Developing Countries: HBD Getting More Important

about 2 years ago

There was an election in Brazil and Luiz Inácio Lula da Silva was able to defeat Jair Bolsonaro. While this is not something that is going to upset the balance of power globally, it does affect the citizens of Brazil.

In reading Lula's platform, it is easy to see how he is going to follow the same playbook. Politicians never learn. Granted, there is debate whether he will get his ideas through. Yet, this is exactly what people should prepare for.

Long story short, these people fail to see (or ignore) the interconnectedness of economic and monetary matters. They simply think they can do whatever they want without major consequence.

As for Lula, his policies will set off another massive wave of inflation due to the fact the REAL will further decline against the USD.

This is obviously bad news for the people of Brazil. Fortunately, the Hive Backed Dollar (HBD) offers a solution.

Source

The Milkshake Theory

Brent Johnson was the first I came across promoting this idea. It is something that everyone on Hive should be mindful of. We are dealing with a global situation where capital flow is crucial. Understanding what is taking place can salvage people's accounts.

What is the milkshake theory?

Basically, it is the idea that the US Dollar, and denominated assets, is going to suck in all the capital from around the world. The events taking place globally are the straw which will then reach into other economies and pull out the money.

For example, hedge fund managers in Japan will dump their YEN based assets, convert the YEN for USD, and then purchase dollar denominated assets. This puts further downward pressure on the currency, complicating the matter for policy makers even more.

Naturally, this is not just relegated to Japan. We can see this happening all over the world. Just think of the USD and the related assets as the best house on the block. While it might be in decay, at least it is not on fire like the rest of the neighborhood.

The Power of HBD

It is easy to focus upon the 20% APR that placing HBD in savings pays. However, this is only one piece of the puzzle.

What happens if one's currency declines 10% against the USD? This means that everything in that country is 10% more expensive simply due to currency exposure. Thus, anything tied to international trade will see a price increase.

That means that, by placing some of one's money in HBD, not only does the 20% present a return, it is enhanced by the fact the purchasing power, in USD terms, is preserved. Hence, the individual can swap the HBD back to the native currency for a 10% (in this example) gain.

With we are dealing with globally, this is something everyone outside the USD should be mindful of.

HBD gives people access to the USD without actually having to get them. This is also vital since there is, globally, a USD shortage. Countries are having a tough time getting USD. Since there are so many loans denominated in this currency, there is high demand.

We also have to factor in the massive, overt corruption of some countries banking systems. These effectively are not much more than mafia-style loan sharks. Trust is almost non-existent. It is a situation that only gets worse when the government is of the same ilk as many African nations are.

This is the power of HBD. Anyone reading these words can gain access to the USD by having HBD in one's wallet. It requires no government permission or bank intervention. One can simply gain the coin through swapping other cryptocurrency or even by being active on Hive.

Either way, if one holds a small amount of money in this currency, he or she is protecting oneself from downside moves in the local currency. In some instances this can actually be larger than the APY paid out of savings.

Brazilians Should Pick Up Some HBD

Looking at Lula's victory against this backdrop shows how it is a good idea for Brazilians to park some of their money in HBD.

Lula is going to be like most politicians and try to spend into prosperity. This challenge with this is that it puts downside pressure on the currency.

If USD denominated assets start to suck money in from around the world, this will continue to add to the demand for USD. This is going to have an effect on local economies as they deal with issues of currency exchange.

Turning to HBD can be a game changer for these people. Whereas the banks might not have USD available, HBD can be acquired in the Internal Exchange. As we can see, even without much volatility in $HIVE, we see almost $200K in trading volume.

It is often best to have a hedge in place when there is uncertainty. In many of the developing nations, the inflation rates are getting out of control, mostly because of the relation to the USD.

HBD is a way to hedge against this and protect at least a portion of one's wealth.

This is something overlooked by those who deal mainly in USD. However, for those outside of this currency, getting into it might be a way to save a lot of downside pain.

HBD accomplishes this.

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