El Salvador, Switzerland, and Argentina Are on to Something

Punishment at school hit different when I was a kid—literally.

None of this namby-pambiness we have today, where teachers who give zeros to students who don’t do their assignment are fired for creating an environment destructive to a student’s academic growth (true story).

I was in fifth grade. A rainstorm had passed just before recess. On the way back to class 20 minutes later, I watched a couple of classmates jump into a puddle and run off.

So…

I did the same.

A teacher saw and grabbed my arm, and asked why I would do that.

“Because those two did,” I pointed.

“So, if they jump off a bridge, you’re gonna jump, too,” she replied, with one of the most trite and overused phrases of my Gen X childhood.

“If the bridge was on fire, I’d jump.”

Wrong answer.

Bop! Right on the back of the head.

She then sent me to the principal’s office.

There’s a message here: Just because some people see life through a mainstream lens does not mean the mainstream lens is the best way to see life. (The teacher hadn’t considered that the bridge really could be on fire…)

Sometimes, those who operate along the tail of the bell-curve are the wisest of the bunch.

Which brings me to Argentina, a decades-long economic basket-case now seeking redemption by way of the country’s recently elected, right-wing populist president, Javier Milei.

Note: This is not a story about Argentina.

It’s a story about bitcoin…

Last month, an Argentine financial muckety-muck met with a muckety-muck from El Salvador, a country famous (or infamous, if you’re the International Monetary Fund or the World Bank) for adopting bitcoin as legal tender, and stashing tons of national wealth in the granddaddy of crypto.

The traditional finance world, known as TradFi in the cryptosphere, had a big ol’ bout of pearl-clutching, hissy-fitting, and huffing-and-puffing as it chastised the little Central American nation.

Everyone in TradFi claimed El Salvador would go bust.

Instead, the country has more than $400 million in bitcoin, and well over $100 million in profits. It’s even using volcanic geothermal heat to power bitcoin mining rigs that so far have generated about $30 million in profits.

In short: El Salvador’s bet on bitcoin has proved far—far!—more profitable than if the government had listened to the hissy-fitting pearl-clutchers insisting that they “drop this stupid idea and keep your dinero in dólares, right now!”

Now comes Argentina, a country where fiscal crises seem to erupt as spontaneously as tango dancing on a Buenos Aires street.

Tangoland wants to “strengthen ties with the Republic of El Salvador,” the muckety-muck said, because the Salvadorans, under crypto-bro President Nayib Bukele, have “vast experience” in cryptocurrency regulation and market development. (And in saying that, at the same time offered a middle-finger salute to the Western financial powers that for years have bashed on Argentina in ways that have made it hard for the country to emerge from its string of never-ending fiscal crises.)

All code, basically, for: We like what El Salvador is doing with bitcoin to support its national reserves and build its economy around the future of money—crypto.

Whether Argentina sought guidance from El Salvador on turning bitcoin into legal tender is unknown.

And also not the point.

Bitcoin is clearly emerging as a globally preferred alternative to the world’s short-sighted affair with the US dollar.

Over in Switzerland, as I noted in a dispatch back in April, citizens are pushing for a constitutional referendum that would force the national government to hold part of the country’s reserves in bitcoin.

The logic of doing so is as sound as jumping off a bridge… when it’s on fire.

As I noted in that Swiss dispatch:

Professor Gunther Schnabl, head of the Institute for Economic Policy at the University of Leipzig and a former advisor to the European Central Bank, framed the bitcoin proposal in terms of the Western world today: “Government debt has risen sharply in most industrialized countries, meaning that the risk of default has increased.”

The good professor sees the granddaddy of crypto as a legit tool for risk diversification within the Swiss National Bank’s foreign currency reserves.

I say it all the time, but facts are facts: Western currencies face a crisis.

Then again, what would you expect when currencies are backed by nothing but debt and plagued by rancorous politics. The dollar, the euro, the yen, and several others are increasingly viewed with suspicion by folks globally who are increasingly aware of—and concerned about—their weaknesses.

El Salvador, the Swiss, and now Argentina are on to something.

That something is a financial safety net.

I can’t think of many times where’d I say that “Argentina is on to something”—unless it’s steak, wine, or soccer. But in this case, those Argentine muckety-mucks are on to something.