By Craig Erwin, Ph.D.
El Salvador is a small, poor country. Its president, Nayib Bukele, promises to make the country and its people wealthy, but his ideas are risky at best and catastrophic at worst. He plans to generate wealth for El Salvador by selling Bitcoin-backed bonds (I.O.U.’s) to raise a billion dollars, and by mining Bitcoin (creating new Bitcoins by using computers to solve complex math problems). Bukele made Bitcoin legal tender in El Salvador, but he is baffled that few in El Salvador use Bitcoin. It’s because very few Salvadorans have any cryptocurrency or much of any currency. Bukele also hosts Bitcoin conferences, which are more like Bitcoin pep rallies.
Bukele doesn’t look like a typical politician. He frequently wears a baseball cap (often backwards), mirrored sunglasses, and leather jackets. His background isn’t typical either. Previously he was a nightclub owner and marketing executive. He calls himself “the coolest dictator” and he has broad powers, much like a dictator.
Bukele has drawn criticism from outside El Salvador, including from the International Monetary Fund (IMF), a global organization working to foster international economic cooperation. The IMF advised El Salvador to dump Bitcoin, but It probably should have recommended that Bukele be dumped too.
Since El Salvador is a small country, Bukele’s policies are particularly risky. The devastation that could result from his policies would be concentrated on a relatively small population. Thank God the U.S. has a balance of powers.
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