«He who lives according to the pleasures of the body lives like an animal, pursuing immediate satiety that brings more pain later; On the other hand, the philosopher, by postponing and disciplining those desires, achieves higher and more lasting pleasures.
Plato
The money you use determines your time preference. But your time preference also determines the money you use. It is a bidirectional relationship, largely conditioned by the material context to which one is subject at a given time and place, as well as the knowledge available for that same space-time.
Time preference refers to the degree of patience or impatience that a person is willing to tolerate for the satisfaction of their desire, according to the degree of well-being that said satisfaction will bring them in relation to how long they wait for it. The economist of the Austrian school, Hans Hermann Hoppe, thus distinguishes between a high and low time preference:
«Depending on your high time preference, you may want to be a vagabond, a wanderer, a drunk, a drug addict, a dreamer or simply a carefree guy who wants to work as little as possible to enjoy each day as much as possible. (…) However, regardless of what a person’s original rate of time preference is or the original distribution of such rates in a given population, once it is low enough to allow any savings and formation of capital or consumer durables, a tendency for the rate of time preference to fall is set in motion, accompanied by a civilizing process.
Democracy, the God that failed – Hans-Hermann Hoppe
Simply put, high time preference: eating in a restaurant every day; low time preference: save by eating at home to open a restaurant.
The Venezuelan case, with its different socioeconomic levels and the coexistence of different qualities of money such as the bolivar, the dollar, bitcoin and USDT, is paradigmatic to illustrate how bad money leads to a high time preference, but also how a high time preference inclines towards the use of bad money.
The bolivar or storing value in fish
Let’s start from the bolivar. Like any hyperinflationary currency in history, the bolivar contracts the time horizon. As if it were fish, a hyperinflationary currency is no good for storing and transporting value over time because it rots, starts to smell bad and, if consumed at the wrong time, makes you sick.
The bolivar, we know, expires rapidly. It is not surprising, since 14 zeros have been subtracted from it in less than two decades. As soon as you get it, you receive along with the coin a feeling of haste: you must get out of it as soon as possible because every second you spend with it is a second in which you are losing value, in which it rots.
This rush to get away from the hot potato or the rotten fish is already symptomatic of the mental and cultural illness imposed by hyperinflationary money. As we discussed with psychologist Paulo Márquez in episode 8 of the podcast Separating Money and the State (SDE), This career is bad money, it is a stressor that functions as a breeding ground for the universe of pathologies and/or extreme behaviors by mutilating the future perspective.
The impossibility of saving makes a nihilistic society, as expressed by Trezor’s Josef Tetek in the second episode of SDE. If your saving capacity is limited to a few minutes, life is hopefully reduced to satisfying basic needs.
If you barely live day to day, the coverage of your physiological needs remains a continuous question, the family falters, the cultivation of emotional relationships is truncated, self-esteem falls, and spiritual self-realization or the development of virtue become chimeras if they even cross the mind.
Assuming that we are beings of meaning, I mean that the meaning and direction of our life is configured through what we do with what is given to us in the world, using a currency that makes future perspective impossible empties us of meaningbecoming a shell that drags ourselves through day to day.
Of course we are talking about the most extreme cases and we know that not every person who lives in bolivars, especially when inflation is slight, lives in such a state of need. But, in all cases, the person who earns in bolivars will look for a way to get rid of them to glimpse a glimpse of savings and, therefore, of the future.
The dollar or borrowing from the future
The dollar provides an intermediate stage of temporal perception and a respite of stillness from the hectic urgency of the bolivar. Earning in dollars allows you to live more peacefully in the present and, depending on how much you earn, even accumulate for the future.
However, all fiat currencies, since they are not anchored in real money (such as gold) and even by macroeconomic decision, have historically been inflationary. The difference between inflationary and hyperinflationary is one of degree, not nature: some, at certain historical moments, are more inflationary than others. Like food, some currencies have a closer expiration date, while others last a little longer. But storing value in food is always doomed to expire.
For reasons that exceed the scope of this text, Latin Americans in general, but, in this case, Venezuelans, have the US dollar on a pedestal and do not realize that it is also subject to the inflationary policies of the rulers in power. All in all, considering that their local currencies are usually of worse quality than the dollar, it makes sense that they lean towards the lesser evil.
The logic promoted by dollarized economies is that of debt, consumption and spending. This is how it was designed since Keynes and it still remains the canon of the economic establishment. Saving is penalized because, it is said, it slows down the economy, while spending boosts it. This is how inflation is theoretically justified as a benefactor for society.
Under this vision, the accumulation of value in dollars is only possible in the medium term. For the time you save for, say, a home or a business, chances are that prices have gone up and you can no longer afford it.
The structure of the game promotes living under debt, having to borrow from the future in order to acquire present goods and services. This is also why it is common for Americans to have to become part-time investors, since they do not have money that is good at transporting long-term value.
But it is also because of living under this reality that some Americans are quicker to understand Bitcoin as a store of value, while many Venezuelans prefer to hoard the currency that Americans are looking to throw away.
Bitcoin and USDT: the best is not always the most useful
The first Venezuelans to adopt Bitcoin did so as a way to escape the bolivar, just as they adopted money from video games such as RuneScape, World of Warcraft or Tibia. They soon understood it as money outside the control of any government, which resonated as something favorable within the framework of their traumatic monetary experience. They also understood it as a lucrative business in the context of subsidized electricity, so they began mining. We have written extensively about the Bitcoin adoption experience in Venezuela in NoticiasVE.
At that time stablecoins were not so popular and there was no existing infrastructure to operate with them either. It is curious to think that, despite the fact that Venezuela was a pioneer in the adoption of Bitcoin, and despite the great revaluation of bitcoin since those early years, and the great depreciation of the dollar in the same time frame, The herd effect of the adoption of cryptocurrencies in Venezuela is occurring through stablecoins.
It is increasingly common in the country for people to use Binance and USDT. The Binance p2p market has even become a reference for the exchange rate in the parallel market. Despite the efforts to promote bitcoin, the privilege that the dollar enjoys in the Venezuelan collective imagination made it easier for this digital version to penetrate the population.
Obviously, there are practical advantages. Short-term price stability in a low-income country provides greater comfort than bitcoin’s volatility. Also the fact that they appear to be the usual dollars reduces the mental fatigue of having to learn what that new bitcoin currency is. The counterparty risk that Tether and Binance are companies while Bitcoin is a commodity is not taken into account; it’s just trusted that, to the extent that so many people are adopting it, it must be safe.
USDT penetrates more easily in Venezuela also for a deeper reason: we are not used to thinking and planning life in Bitcoin timeframes. Venezuelan society, in general, is immediate and hedonistic. Postponing the satisfaction of current desire in pursuit of a higher, but more distant, good is a rarity in the scale of Venezuelan values.
This may be linked, as we mentioned, to the determination of the time preference imposed by money as bad as the bolivar, so achieving a medium-term vision and stability like that offered by the dollar seems more than enough. Thinking about savings for ten, twenty, thirty years, much less generational savings, is usually something unthinkable.
Bitcoin causes this effect. After understanding its internal mechanics and its quality as money, and experiencing its appreciation over time, instead of the usual currency depreciation, people begin to postpone consumption and think more about the long term. That civilizational process that Hoppe mentions is set in motion, in which we even begin to think about a legacy for future generations.
Obviously, it is unfair to want a person who earns only what is necessary for daily subsistence to think about saving even a dollar in bitcoin. But we also know that this is not the entire population.
It is often said that using stablecoins and platforms like Binance is a gateway to Bitcoin. It is undoubtedly something that facilitates literacy about the available tools. But really the jump to use one currency or another also depends on a jump in time preference and in how we value the satisfaction of our desires over time, which also represents a cultural leap.
We want to believe that with the political changes that the Nation is experiencing, it is not a time when the dollar is ratified as the standard and that, while Americans get rid of them in favor of Bitcoin, Venezuelans end up accumulating that waste.
We trust that open-mindedness to new forms of money and, potentially, new standards of living will bring with it an update in time preference and, with it, in the money that is used to transport value over time.
Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of NoticiasVE. The author’s opinion is for informational purposes and under no circumstances constitutes an investment recommendation or financial advice.