Imagine a world in which large % of El Salvador prices are actually posted in BTC. Tradable goods would fluctuate between stupid cheap or expensive depending on BTC prices
Suppose you build a car in US and want to sell it for $30k USD in El Salvador. You set the price at 1 BTC. Your offer effectively functions as an outstanding BTC put. At any point in time, buyers can "sell" you one BTC for a car. BTC goes down and you are out a lot of cars!
If your tradable goods price is essentially long vol, what do you do? You perhaps price the vol into the contract, setting the price at say 2 BTC to make enough profits to cover the price movements
Or when BTC prices move too much you could conveniently "oops! all our cars are sold out"
Or you could simply have (assuming govt allows this) an equilibrium where all tradables at least are priced in e.g. USD or something. Anyways, if this goes ahead, it could be interesting to watch...
Even funnier, as was discussed on here a while back, _return policies_ become super weird with volatile currencies. Sell a bunch of cars in BTC, BTC values go up, suddenly a lot of people aren't happy with their cars and want their BTC back...
All this depends on how sticky prices are of course. Moreover, firms can hedge out much of this risk if they want! There are now many semi-liquid (though also some semi-legitimate) BTC derivatives markets, your car factory can in principle just swap out the risk and go to sleep
And from the perspective of El Salvadorian citizens, life is also weird. You hold a bunch of tokens. Perhaps prices of services, etc. stay relatively stable in BTC terms. But your purchasing power for intl goods/services fluctuates like crazy month over month
A more speculative thought. I have no idea how to model this, but I wonder whether the kinds of goods flows in/out of the country due to BTC/USD shifts would tend to stabilize BTC/USD, in some sense?
Or... the El Salvadorian central bank presumably couldn't defend BTC/USD even if it tried. But if enough countries did this, and in a sense acted in concert to trade to stabilize some BTC exchange rate, could we actually reach a relatively stable BTC/other-fiat regime?
Perhaps this would look something like the old gold-standard days, except rather than ppl trading in-principle-gold-backed fiat, ppl are literally trading tokens they own, but CB's do some occasional semi-concerted big interventions to try to stabilize prices?
Anyways, this is mostly sci-fi-(nance?), but it's an interesting situation to think about!
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