest rates, but they completely ignored the fact that the hikes are at least two years away. A lot can happen in two years.'

Milling-Stanley added that once this wave of panic selling ends, gold will still be in a good position to push back up above $1,900 an ounce and take a run at the record highs above $2,000 an ounce by the end of the year."

tax hikes Biden’s Tax Plan Means 60 Percent of Taxpayers Will Pay More

"President Joe Biden's pledge not to raise taxes on American families earning less than $400,000 annually was a centerpiece of his campaign and of his first months in the White House. But a new analysis suggests that more than 60 percent of taxpayers will face a higher burden under Biden's first budget plan.

The Tax Policy Center (TPC), a center-left think tank based in Washington, D.C., reports that 'nearly all' of Biden's proposed tax increases would be borne by American households earning over $800,000 annually. But while the tax increases are undeniably concentrated in the upper echelons, most taxpayers would see at least a small increase in what they owe the federal government via income, payroll, and corporate taxes. In fact, three-quarters of households earning between $75,000 and $100,000 annually would face higher taxes under Biden's budget - with an average tax increase of $440.

The tricky thing is that those higher taxes would be somewhat hidden for most individuals and households because they would be the result of higher corporate taxes.

Biden has called for raising the corporate income tax to 28 percent, up from the current level of 21 percent. His budget also calls for raising the top marginal income tax bracket - which applies to individuals earning over $452,000 and couples earning over $509,000 - to 39.6 percent, up from the current level of 37 percent.

That means, for example, a worker earning $80,000 annually would not see the government extract a larger share of her income via payroll taxes, which fund Social Security and health care entitlements, or via income taxes....

Instead of promising that it's possible for America to deal with its current fiscal mess and massively expand the size of government by merely taxing the rich, Biden should be honest about what he's proposing. A more expensive government means higher taxes on almost everyone."

Fed explores 'once in a century' bid to remake the U.S. dollar -POLITICO

"The Federal Reserve is taking what may be the first significant step toward launching its own virtual currency, a move that could shake up banks, give millions of low-income Americans access to the financial system and fortify the dollar's status as the world’s reserve currency.

The idea of creating a fully digital version of the U.S. dollar, which was unthinkable just a few years ago, has gained bipartisan interest from lawmakers as diverse as Sens. Elizabeth Warren (D-Mass.) and John Kennedy (R-La.) because of its potential benefits for consumers who don’t have bank accounts. But it’s also sparking strong pushback from those with the most to lose: banks.

'The United States should not implement a [central bank digital currency] simply because we can or because others are doing so,' the American Bankers Association said in a statement to lawmakers this week. The benefits 'are theoretical, difficult to measure, and may be elusive,' while the negative consequences 'could be severe,' the group wrote.

The explosive rise of private cryptocurrencies in recent years motivated the Fed to start considering a digital dollar to be used alongside the traditional paper currency....Now, central banks around the world have begun exploring the idea of issuing their own digital currencies - a fiat version of a cryptocurrency that would operate more like physical cash - that would have some of the same technological benefits as other cryptocurrencies.

That could provide unwelcome competition for banks by giving depositors another safe place to put their money. A person or a business could keep their digital dollars in a virtual 'wallet' and then transfer them directly to someone else without needing to use a bank account....

'What problem is a central bank digital currency trying to solve? In other words, do we need one? It’s not clear to me yet that we do,' Sen. Pat Toomey (R-Pa.) said. 'In my view, turning the Fed into a retail bank is a terrible idea.'

And, 'the fact that China is creating a digital currency does not mean it’s inevitable that the yuan would displace the U.S. dollar as the world’s reserve currency,' he said."

Millions of Americans are about to lose their homes. -Slate

"When the CDC’s eviction moratorium ends on June 30, what will still-struggling renters do? With a possible eviction boom just days away, I spoke with Alieza Durana, a reporter with the Eviction Lab at Princeton University who focuses on housing, evictions, and homelessness.

Mary Harris: As people got sick and lost their jobs, Congress first issued an eviction moratorium. This was back in the spring of 2020. It expired, last summer, and the question was, what was going to happen then? That’s how the CDC stepped in.

Alieza Durana: The CDC moratorium came about because policymakers were worried that the public health and economic crisis that had affected so many households - job loss, health issues - might trigger a cascade of events in which folks were unable to pay for their rent. They might then lose their home and, in the process, face increased exposure to COVID-19. So in September of last year, shortly after the CARES Act had expired, the Eviction Lab saw a big spike in evictions with the loss of the federal moratorium. Within two weeks, the Trump administration passed a CDC order through the Department of Health and Human Services to help try to buy time to keep people in their homes while they applied for rent relief and tried to find new jobs....

Mary Harris: There is a system in place that’s supposed to catch these renters when the moratorium expires...But local municipalities have struggled to get that money out to families.

Alieza Durana: Congress allocated about $25 billion in December and then an additional $20 billion in 2021. This money has just started to trickle down to states. My understanding, from the National Low Income Housing Coalition, was that about an average of 13 percent of that $45 billion has been spent down....We’re seeing this play out in real time, where folks who have an eviction filed against them have applied for rental assistance but the eviction is being processed faster than they’re receiving the money....

Mary Harris: What are you expecting to happen on July 1 when this moratorium is over?

We could see a couple of things happen. There might be a boom of evictions...But at this point, with so few state-level eviction moratoria in place and the federal moratorium about to expire, we’re preparing for a possible spike in eviction filings and increased risk of eviction and homelessness for millions of Americans."

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6.17.21 - Fed Cannot Control Its Easy-Money Monster

Gold last traded at $1,780 an ounce. Silver at $25.99 an ounce.

NEWS SUMMARY: Precious metal prices traded near 1-month lows Thursday following the Fed's hawkish policy statement. U.S. stocks traded mostly lower a day after the Federal Reserve's rate outlook sparked a sell-off.

Gold hovers near one-month low after Fed mulls earlier rate hikes -Reuters

"Gold prices pared early gains on Thursday to hover near their lowest levels in more than a month, bruised by an elevated dollar and yields after the U.S. Federal Reserve signaled it might raise interest rates sooner than expected....

'Gold was crushed overnight by a more hawkish Fed. It has staged a modest recovery in Asia, but the rally looks more like speculative dip buying and fast money short-covering, than a vote of confidence in the yellow metal,' said Jeffrey Halley, a senior market analyst at OANDA.

'The recovery in gold should be approached with caution as we have yet to see how a change in tone from the Fed will fully play out in markets.'....

Gold prices slipped more than 2.5% on Wednesday, hitting their lowest since May 6, after hawkish comments from Fed officials lifted the dollar to a two-month high, while U.S. Treasury yields jumped.

The Fed on Wednesday began closing the door on its pandemic-driven monetary policy with 11 of 18 central bank officials projecting at least two quarter-point interest rate increases for 2023. .

'Bargain-hunting, safe-haven demand and buying the dips emerged as gold fell to $1,804, although the change in Fed’s script had benefited the dollar and Treasury yields rather than precious metals in the immediate term,' Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note.

Silver was steady at $26.97 per ounce, while palladium dropped 1% to $2,770.72 and platinum was flat at $1,122."

the Fed The Fed Cannot Control Its Easy-Money Monster -New York Times

"One of the more important parlor games macroeconomists and Wall Streeters are playing is guessing when the Federal Reserve will finally stop keeping long-term interest rates at historically low levels.

The Fed’s policy, which began in the wake of the 2008 financial crisis, even has a name: quantitative easing (Q.E.), Fed-speak for when the central bank goes into the market, month after month, to buy Treasury bonds, mortgage-backed securities and other forms of long-term credit to drive up the price of these securities and lower their yields. In effect, this keeps long-term interest rates lower than they otherwise would be.

In the wake of the Great Recession and the onset of the Covid-19 pandemic in March 2020, that has proved to be an effective short-term strategy to kick-start the economy. But many people wonder if Jerome Powell, the chairman of the Fed, has reckoned with the power of the easy-money monster the central bank spawned all those years ago. They worry that Mr. Powell has helped inflate bubbles in housing, lumber, copper, Bitcoin and stocks, bonds and other assets. The evidence is mounting: The Consumer Price Index, a gauge of inflation, rose 5 percent in May from a severely depressed number a year earlier - the fastest rate in nearly 13 years. And that’s just one worrisome indicator.

It’s unclear whether the Fed has the will - or the ability - to end all this. Or if it even knows how to taper the bond-buying program without sending interest rates sky high, choking off the nascent economic recovery and freaking out everyone now addicted to low interest rates.

What happens when the easy-money monster gets too big to control?....

At some point, the years of excess in the financial markets will likely lead to a volcanic economic disruption. Capital markets will seize up, and debt and equity financing will be largely unavailable. Years of economic pain and turmoil will follow, with the worst of it, as ever, borne by those least able to handle its consequences. Just as in the aftermath of 2008, the blame will be diffuse."

U.S. Inflation Expectations Rise to New Highs in N.Y. Fed Survey -Bloomberg/Yahoo Finance

"U.S. consumers’ expectations for inflation over the medium term rose to an eight-year high in May, according to a Federal Reserve Bank of New York survey.

The median survey respondent anticipated an inflation rate of 3.6% in three years, up from 3.1% in April, the New York Fed said Monday. The reading marked the highest level since August 2013, while short-term expectations, over one year, reached a record....

Inflation hawks may point to the risk of higher expected inflation becoming embedded in price-setting behavior. Doves may argue the smaller increase in medium-term expectations versus short-term ones supports their view that the current bout of price increases is associated with the reopening of the economy as the pandemic recedes and will be temporary.

Expected inflation one year ahead rose to 4% in May from 3.4% the month before, the New York Fed data showed.

'Notably, medium-term inflation expectations have increased at a slower pace than short-term inflation expectations over the past few months, and the difference between one- and three-year-ahead median inflation expectations (0.4 percentage point) marks a series high,' the New York Fed said in a press release.

Consumer prices rose 5% in the year through May, marking the fastest annual pace since 2008, according to Labor Department figures published on June 10."

A Global First: Bitcoin as National Currency -Wall Street Journal

"Central banks around the world have been scrambling to co-opt digital currencies for their own purposes. El Salvador beat them all to the punch by passing a law that makes bitcoin legal tender for all debts public and private.

Through this law, El Salvador’s legislators essentially voted to begin the process of outsourcing the country’s monetary policy to a decentralized network of computers governed by a fixed set of rules. This is an important step toward a world where money is sound, not subject to the vagaries of politics.

Most proposed central-bank digital currencies would be tightly controlled by governments. These currencies would reinforce the status quo, not revolutionize monetary systems. That’s because the overwhelming majority of money in existence issued and controlled by central banks is already digital - only a small share of global money supply exists as paper money and coins....

El Salvador, which doesn’t have its own currency, is avoiding this risk by making bitcoin legal tender alongside the U.S. dollar. The law provides that any economic actor technologically able to accept bitcoin is required to do so for payments of goods and services. It also permits bitcoin to be used to pay taxes and exempts bitcoin transactions themselves from capital-gains taxation....

El Salvador has the right idea here. In 'The Denationalization of Money' (1976), F.A. Hayek questioned whether government control over the money supply was necessary and argued that competition in money had the same benefits as competition in goods and services. It disciplines economic actors and gives them incentives to serve consumers better - in this case by acting as a check on governments’ tendency to inflate and forcing innovation in payment systems....

Sound monetary policy isn’t a magic solution to a country’s every economic woe. El Salvador needs to embrace the rule of law, private property and limited government. But having faith in a sound currency is going to become more and more important as the inflationary costs of monetary stimulus become known."

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