Fiat Economists & Inactive Volcanoes

Good Morning Everyone,

A debate erupted (pun intended) on Saturday with American fiat economist Steve Hanke intentionally mocking El Salvadorian President Nayib Bukele over his plans to utilize geo-thermal energy from an inactive volcano to mine bitcoin, and to power the proposed “bitcoin city”.

He said in a tweet:

Lets be clear. Hanke is the epitome of a fiat economist. His twitter bio states he is also an FX and commodities trader. Assuming he is actively participating in markets as per his own words, it’s important to appreciate his motives, and the incentives at play. That’s not to say what he says is automatically untrue, but in this instance it seems that he is either wildly ignorant to the particulars related to geothermal energy and volcanoes, or has a very strong bias against El Salvador. I don’t know for sure, but my money is on the latter.

I view betting against Hanke in a similar vein to betting against fellow washed up fiat slave Paul Krugman who has been ridiculed and basically laughed out of existence online for the last 15 years for his comments comparing the internet to fax machines.

Honestly you can’t make this stuff up. I used to connect to bulletin boards from the school library when i was 12yo in the early nineties, and I could have told you that back then that the internet was going to be HUGE. Perhaps he was short a bunch of tech stocks at the time and was talking his book.. ? We’ll likely never know.

Anyway…

President Bukele fired back highlighting Hanke’s obvious lack of understanding in relation to geo-thermal energy in a high quality twitter dunk.

To quote Bukele:

Hard to argue against the idea of building a city below an active volcano. Not sure who could possibly think thats a good idea .. ? Hanke’s comments seem to suggest he thinks so. Pretty classic.

You’ve got to love the fact that conversations like this can happen on the internet in a completely open way and public way. Pre-internet when a small number of corporations had a monopoly on broadcasting, it was easy for them to discredit those they opposed, and difficult for people to set the record straight and call out the nonsense and counter. Not any more!

Just another example of how powerfully the way we communicate globally has changed. Access to this kind of discourse in my opinion is absolutely incredible, and the value of it is certainly not lost on me.

The debate continued with Steve Hanke calling for a feasibility study, and stating El Salvador already has a huge energy deficit and that they import 22% of their electricity.

President Bukele does not waste a second and unleashes a jordan-esque dunk session on Hanke and shows he is clearly underestimating the Salvadorian President.

In a phenomenal thread that i recommend you read as he includes some images and further data, he completely pulls apart Hanke’s attack, and frankly gives him a real dressing down.

Bukele highlights the following:

* El Salvador does not have an energy deficit. They import energy because it is still cheaper in some respects to do so. Maximum energy consumption in El Salvador is 1,030 MW, while the installed capacity is able to produce 2,065.79 MW

* Bukele outlines the $1b natural gas plant project he started at the beginning of his presidency projected which would output 380MW of electricity 24/7, in a cleaner and more economical way than anywhere else in their region.

* The plant will start producing as of May this year

* This will enable El Salvador to export energy, and remove less sustainable supply.

* El Salvador are building a water damn that will generate a further 66MW of clean energy

* Despite the countries size (21,000km2), there are more than 170 volcanos.

* El Salvador have dug 4 new wells to increase energy production from geothermal, and plan to do more.

* Regarding the “inactive” Conchagua Volcano - Bukele estimates a 90% chance of finding a well generating more than 42MW - enough alone to power bitcoin city.

Bukele finishes with the following:

My main takeaway from this is that Bukele is clearly being underestimated. He is focussed and has prioritized energy which is without question to the benefit of the countries citizens. He demonstrates competence on the topic of energy, and is betting on it. He is running El Salvador like a CEO of a company. He is getting the attention from the world, because instead of talking and playing games, and playing politics - he is executing.

Very hard to hate. Especially in a world fixated on case numbers, masks and general covid hysteria.

While I have no doubt it’s not all sunshine and roses, ofcourse Bukele has his flaws as we all do, but it’s very difficult to want to bet against him. Especially when his international collegues are making it so easy. The majority of leaders, certainly those in the west are making Bukele look like something akin to a political version of Jeff Bezos.

Although it feels like the bar has never been lower politically, and most in the west continue to demonstrate an utter lack of competence, posturing and virtue signalling with very little actual results to show for all the words, Bukele and El Salvador continue to move ahead with their strategy and continue to innovate inspired by a new technology and a world of new possibilities. Exciting stuff.

Hope you all have a great start to your week, and i’ll speak to you tomorrow.

AK

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