Electronic money & will it eventually devalue your dollar?

HGQ2112 wrote:

Here is "my answer"...just...that...well, it's not so much mine. I am going to trust Correa, for now...since he has done mor in 7 years than the combined efforts of the previous 70 years. So, I will offer Correa's response to this:

1) Tourism;
2) High-tech;
3) Creating a high-quality domestic industrial base (Hence, why I stomach the high-tariffs, which I admittedly mostly oppose - but I understand what Correa is trying to accomplish...domestic production = domestic consumption = more jobs = greater cash circulating in the domestic economy).

That's what he's building...and I am buying...because he's got one heck of track record under his belt right now.  Separately, yeah...I believe it can be done.  Tourism is the "easy part", the other two...much longer-term and more challenging, so we will have to be patient to see the full results. Could that mean a temporary economic bump? Yes. Why? Tell me one economy in the world that has gone up, up...with...with nary a bump in sight? Just not possible, so, eventually, the great times will end...but I am riding my winners long...and glad this country finally cut its losers...even if they didn't do it short.

Hector

All valid points HQ. Can't fault you for buying into Correa, nor can I fault the job Correa has done. Suppose one of my concerns is what happens when there is a bump in the road, and a downturn? You are absolutely correct that it's normal, and happens in every country. To keep rising with no cooling off period is completely unrealistic. Don't personally hold Correa responsible for the fact that there will be some bumps in economic terms along the road, but I do worry there will be a snowball effect because there is not enough private enterprises that can cushion some of the blow. Understand that big business, and private enterprise is by no means perfect, and it does come with some strings attached, but personally would like to see a little more growth in that area.

j600rr wrote:

but I do worry there will be a snowball effect because there is not enough private enterprises that can cushion some of the blow. Understand that big business, and private enterprise is by no means perfect, and it does come with some strings attached, but personally would like to see a little more growth in that area.

Guess should clarify that in case is taken out of context, or misunderstood. Though think most probably understood where I was headed. By snowball effect am concerned that a normal economic downturn could very easily become much more problematic than normal if too many industries, and sectors are dependent on the government injecting money into system to keep things afloat, and that you don't have enough private enterprises, and businesses that are less reliant on government spending to create some jobs, and keep money coming into the overall economy during down times.

Granted Ecuador will never have as many sectors, and private industries as say the U.S., but to me appears that they are still over reliant on only a few sectors, and loans from China to keep things afloat. Now, don't get me wrong. Hopefully that is not the case, and some of these concerns are blown out of proportion by different media outlets.

An article in Spanish from WSJ today discussing the strengthening dollar, which of course is bad for exporters of raw materials in Ecuador.

Just last week Correa was lamenting the fact Ecuador is using the dollar.

Too bad there are restrictions on bringing goods here, because I would like to take advantage of some cheap electronics..................

http://lat.wsj.com/articles/SB113852490 … 33220.html

j600rr wrote:

HGQ2112 wrote:

Here is "my answer"...just...that...well, it's not so much mine. I am going to trust Correa, for now...since he has done mor in 7 years than the combined efforts of the previous 70 years. So, I will offer Correa's response to this:

1) Tourism;
2) High-tech;
3) Creating a high-quality domestic industrial base (Hence, why I stomach the high-tariffs, which I admittedly mostly oppose - but I understand what Correa is trying to accomplish...domestic production = domestic consumption = more jobs = greater cash circulating in the domestic economy).

That's what he's building...and I am buying...because he's got one heck of track record under his belt right now.  Separately, yeah...I believe it can be done.  Tourism is the "easy part", the other two...much longer-term and more challenging, so we will have to be patient to see the full results. Could that mean a temporary economic bump? Yes. Why? Tell me one economy in the world that has gone up, up...with...with nary a bump in sight? Just not possible, so, eventually, the great times will end...but I am riding my winners long...and glad this country finally cut its losers...even if they didn't do it short.

Hector

All valid points HQ. Can't fault you for buying into Correa, nor can I fault the job Correa has done. Suppose one of my concerns is what happens when there is a bump in the road, and a downturn? You are absolutely correct that it's normal, and happens in every country. To keep rising with no cooling off period is completely unrealistic. Don't personally hold Correa responsible for the fact that there will be some bumps in economic terms along the road, but I do worry there will be a snowball effect because there is not enough private enterprises that can cushion some of the blow. Understand that big business, and private enterprise is by no means perfect, and it does come with some strings attached, but personally would like to see a little more growth in that area.

It is all a process.  Done right, greater amounts of FDI will come. Done wrong, FDI comes into a country completely devoid of infrastructure, sans an educated population and heavily indebted to vulture capitalists - or, as I prefer to think of it, the "grand" Ecuador of old. Anyone longing for a return to those "halcyon" days?  Btw...let's be clear...Ecuador has plenty...and I do mean plenty...of FDI. What most folks politely mean is "Western capital". That's just so "yesterday". Happens every time there is a global economic sea change...has happened many times before....but the capital axis is shifting West to East and North to South. So, if what remains of Western capital would like to just keep their money up North and those "thriving economies", well...have at it. Of course...I don't see the value there...and I don't see the growth opportunity there...which, of course, makes me starkly curious as to what exactly one would invest in, at that point? However, China, South Korea, Qatar and a host of non-Western countries...well, their pouring in money into the exceptional value and high growth Ecuador market.  I think we'll do just fine. That's my bet...the old-fashioned way, betting on value and growth.

Hector

HGQ2112 wrote:

It is all a process.  Done right, greater amounts of FDI will come. Done wrong, FDI comes into a country completely devoid of infrastructure, sans an educated population and heavily indebted to vulture capitalists - or, as I prefer to think of it, the "grand" Ecuador of old. Anyone longing for a return to those "halcyon" days?  Btw...let's be clear...Ecuador has plenty...and I do mean plenty...of FDI. What most folks politely mean is "Western capital". That's just so "yesterday". Happens every time there is a global economic sea change...has happened many times before....but the capital axis is shifting West to East and North to South. So, if what remains of Western capital would like to just keep their money up North and those "thriving economies", well...have at it. Of course...I don't see the value there...and I don't see the growth opportunity there...which, of course, makes me starkly curious as to what exactly one would invest in, at that point? However, China, South Korea, Qatar and a host of non-Western countries...well, their pouring in money into the exceptional value and high growth Ecuador market.  I think we'll do just fine. That's my bet...the old-fashioned way, betting on value and growth.
Hector

Pretty good article highlighting some of the many problems currently facing China, and I am actually still a fan of China. Believe they will still be a major player throughout the 21st century, but there will be some busts during that time.
http://online.barrons.com/articles/anne … 1417846773

Completely agree that there is a global economic sea change, but guess maybe I'm missing the point you are trying to make. Is not most of the investment from these countries going into Ecuador basically for access to Ecuador's natural resources? Isn't China loaning large amounts of money for access to oil, oil rich land, and other natural resources? How interested in Ecuador would any of these countries be if Ecuador wasn't rich in natural resources?

Are not several of the countries you mentioned very pro capitalist? Again, perhaps am missing the point, but seems like Ecuador is more than willing to accept money from capitalist countries. So if it's a capitalist country not from the West that's fine, but if it's from the West then it's the bad vulture capitalists? Do you believe that  these countries investing in Ecuador are doing it out of the goodness of their hearts, and don't expect something in return for their investment? Do you think China isn't going to completely strip and destroy the land? When all is said and done I'll put money down that China makes the U.S. look like a bunch of boyscouts.

Should mention there is a free market entrepeneur, and a political entrepeneur.
Granted there is never really a 100% true free market, but is still relatively free , and open to anyone
willing to take the risk on his or herselfs idea, or product.

Political entrepeneurship is more of token capitalism, and is protected by political connections, unfair and
expensive rules, and regulations, and only a select few profit. It's bloated, inefficient, and not beneficial
to society.

Example of a more free market would be the computer industry, and hi-tech which has been relatively open to all,  and think for the most part the results have been pretty positive. Example of a politically capitalistic market would be health insurance, or the whole insurance industry in general. It's big, bloated, inefficient, costly, and is of little benefit to anyone the way it is now.

Some would associiate the insurance industry with capitalism, but I think it's the complete opposite of capitalism, or at least free market capitalism. Now if you want to argue Ecuador has had a past history full of political entrepeneurs that have had a destructive impact on the society, then I'd agree. If your going to say Ecuador has been basd on free market capitalism in the past, and failed, then I would disagree.

j600rr wrote:

Example of a politically capitalistic market would be health insurance, or the whole insurance industry in general. It's big, bloated, inefficient, costly, and is of little benefit to anyone the way it is now.

Some would associiate the insurance industry with capitalism, but I think it's the complete opposite of capitalism, or at least free market capitalism.

Especially in the USA where there are tax penalties for not participating in health insurance, against the law to drive without car insurance, how free is that?

mugtech wrote:

Especially in the USA where there are tax penalties for not participating in health insurance, against the law to drive without car insurance, how free is that?

Probably not particularly free. It's not like insurance isn't a great hedge to help protect against catastrophes that could easily bankrupt a person. Unfortunately has gotten to point that you'll  wind up going broke just getting the minimums required by law, and then if something does occur the companies will find some reason why they don't have to pay out, and then raise your rates more, or dump you as a customer afterwards.

I mean look, there is no absolutely perfect system. That nirvana and perfect system that people want doesn't exist, but It's hard to argue that Cuba, Venezuela, former Soviet Union, and other countries that are very anti-capitalist(or were) are superior to countries that have some form of capitalism.

j600rr wrote:

I mean look, there is no absolutely perfect system. That nirvana and perfect system that people want doesn't exist, but It's hard to argue that Cuba, Venezuela, former Soviet Union, and other countries that are very anti-capitalist(or were) are superior to countries that have some form of capitalism.

Would never want to live under any system like the ones you listed, and let's thrown China on to that list.  Obviously totally unrestrained capitalism doesn't work either, where money just keeps buying more power and more unfair advantages.  Regulating same has been difficult, such as "Too big to fail" ideas.  We need more huge failures to let everyone know that the money they risk is their own.

mugtech wrote:

Would never want to live under any system like the ones you listed, and let's thrown China on to that list.  Obviously totally unrestrained capitalism doesn't work either, where money just keeps buying more power and more unfair advantages.  Regulating same has been difficult, such as "Too big to fail" ideas.  We need more huge failures to let everyone know that the money they risk is their own.

Agree, with the exception of China. Still think long term they will make the adjustments necessary, but I'd be shorting them big time right now. Oddly enough going back to around the mid to late 70's  the government started to take a much more free market approach, and made enormous progress (economically). Socially there is still much to be desired, but there has been progress.

The rest I agree 100% with you. People always take things to extreme. Business, and government both have important, and vital roles to play. When one or the other has to much power with no checks and balances in place, then that is usually followed with disastrous results.

j600rr wrote:

Some would associiate the insurance industry with capitalism, but I think it's the complete opposite of capitalism, or at least free market capitalism.

The way the insurance industry (and more generally, the entire financial sector) operates in the US is a good example of corporatism. A more popular term is crony capitalism.

BobH wrote:

The way the insurance industry (and more generally, the entire financial sector) operates in the US is a good example of corporatism. A more popular term is crony capitalism.

Thanks Bob. Crony capitalism was the term I was looking for. Yep, financial sector, insurance industry, and quite a few other industries operate in this manner. Is unfortunate, but that seems to be the basic mentality of entrepreneur's these days. Have political connections, get government money to fund you, and then government money to bail you out, overwork and underpay employees, lay them off when they start to get experience, and can be a major net benefit to long term success of company. Gee, what could possibly be destructive to a society, and economy under that scenario?

Am probably only a small minority who feels this way, but is a pet peeve of mine when people who are anti-capitalism/business always use the above examples, and ignore the positive examples of capitalism, and free market enterprise that has produced amazing things, and created many quality jobs, and bettered many lives throughout the course of history.

j600rr wrote:

HGQ2112 wrote:

It is all a process.  Done right, greater amounts of FDI will come. Done wrong, FDI comes into a country completely devoid of infrastructure, sans an educated population and heavily indebted to vulture capitalists - or, as I prefer to think of it, the "grand" Ecuador of old. Anyone longing for a return to those "halcyon" days?  Btw...let's be clear...Ecuador has plenty...and I do mean plenty...of FDI. What most folks politely mean is "Western capital". That's just so "yesterday". Happens every time there is a global economic sea change...has happened many times before....but the capital axis is shifting West to East and North to South. So, if what remains of Western capital would like to just keep their money up North and those "thriving economies", well...have at it. Of course...I don't see the value there...and I don't see the growth opportunity there...which, of course, makes me starkly curious as to what exactly one would invest in, at that point? However, China, South Korea, Qatar and a host of non-Western countries...well, their pouring in money into the exceptional value and high growth Ecuador market.  I think we'll do just fine. That's my bet...the old-fashioned way, betting on value and growth.
Hector

Pretty good article highlighting some of the many problems currently facing China, and I am actually still a fan of China. Believe they will still be a major player throughout the 21st century, but there will be some busts during that time.
http://online.barrons.com/articles/anne … 1417846773

Completely agree that there is a global economic sea change, but guess maybe I'm missing the point you are trying to make. Is not most of the investment from these countries going into Ecuador basically for access to Ecuador's natural resources? Isn't China loaning large amounts of money for access to oil, oil rich land, and other natural resources? How interested in Ecuador would any of these countries be if Ecuador wasn't rich in natural resources?

Are not several of the countries you mentioned very pro capitalist? Again, perhaps am missing the point, but seems like Ecuador is more than willing to accept money from capitalist countries. So if it's a capitalist country not from the West that's fine, but if it's from the West then it's the bad vulture capitalists? Do you believe that  these countries investing in Ecuador are doing it out of the goodness of their hearts, and don't expect something in return for their investment? Do you think China isn't going to completely strip and destroy the land? When all is said and done I'll put money down that China makes the U.S. look like a bunch of boyscouts.

Answers to your very well articulated inquiries, seem pretty direct:

1) Yes, China will have economic ups and downs, no nation-state can avoid the vagaries of economic history.  Japan has been in a near 30 year recession.  The United States sits on a mountain of $18 Trillion USD in debt, with no hopes of ever growing out of it, leaving only a devaluation of the USD to the monetary equivalent of Monopoly currency as the only solution.  Economic cycles happen.
2) The FDI into Ecuador is fueling the natural resource sectors, the export of commodities sectors, the tourism sector, the high-tech sector...so, no...that's just more of the highly ignorant Western Press talking, Anyone wants to put boots on the ground in Ecuador and I will gladly show them the breadth of what FDI is accomplishing across multiple sectors in Ecuador.  It is not just an oil "tit-for-tat".
3) I never argued against Ecuador receiving money from capitalist nations, I merely noted that they are receiving money from capitalist China, capitalist South Korea, capitalist Qatar...etc.  Today's global nations have many capitalist fountains from which to drink and do not have to be bound to only the decaying Western World streams of capital any longer.
4) History has shown, with a great deal of consistency, that the servitude that comes from Western capital seems to exceed that found in capital from anywhere else. I have yet to see China demand a military base in Ecuador...while the USA decried the removal of their base in Manta, Ecuador.  Yes...there IS a difference and I won't pretend there isn't.  Economic transactions should be confined to the economic sphere of influence and not spill over to the political or military sphere of influence, as the strings attached to Western capital almost always seem to imply. Ask the African nations that are receiving Chinese capital if they note that difference, from the "financial assistance" of Western colonialists.  I've done that...from the board rooms to the streets. Score is China 1, Western Colonialists 0.
5) As for the destruction of the land...Chinas has been conducting oil related operations here for some time...no problem.  Chevron and BP left a legacy of environmental contamination. I will base my perspectives on existing facts, for now...and we'll see what the future brings, regarding your dire prognostications for the "China impact".  At present, hard to argue against current fact.

I enjoy the information you always give HQ. When I finally make it down to Salinas I'll have to buy you a few drinks, and pick your mind when you have some free time. For the record, I have no particular gripes with Correa's anti-U.S., or less than enthusiastic feelings he has for U.S., or Western capital. In point of fact he has many valid arguments against the U.S., and entities such as the IMF.

Agreed that it's important to have your boots on the ground, and see first hand what is happening in Ecuador. Is why I asked your opinion. You are there everyday, and can see first hand exactly what is happening, and what the general consensus is of the population.

Agreed again that the Western press puts it's own spin on things, but what media, government, etc., doesn't put a spin on things to support their opinion? It's good to see that it would appear  Ecuador is open to free enterprise.

In reality our overall view of things probably aren't that far apart. We will have to agree to disagree what the overall impact of China will be on Ecuador. I agree completely with many of the arguments you have made in the past about the U.S. debt, as well as the other negatives you have mentioned. Trust me, I am far from a fan of the overwhelming majority of U.S. policies. I like my life in the U.S. because am in good economic position, and enjoy all the amenities it offers. Trust me, don't enjoy the U.S. because of it's overbearing government.

I look forward to your Ecuador visit. Would be glad to meet...have a drink or two...show you around the place. Gorgeous country, finally on the right track after 100 years of abuse at the hands of its own leaders.

Nards Barley wrote:

Just last week Correa was lamenting the fact Ecuador is using the dollar.

And again this week. I don't usually quote entire articles (for copyright reasons, if nothing else), but this one is reasonably short:
http://www.telesurtv.net/english/news/D … -0058.html

President Rafael Correa says the U.S. dollar is the “exact opposite” of what Ecuador needs.
Ecuador's use of the U.S. dollar is hurting the country's economic growth, President Rafael Correa warned Monday.

“Dollarization was a bad decision,” Correa said.

The president said that in the face of low oil prices, Ecuador would benefit from control of its own currency.

Ecuador is the smallest member of OPEC. Under Correa, the Ecuadorean government has increasingly invested oil revenues in social services and economic development.

However, with oil prices slumping, Correa says Ecuador needs a flexible currency now more than ever. He argued that by using the dollar, Ecuador is “doing exactly the opposite of what (it) must do to address the looming scenario.”

“In these difficult times we will see just how important it is to have a national currency,” he added.

Ecuador adopted the U.S. dollar in 2000 after the value of its former currency nosedived in 1999.

Correa has long warned the continued use of the dollar is holding back the economy, once describing it as a “straight jacket.”

In July, Ecuadorean legislators approved a law paving the way for the use of a parallel electronic currency for domestic use.

There's nothing new here, Correa was an opponent of dollarization when it happened, and has been consistent on the subject (while saying he won't reverse it). I just think that with the new currency and the problems for oil exporters (possible default for Russia, much more so for Venezuela), speaking out on the subject may be a signal of things to come.

Or maybe not.

This is a very interesting dynamic. From an Ecuador-centric perspective, this is really an issue strewn with opportunity and risk on either side.The USD was the salvation of Ecuador, after USA-influenced factors sunk the country in the first place. However, the fundamentals for the USD are tragic, even if I continue to believe that its pending fate will be avoided, until another "international trade" currency of choice steps forward. So, jettisoning what will long-term be a "wounded currency", not all bad. However, short-term, this will lead to a devaluation of fiat assets in Ecuador and, long-term, while I remain confident of how Correa would handle the printing presses, the question becomes how will a future leader not named Correa do? If you own hard assets in Ecuador, you could benefit. If you are looking to acquire hard assets in Ecuador, you will definitely benefit, at least short-term, from a currency swap/likely devaluation. Interesting dynamics and I hope President Correa will remember that it is but a short shift from the frying pan into the fire. Make sure the cure isn't worse than the disease.

mugtech wrote:

j600rr wrote:

Example of a politically capitalistic market would be health insurance, or the whole insurance industry in general. It's big, bloated, inefficient, costly, and is of little benefit to anyone the way it is now.

Some would associiate the insurance industry with capitalism, but I think it's the complete opposite of capitalism, or at least free market capitalism.

Especially in the USA where there are tax penalties for not participating in health insurance, against the law to drive without car insurance, how free is that?

But don't you think that the taxpayer ultimately picks up the tab when people are sick or injured? Don't think health care insurance should have to be mandated either. Would love to expatriate to a civilized country where health care is just a given and nobody complains about the taxes they pay for it. Guess I'm an out of the closet socialist.

suefrankdahl wrote:

But don't you think that the taxpayer ultimately picks up the tab when people are sick or injured? Don't think health care insurance should have to be mandated either. Would love to expatriate to a civilized country where health care is just a given and nobody complains about the taxes they pay for it. Guess I'm an out of the closet socialist.

I still like you even if you are a socialist Sue.
Yes the taxpayer picks up the tab, but the taxpayer picks up the tab for a lot of things. I'll be the first to admit don't have the answer. Does U.S. healthcare need changes? Of course.
Is the health care perfect in countries that have a socialized health care system? Far from it.
Why can't there be a combination of both? Many countries have private health care, and also socialized, or government run healthcare.

HGQ2112 wrote:

This is a very interesting dynamic. From an Ecuador-centric perspective, this is really an issue strewn with opportunity and risk on either side.The USD was the salvation of Ecuador, after USA-influenced factors sunk the country in the first place. However, the fundamentals for the USD are tragic, even if I continue to believe that its pending fate will be avoided, until another "international trade" currency of choice steps forward.

The main question is what might that international currency be? Lots of talk, but as of now nothing can even be considered remotely close to replacing the U.S. dollar. Having an international trade currency probably isn't a bad idea at all, but the implementation of it is far from simple.

http://economix.blogs.nytimes.com/2014/ … ency/?_r=0http://usa.chinadaily.com.cn/world/2014 … 264069.htm

j600rr wrote:

Having an international trade currency...the implementation of it is far from simple.

http://usa.chinadaily.com.cn/world/2014 … 264069.htm

So Peking U. Prof. J. Yifu Lin blames the USD for global financial crises and thinks the solution to this is an international currency.   It's "the root cause" of these crises, he said of supposed dollar dominance.

If the dollar is to blame for creating financial crises internationally, Lin assuredly didn't come close to proving his case for that in this China Daily article.

Scape-goating.  Lin-sanity.

j600rr wrote:

As of now nothing can even be considered remotely close to replacing the U.S. dollar.

http://economix.blogs.nytimes.com/2014/ … ency/?_r=0

In this article, Cornell Prof.* Eswar Prasad essentially agrees with J600's point and makes a more logical case (than Lin's) for the USD remaining the world's reserve currency:

"The world still clamors for dollars, and there's no sign this will end.  The world is so eager for protection against financial market mayhem, and there's such a dearth of safe assets, so people may be willing to pay a high price for safety.

"It is plausible that there could come a tipping point when foreign and domestic investors lose confidence in the dollar.  But this would create turmoil in financial markets worldwide.  And that would cause investors to run for cover -- right back into the arms of the dollar!  So...for the foreseeable future the world is stuck in the dollar trap." 



* and former IMF China hand.

cccmedia wrote:

This is the month -- December 2014 -- that Ecuador's government is supposed to introduce the new digital currency, supplementing and at par with the U.S. dollar.

Technically, the EC government met its goal of launching the new digital currency in December, on Christmas Eve.

The "launch," as reported extensively at the blog SiliconANGLE, is phase one of three, and essentially involves enrollment in the system, to be followed by phase 2 in late February when the e-Money will start changing hands.

Here is what we now know....

The (English) name of the program has been announced:  Electronic Money Sysem (or EMS).

In this introductory phase, EC citisens can sign up for EMS on their cellphones by dialing *153#.

The money will start moving in phase 2 as participants can start delivering payments to individuals, stores and businesses that participate.

The third and final announced phase will begin almost one year from now, in late 2015, when EMS will allow the payment by cellphone of utility bills and taxes, and bank-funds transfers.

As was announced, the EC Central Bank will back the system through liquid assets and operate it as middleman.

Source: SiliconANGLE...and now widely available around the Internet.

cccmedia wrote:

The money will start moving in phase 2 (in late February 2014) as participants can start delivering money to individuals, stores and businesses that participate.

Expats are being deliberately excluded from using EC's new crypto-currency.

Users must supply their "cedula" (national ID) number AND PROOF THAT THEY VOTED IN RECENT NATIONAL ELECTIONS -- "a step that's designed to prevent foreigners from accessing the system."
(SiliconANGLE)

cccmedia in Quito

cccmedia wrote:

If the dollar is to blame for creating financial crises internationally, Lin assuredly didn't come close to proving his case for that in this China Daily article.

Scape-goating.  Lin-sanity.

Of course he speaks from a country which firmly controls the "value" of its currency.
Not exactly a free market country.

CNBC and former EC-businessman Gary A. Scott have weighed in on the matters of the Ecuadorian economy, the e-currency and inflation.

"Dollarization makes it very hard for Ecuadorian businesses to survive when the greenback is strong," writes Scott in a letter to his garyascott.com subscribers.  EC competitors such as Peru and Colombia gain a competitive advantage due to their currencies being weaker than the dollar, he says.

On the plus side, Scott adds, using the dollar has kept inflation low in Ecuador by preventing the printing of money here.

Unexpectedly low oil prices have put Ecuador under pressure to reduce the budget, obtain more loans from China and raise some taxes, according to CNBC analyst Everett Rosenfeld as quoted in Gary Scott's letter.

The CNBC analysis states that inflation will be more likely when the new e-currency starts catching on, as it will give the powers-that-be a vehicle for monetary expansion.

cccmedia wrote:

CNBC and former EC-businessman Gary A. Scott have weighed in on the matters of the Ecuadorian economy, the e-currency and inflation.

"Dollarization makes it very hard for Ecuadorian businesses to survive when the greenback is strong," writes Scott in a letter to his garyascott.com subscribers.  EC competitors such as Peru and Colombia gain a competitive advantage due to their currencies being weaker than the dollar, he says.

On the plus side, Scott adds, using the dollar has kept inflation low in Ecuador by preventing the printing of money here.

Unexpectedly low oil prices have put Ecuador under pressure to reduce the budget, obtain more loans from China and raise some taxes, according to CNBC analyst Everett Rosenfeld as quoted in Gary Scott's letter.

The CNBC analysis states that inflation will be more likely when the new e-currency starts catching on, as it will give the powers-that-be a vehicle for monetary expansion.

A strong currency can be a bit of a catch 22. Seems the new fad for governments is to try and devalue their countries currency. Mainly hurts a country, and businesses that rely heavily on manufacturing, and exporting. On the plus side imports are cheaper, and citizens have more buying power. Wonder how happy Russia is with a weak currency? Is kind of like oil. There is winners, and losers with high prices, and winners, and losers with low prices. Kind of the same scenario for currencies. Never going to have that perfect equilibrium point where everyone benefits, and wins.

Not really sure a strong dollar hurts business in Ecuador greatly, because don't really think Ecuador is that big of a manufacturing, and exporting country. Sure, they export some things, and will probably be hurt a bit, but if a strong u.s. dollar does major damage to the economy, then the whole economy has some major fundamental flaws. A strong dollar would be nothing more than a convenient excuse.

cccmedia wrote:

cccmedia wrote:

This is the month -- December 2014 -- that Ecuador's government is supposed to introduce the new digital currency, supplementing and at par with the U.S. dollar.

Technically, the EC government met its goal of launching the new digital currency in December, on Christmas Eve.

The "launch," as reported extensively at the blog SiliconANGLE, is phase one of three, and essentially involves enrollment in the system, to be followed by phase 2 in late February when the e-Money will start changing hands.

Here is what we now know....

The (English) name of the program has been announced:  Electronic Money Sysem (or EMS).

In this introductory phase, EC citisens can sign up for EMS on their cellphones by dialing *153#.

The money will start moving in phase 2 as participants can start delivering payments to individuals, stores and businesses that participate.

The third and final announced phase will begin almost one year from now, in late 2015, when EMS will allow the payment by cellphone of utility bills and taxes, and bank-funds transfers.

As was announced, the EC Central Bank will back the system through liquid assets and operate it as middleman.

Source: SiliconANGLE...and now widely available around the Internet.

Any updates as to how things are going with the new digital currency? Realize it's still early, but haven't really heard much word (pro or con) lately on how it's doing so far

Here is an episode of the Keiser Report where Max Keiser discusses how a digital domestic currency might work for Greece, while it is still using the Euro as an exchange currency. Very insightful as well regarding Ecuador's pioneering use of digital while running an economy on a currency it cannot produce itself.

Digital currency discussion in the first half:
http://www.maxkeiser.com/2015/02/kr724- … ve-greece/

CCC  The "Electronic" Money (so called) is actually nothing more that opening an account at one of the banks or coops using "cash". The account will be your so called Electronic money. You have to deposit money into the account and you will get an account number and a pin number. They claim that one reason for this is for the many poor Ecuadorians that dont have regular bank accounts. It is almost identical to using a debit card, except that the cell phone transfers the information re the account and amount to transfer to another person or business and it is deducted from the persons account. There is a list of all of the company's that except it on the Banco Central website . The merchants or? have to have a separate EMC also. They can immediately transfer the money to their regular accounts. But at a cost of .15 There are also pages that explain exactly how to use the EMC. They say that all transactions are backed by "liquid" cash assets in the Central Bank even though they say the Govt does not plan to pay contractors ect. this way. A person who might get paid with this form can go to the banks listed and receive cash or transfer to their regular accounts at a cost. They charge a fee .15 more or less for each transaction. A debit card does not charge. This may disuade Ecuadorians because that can add up in a day.

One of the reasons you see so many Ecuadorians filling lines at all of the banks and coops (we have all experienced this!) is that most get paid by direct deposit from their employers. They need to draw cash daily to live on. They say on the site that ATM's will also be able to fund cash for the Electronic money accounts also. It would appear that it would have been easier for the govt to ask "all" the poor Ecuadorians to open bank accounts. If you do the research on the actual function of this "so Called" Electronic money is is easy to see why most Ecuadorians will avoid it. It is easier to open a bank account and use a debit card almost anywhere you choose. Also according to the Banco Centrals list you can pay services now at least in Quito and Guayaquil. I pay services bills here in Cuenca on line on my computer directly from one of my bank accounts. Granted that many Ec do not have computers but they can pay simple at a coop or bank by giving the code number and have it deducted from their accounts.

In summary, why have more than one account for transactions. A regular bank account with a debit card makes so much more sense and can be used virtually anywhere and cash  is easily available at an ATM. Places that dont except debit cards now are probably not inclined to open another account and do the extra work for a sale using this EMC. And charging money to use the service is just another way for the Govt to make money.

All in all if you look carefully at this system you could quickly see that there is no real advantage to EMC but more expense. It is similar to all of the high tech company's in the US with smart phone apps to do tap and pay or Wallet, iPay, Pay Pal or ??. However those systems use one of your debit or credit card accounts. All still falls into the "catch all" electronic money in as much as they are  all digital (electronic) transactions. With all of the "world class" hackers out there it would seem that anything like this offers crooks more pickings to choose from putting us all at risk!! I do not see any advantage to using any type of "digital" currency. in addition to the digital means we already use.

Thanks for the informative post Cuenca boy.

Do you agree? Would like to see if other clear thinking people can see the real deal! I think I am correct in my post but am open to other observations.

gardener1 wrote:

Digital currency discussion in the first half:
http://www.maxkeiser.com/2015/02/kr724- … ve-greece/

Thanks for the link gardener.

Now I am a complete neophyte on the subject of cryptocurrencies. Here is where am lost. If anyone watched the first half of the link, the basic premise was that if Greece goes to a cryptocurrency, all of it's problems go away. Not for me to say if Greece getting involved with the Euro, and European Union was smart or not. However, seems like the notion that all they have to do is start a new currency pegged to the Euro, and all the problems go away is kind of suspicious. Hasn't one of the major problems facing Greece been poor economic policies, corruption, inept and incompetent leadership, and the list goes on? How does going to a cryptocurrency eliminate all these problems?

Cuenca boy wrote:

Do you agree? Would like to see if other clear thinking people can see the real deal! I think I am correct in my post but am open to other observations.

Yes I agree. Don't really have anything to add to your great post. Think you have pretty much summed things up very well.

My biggest curiosity was how the implementation was going?

I somewhat explained that as I have ascertained. My information came from the Central Banco website. They list all of the "users" at this time and explain exactly how it works. It is very different than some of the other electronic currencies in that a person has to deposit cash in the bank to use it. My understanding of Bitcoin is that guys sitting on computers are called "miners" create the complicated algorithms and then sell them to other users. I remember 2 years ago a friend of mine wanted me to invest in Bitcoin. He said at the tme I could buy for $2.50 the value increased to almost $1000. That is absolutely an inflationary and speculative venture. Like buying a stock with anticipation of it going up in value. When you buy Bitcoin it goes into a storage devise of yours called Bitcoin wallet. It consists of a number of algorithms  for the total value (perceived) of your total holdings. I have read that people have lost their storage devises and lost all of their money in Bitcoin. There is apparently no way to recover the money if that happens. I understand it is popular (dont know why?) But the stock market is also very popular as are casinos! I also read that the MIT originators of Bitcoin engineered it so that only 20 million algorithms could ever be written. With that being the case  the value has to fluctuate just the same as inflationary practice predicts.  20 million dollars 20 years ago it what??? today. No way in my book to be involved in such an uncertainty. Whats your take on this? Here is the link to Banco Central "Dinero Ecectronico"   http://www.dineroelectronico.ec/  use google page translate to read in English

If you want something with no liquidity, and wild price swings then guess bitcoin would be good. Personally have no interest in it. At least not as a currency. Guess if you want to treat it as a trading vehicle like a stock, or commodity, then that could be profitable, but again the lack of liquidity is a major problem. Anyone that trades the markets knows that you can very easily get killed from wild price swings in  a non liquid market instrument.

Even the majority of businesses that are accepting payments in bitcoins convert them to cash as soon as they get them. I look at it like this. If a penny stock jumps from a few pennies to $1200, and is now trading in the $200's with no liquidity, and everyone who gets paid in that stock are converting it into cash the next day, I want nothing to do with it. Which will offend some people, but that's essentially what it is. More power to the die hard fans. Maybe in time you are the ones who will have the last laugh. I will look elsewhere to make my money.

I agree, I said "no way" would I ever be involved in something like Bitcoin or any other medium without liquid support. Even the business's that take bitcoin have to sell  on a bitcoin exchange and are subject to value swings. As the dollar is strong I would suppose that it is more difficult to get the same value as when the merchandise was sold for bitcoin. Did you look at the bank link I posted? That will show you exactly what the implementation is now for EMC. That was your original question.

Cuenca boy wrote:

I agree, I said "no way" would I ever be involved in something like Bitcoin or any other medium without liquid support. Even the business's that take bitcoin have to sell  on a bitcoin exchange and are subject to value swings. As the dollar is strong I would suppose that it is more difficult to get the same value as when the merchandise was sold for bitcoin. Did you look at the bank link I posted? That will show you exactly what the implementation is now for EMC. That was your original question.

Yes. Got the link. Thanks for that. Have only browsed through it. Will take a closer look a little later.

j600rr wrote:

Any updates as to how things are going with the new digital currency? Realize it's still early, but haven't really heard much word (pro or con) lately on how it's doing so far.

You're darned tootin' it's early.

I suspect it's going to take many months to get this optional program really going, and at this point it's anybody's guess how many people will get digital bank accounts.

Thanks to Cuenca boy's detailed analysis we can see that the "new money" may not be that attractive to Ecuadorians overall.

This was designed as a program for citizens, not Expat residents, and I don't expect any discernable impact on Expats this first year.

I haven't seen or heard a thing in the marketplace about the electronic money.  As far as I can tell, the folks who are participating are not broadcasting about it.

cccmedia in Quito