Posts tagged 'altcoins'

How not to introduce official e-money?

We’ve argued enthusiastically for the introduction of state e-money before.

But we overlooked the likelihood that it might first be adopted by countries like Ecuador as a means of getting out of their dollar bind (via Bloomberg):

Ecuador’s congress approved a new law today that allows the government to create its own parallel currency for use in local transactions as the government struggles to meet spending commitments.

Congress voted 91-22 to approve President Rafael Correa’s proposal to change the South American nation’s monetary and financial laws, allowing payments in “electronic money” and giving presidential appointees the power to decide who gets loans and how lenders invest their reserves.

The bill now goes to Correa for his signature or veto. As a current-account deficit drains dollars from the economy, making it harder for Correa to fund a burgeoning budget gap, a new currency could be used to meet government payments, said Jaime Carrera, a former deputy finance minister and director of the Quito-based Fiscal Policy Observatory. It could also lose its value quickly if not backed by the central bank, he said.

 Read more

Why it’s tough being in an altcoin cartel

Cartels come in many shapes and sizes.

There are Colombian drug cartels. Mafia protection cartels. Oil producer cartels. Diamond cartels. Commodity cartels. Central banks. Altcoin cartels. All sorts.

All of them, however, extract value from potentially low-value things by means of organised collusion and discipline.

Columbian drug cartels organise to ensure drug markets are not oversupplied by wiping out the competition. The mafia organises to extract rents from those who would otherwise not be inclined to pay them, mostly by imposing an artificial market for protection. Oil producers organise to ensure oil markets are not oversupplied for the best possible return from oil prices. Diamond cartels do the same , but since diamonds are not an essential commodity they also create fanciful myths about diamonds being a girl’s best friend to create continuos demand. Central banks control the money supply, and thanks to that can corner and support any market they wish for as long as their underlying currency is demand. Read more