Hamstrung by dollar, Ecuador will create its own virtual currency

10:33a ET Tuesday, August 5, 2014

Dear Friend of GATA and Gold:

Bloomberg's headline on the report appended here about Ecuador's plan to create "bitcoin-like money" is misleading, insofar as bitcoin's virtue as money, like gold's virtue, is its supposed finiteness, while any money created by government is far more likely to become infinite in supply. The report itself seems worthwhile mainly for indicating another government's inability to accept that other than perhaps sunshine, wind, rain, and tides, no real resource is infinite and that, as a result, human affairs require choices.

Indeed, maybe Ecuador should name its virtual currency the "infinito" -- if the name isn't grafted onto the dollar, euro, yen, and yuan first.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

***

Bitcoin-Like Money Is Ecuador's Latest Dollar-Saving Plan

By Nathan Gill
Bloomberg News
Tuesday, August 5, 2014

QUITO, Ecuador -- After mortgaging most of Ecuador's oil and gold to finance spending, President Rafael Correa is planning to create virtual money to pay the nation's bills.

Congress last month approved legislation to start a digital currency for use alongside the U.S. dollar, the official tender in Ecuador. Once signed into law, the country will begin using the as-yet-unnamed currency as soon as October. A monetary authority will be established to regulate the money, which will be backed by "liquid assets."

Less than six years after repudiating $3.2 billion of its dollar-denominated debt, Ecuador has dwindling oil reserves, with current-account deficits that are draining dollars from the economy and financing needs at a record. While using virtual money to pay government workers and contractors would help conserve hard cash, the currency may prompt Correa to boost spending even more and undermine the nation's ability to repay long-term bonds, according to Landesbank Berlin Investments.

"This is usually the start of debasement, inflation, and depreciation," Lutz Roehmeyer, who helps manage about $1.1 billion of emerging-market assets at Landesbank Berlin, including Ecuadorean debt, said in a telephone interview. ...

... For the remainder of the report:

http://www.bloomberg.com/news/2014-08-05/bitcoin-like-money-is-ecuador-s...