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Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

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Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#71

Post by perl4ever »

pbhjpbhj wrote: post #64
ShorsHammer wrote: post #58

Earlier quoted context omitted.

Do you think the US government could cover every single cent if all the depositors wanted their money out now? Not even physical cash, just a transfer to an overseas account. The money simply isn't there and the scales are enormous. US banks only can pay back 3-10% of cash deposits. The FDIC only has enough to cover a tiny proportion of bank liabilities. It seems very disingenuous for people in this thread to say "we…

The USA gov can just print the money to pay off the backed cash. Everyone gets their money. It may not be worth much if everyone actually demanded they could hold the dollar amount of their accounts in their hands in paper money - indeed, I imagine, you'd cause severe privations on the government funds in order to produce the money.

"It may not be worth much if everyone actually demanded they could hold the dollar amount of their accounts in their hands in paper money"

If literally nobody (hypothetically) is willing to own actual land, factories, and so on, then it's the tangible assets that are worthless, not the money. It would be the ultimate in deflation.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#72

Post by jeremyjh »

saalweachter wrote: post #48
e_tm_ wrote: post #19

Earlier quoted context omitted.

This is assuming that the stated 74% number is true. Fool me once...

If it's a fake number, it's an interesting choice. They aren't claiming to be 99% or 90% backed, which would be similarly disbelieved by the same people who disbelieved the 100% claim.

Suppose the real number is 3%. 74% sounds pretty good as a way to soften the blow a bit. It would be best to let the air out over a matter of weeks than minutes.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#73

Post by ShorsHammer »

pbhjpbhj wrote: post #64
ShorsHammer wrote: post #58

Earlier quoted context omitted.

Do you think the US government could cover every single cent if all the depositors wanted their money out now? Not even physical cash, just a transfer to an overseas account. The money simply isn't there and the scales are enormous. US banks only can pay back 3-10% of cash deposits. The FDIC only has enough to cover a tiny proportion of bank liabilities. It seems very disingenuous for people in this thread to say "we…

The USA gov can just print the money to pay off the backed cash. Everyone gets their money. It may not be worth much if everyone actually demanded they could hold the dollar amount of their accounts in their hands in paper money - indeed, I imagine, you'd cause severe privations on the government funds in order to produce the money.

I certainly agree it's possible, but at that stage you've gone down the Venezuelan path and I'd assume there are far smarter regulators in the States. The money wouldn't be given out, not even a fraction, it's a such a huge risk to stability that they'd cancel withdrawals and work from there. We saw this happen in Cyprus.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#74

Post by throwaway76524 »

tinco wrote: post #59

It's crazy that they messed this up, Tether is basically a money printing machine, all they had to do was be solvent. Let me start by saying I don't hold Tether nor have I ever, nor do I think it's a good idea. Tether is a fundamentally a risk free money making concept, it works just like gift certificates. The only thing Tether has to do is buy back Tether at any price lower than they sold it for and they make profi…

Kinda like the federal reserve ...

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#75

Post by ShorsHammer »

perl4ever wrote: post #57
bb88 wrote: post #54

Earlier quoted context omitted.

I think the difference is that in the end a Bank is backed and regulated by the US Government. Tether is not. So it is solvent or insolvent.

I don't see why being regulated or not has anything to do with whether you are practicing fractional reserve banking. As I understand it, the concept is just that your assets are not all liquid, but rather some of them are long term loans. Which is not to say I think unregulated banking is the same as regulated banking.

Bank reserves have little to do with money creation:

> Lord Adair Turner, formerly the UK's chief financial regulator, said "Banks do not, as too many textbooks still suggest, take deposits of existing money from savers and lend it out to borrowers: they create credit and money ex nihilo (out of nothing) – extending a loan to the borrower and simultaneously crediting the borrower’s money account

> the German central bank explains that the money supply is not determined by the reserves of private banks, but by market factors and regulatory decisions.

https://en.wikipedia.org/wiki/Fractional-reserve_banking#Cri...

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#76

Post by gridlockd »

tinco wrote: post #59

It's crazy that they messed this up, Tether is basically a money printing machine, all they had to do was be solvent. Let me start by saying I don't hold Tether nor have I ever, nor do I think it's a good idea. Tether is a fundamentally a risk free money making concept, it works just like gift certificates. The only thing Tether has to do is buy back Tether at any price lower than they sold it for and they make profi…

Are you aware that an actual bank - the kind of bank that the entire world economy relies on to function - would on average hold maybe only 10-20% of the money in their clients accounts? How do banks do it? They invent money out of thin air.

If Tether was a bank, its 73% reserve rate would be considered spectacularly high. The crypto world is basically re-inventing fractional reserve banking now.

> The only thing Tether has to do is buy back Tether at any price lower than they sold it for and they make profit.

How would Tether be able to sell Tether at a higher price than market price but then simultaneously buy Tether at a lower price than market price? Tether would have to wait for its price to drop and then rise again, just like any other trader. Curiously, Tether could spread FUD about Tether and then refute it.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#78

Post by georgeecollins »

gridlockd wrote: post #76
tinco wrote: post #59

It's crazy that they messed this up, Tether is basically a money printing machine, all they had to do was be solvent. Let me start by saying I don't hold Tether nor have I ever, nor do I think it's a good idea. Tether is a fundamentally a risk free money making concept, it works just like gift certificates. The only thing Tether has to do is buy back Tether at any price lower than they sold it for and they make profi…

Are you aware that an actual bank - the kind of bank that the entire world economy relies on to function - would on average hold maybe only 10-20% of the money in their clients accounts? How do banks do it? They invent money out of thin air . If Tether was a bank, its 73% reserve rate would be considered spectacularly high. The crypto world is basically re-inventing fractional reserve banking now. > The only thing Te…

If Tether were an actual bank, in the US it would be regulated and insured.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#79

Post by [deleted] »

btown wrote: post #37
miohtama wrote: post #23

Bitfinex money was on an account of a small Polish bank. It was confiscated by a US government when they chased Colombian drug cartels earlier in 2018. There was no proper segregation of client funds by their payment processor Crypto Capital Corp. Looks like Tether was collateral damage. Polish source: https://zaufanatrzeciastrona.pl/post/gielda-bitfinex-zgubila... (please use Google translator)

Tether is alleged to have been far more deeply and willingly involved than just "collateral damage." Per the AG's statement: "Those transactions – which also have not been disclosed to investors – treat Tether’s cash reserves as Bitfinex’s corporate slush fund, and are being used to hide Bitfinex’s massive, undisclosed losses and inability to handle customer withdrawals." https://ag.ny.gov/press-release/attorney-gene…

[deleted]

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#80

Post by wmf »

tinco wrote: post #59

It's crazy that they messed this up, Tether is basically a money printing machine, all they had to do was be solvent. Let me start by saying I don't hold Tether nor have I ever, nor do I think it's a good idea. Tether is a fundamentally a risk free money making concept, it works just like gift certificates. The only thing Tether has to do is buy back Tether at any price lower than they sold it for and they make profi…

Clearly the "free" profit Tether could make from float is smaller than the legal compliance risks they're taking. It's not the solvency they messed up; it's the money laundering.
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