Bitcoin’s monetary policy is not adjusted by decrees of any State. Argentina has tried to curb the economic crisis by injecting more money into the economy.

An increase in the monetary base in Argentina implies a reduction in inflation but those who adjust the issuance of money presume that its distribution is equitable among citizens and commercial banks. For this reason, those who thought of Bitcoin’s monetary policy chose a model that did not depend on individual decisions.

Due to the difficulties in financing 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. In this way, the tight liquidity does not create a bottleneck that prevents the payment of commercial commitments.

Theoretically, the measure allows increasing the amount of circulating bills and coins, considering the reserves of commercial banks and the Central Bank. However, the goals are actually difficult to meet, since each quarterly adjustment is based on how the economy is expected to behave in a 90-day period.

The government needs to adhere to Argentina’s agreement with the International Monetary Fund (IMF), which would only accept a 2.5% increase in the monetary base if it does not interfere with the international organization’s credit program. By the way, Christine Lagarde, former director of the IMF, said that without the agency’s intervention Argentina’s crisis would be much worse.

Unlimited Money Supply

In general, the currencies of countries such as the United States, Venezuela and Zimbabwe were sufficiently supplied at the time of their respective market launches. However, unlimited issuance policies accelerated their respective values as those regulators do not even consider the possibility of an erroneous distribution of value from the beginning.

Monetary inflation, in the context of speculative markets, has led governments to increase the supply of liquidity to blame crises on speculators and the market. If governments were forced to use Bitcoin, they would not be able to devalue the currency on the grounds that more liquidity is needed.

Bitcoin’s Monetary Policy

Bitcoin’s value lies in its ability to cope with the status quo of monetary policies that governments impose on citizens as a form of control. Camilo Jorajuría suggests that, compared to Bitcoin, states are archaic entities, so measuring the two systems would seem an outburst.

Bitcoin does not alter its monetary policy by personal or government decisions of any kind. The basis for 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.

Bitcoin allows any participant in the miners’ network the possibility of obtaining cryptocurrencies issued as a reward for their willingness to contribute to the security of the transactions history. No single entity decides on the issuance of cryptocurrencies, since monetary policy is programmed, and it is only possible to issue 21 million units over a pre-established period of time.

New currencies are produced, which 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 using it, prices remain stable.

By Willmen Blanco

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