Crypto Lessons Living in El Salvador - 2: What Is Wealth?
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January 11th, 2022

Share this if you think it’s valuable. I’m posting these because I’m convinced we are beginning to rewrite our economy and we have a chance to do it well. Thanks to technology we can make democracy what it was meant to be. These posts are meant to provide some insight to anyone interested in laying down a brick or 2. Share for humanity. :)

When living in a 3rd world country and intentionally watching the flow of money, you get a stronger sense of things that would be otherwise hidden. Wealth is a tricky thing to nail down. Yes it’s related to how much money you have, but that’s not the whole picture. Wealth is a vector, and there are a couple factors at play.

For this article, I’m going to be intentionally ignoring the people with ungodly amounts of money. most people aren’t part of the 0.01% so I’d rather focus on practical info for the 99.

Location, location, location.

We’ve all heard this phrase when talking about real estate. A house in LA costs a lot more than one in North Dakota. At first glance that seems to be because LA is better than North Dakota. But that’s not the whole picture. A bottle of water at a gas station might cost $1.50 and a bottle for half the size inside a Vegas night club might be $20 or more. How much money you have makes a difference, but not as much as where you spend it.

In El Salvador the average monthly income is $300 per month. Compared to the ~$4,000 average in the US at time of writing. That’s a big difference. In 1 month Americans make what someone in El Salvador would make all year. Yet some people in the US have to work 80 hour weeks just to make ends meet.

The main reason for this seems to be because in El Salvador, the US dollar is their main legal tender. Being far away from where it comes from makes it harder to come by, and that raises it’s value. making commodities “cheaper” but equal in value and spending power on things like food and rent essentially the same, while things made in other countries like computers and cars cost more and are seen as more valuable than the U.S.

To nail this point home lets look at numbers. We’ll take the cost of things as a percent of average income. Here’s what we find. Cost of a meal in El Salvador might be $2. while a meal for the same size might be $20-25 in the U.S. That’s 0.0066% of average monthly income in El Salvador (2/300) and 0.00625% of average monthly income in the U.S. (25/4000). This is essentially the same. With Fiat money, location determines it’s value. With a crypto standard, 1 bitcoin is 1 bitcoin wherever you are.

Cost Of Living vs. Cost Of Luxury

There are many luxuries in first world countries. The health system is better, the sewage systems function well, and most people have washing machines. These are nice to have for sure, but it feels like you pay for them everywhere. That’s something you notice when you buy a $15 taco. What are you really paying for? I know businesses need to function and everyone needs to get paid. Who doesn’t want a washing machine?

In the US most restaurants are chains, food is factory farmed and you pay a premium for food to be locally grown and organic. In countries like El Salvador, locally grown and organic is the default, and it’s a hell of a lot cheaper. Other things are more expensive. An ipad in the U.S. might be $1,200, while the same model in El Salvador costs $1,600. I know this because I made this purchase mistake while I was there.

For luxury goods, you’re paying for the goods as well as where the company you' are purchasing from is located, costs of doing business there, and costs of getting the thing to where ever you are. Because of the difference in dollar valuation “costs” of living go down while prices for luxury goods go up, and this really seems to be a factor of scarcity due to location.

Debt

A big difference between 3rd world countries and 1st world countries is how much debt there is. Again this seems to be because of the sneaky dollar valuations in different locations. On paper banks don’t want to give a loan to someone who only makes $3,600 per year. this is because they won’t be able afford a loan big enough for the bank to make a profit that’s worthwhile. You can treat debt as money because it gives you spending power. With debt people can buy things that they couldn’t otherwise afford and so they appear to be more wealthy than they are. This also allows for business to gain access to needed capitol to operate at a larger scale, which is probably why you see more chains in America than in 3rd world countries.

Something about debt that no one seems to talk about is that it creates a deficit that needs to be paid back. The lender has an asset and the customer has a liability. Put another way, the lender has gained a positive value and the person might have spending power, but ultimately has gained a negative value. Thus we can see how this can get out of hand. When there’s too much debt that doesn’t get paid back, banks close down, people lose their income and cant buy their $15 tacos. The taco shops have to lay off employees to cut costs in order to stay afloat. With more people losing jobs, a downward spiral has begun and a crash is coming.

A friend of mine told me he saw a pizza company offer 6 month financing for your order. You can get a loan for a pizza. How wealthy are we when people need a loan of this degree?

Conclusion: Bitcoin - The Great Equalizer

In this article I hoped to show a little bit of things that determine wealth. While 1 country might seem to have more on paper, that’s not always the case in reality. The location issue is a huge factor in what countries are seen as wealthy, and no one is taking into account how far away a country is in relation to the creation of it’s currency. In third world countries, a dollar will get you a lot more of some things and a lot less of another, leading to countries being having the ability to produce less due to the price of luxury items like computers and factory machines.

The decentralized nature of bitcoin is what makes it a godsend to countries far away from the money printing. It’s value is the same everywhere in the world, because it’s being mined everywhere. This pulls back the veil of wealth, and once the world moves to the bitcoin standard we’ll be able to see, truly, how wealthy a country is. The best part, is that it’s all about you being free.

I’ve mentioned the bitcoin standard before. You can probably tell by now that it’s a big topic with many nuances. That’s why it’s getting it’s own post, so stay tuned. Follow me on twitter @dill_eth if you want to be notified about future posts. :)

GM & GN! #WAGMI

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