Re:El Salvador expected to default as Bitcoin plummets
by el-salvador on Wednesday May 11, 2022 @11:05AM
(#31341033)
> The downside of using the USD as a local currency is that the local central bank cannot set its own lending rates
Salvadoran here
After dollarization happened in 2001, all loan interest rates went down. My parents paid their mortgage in a shorter time because of that.
Re:El Salvador expected to default as Bitcoin plummets
by el-salvador on Wednesday May 11, 2022 @01:09PM
(#31342859)
It was less risky for the banks to lend in USD than in Salvadoran Colones. So lower interest rates.
That was true even when the Salvadoran Colon was stable for most of its history. It's been very close to 8.75 for the past 30 years.
The downside of using the USD as a local currency is that the local central bank cannot set its own lending rates (markets will set rates at what the larger dollarized economy in the US is at) and has less control over monetary policy.