Earlier quoted context omitted.
What would happen if the US Government stepped in and took over Tether? Would it be feasible for a different foreign government to do so?
What would they take over? Massive liabilities?
Just business as usual.
Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
231–240 of 260 posts
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#232Earlier quoted context omitted.
I’m not sure why this one is getting downvoted. It’s not wrong. Technically bob would probably spend it somewhere and the recipient of bob’s spending would put it in the bank. But the outcome is pretty much the same. I just threw out some bits that didn’t affect the state much. But for illustrative purposes it’s probably best to assume that the 90 cents is eventually put into the same bank, so people can follow why t…
Well, typically the interest from Bob's loan would be deposited, making the bank's balance go up to a maybe $1.03 or $1.04.
If we’re getting really technical, the interest belongs to the bank as profit. The bank decides to give you a cut of it, which you put in the bank anyway.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#233Earlier quoted context omitted.
I never said that Crypto was any good or that fractional reserve was bad. It obviously works for the banks (until it doesn't), it seems to work for Tether as well. I'm just pointing out the parallels, which are far more striking than the differences. People here point out that fractional reserves is backed by loans and securities of (supposedly) equal value, or that it's all regulated and insured, but it wasn't alway…
> but it wasn't always like that, Insurance and regulation is good for you as a consumer, and yeah that is new. But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Tether is not a bank. You have no guarantee of being allowed to exchange tether for dollars. It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything
> But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks.
Greater or equal face value, not actual value. Tether is basically making the same claim.
> Tether is not a bank.
I never said that Tether was a bank.
> You have no guarantee of being allowed to exchange tether for dollars.
To be pedantic, no such guarantee exists for bank deposits either.
> It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything.
Tether obviously does work, it's probably the most stable cryptocurrency out there, despite being run by sketchy people. You can exchange it for other cryptocurrencies and you can exchange cryptocurrencies for ordinary currencies. Absent proper access to ordinary banking, Tether has been a tool for exchanges to perform settlements in the hundreds of millions of dollars. The view that Tether "does nothing" is just uninformed.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#234Weird so many negative comments, this is astronomically better than what banks have in reserve. https://www.google.com/search?q=how+much+cash+must+a+bank+ha...
You're stretching the definition of reserve too far. Banks are fractionally liquid , but they're actually fully backed by non-cash assets, such as mortgages, business loans, and bonds. The reserve requirements and risk levels are tightly regulated and they pay insurance (FDIC) to protect against the risk of sudden withdrawal demands or market downturns. In practice this has been working for a very long time, with run…
Uh, I think you are the one now stretching. Tether can meet 74% of their liabilities all at once. Where a bank can only meet 3% or 10% of their liabilities all at once. Tether is way more liquid than a bank.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#235Earlier quoted context omitted.
> Assume that “the bank” in question represents all banks. "The bank" can't simultaneously be "all banks". Sure, if we consider "all banks" then $1 paid into the system can "magically" turn into $1.90 (and far more) without even considering interest. That's my original point! Money is being created by fractional reserve banking. https://en.wikipedia.org/wiki/Money_multiplier
It doesn’t matter which bank the loan is deposited into. That doesn’t affect what’s happening here. I’m saying one bank because it’s easier to understand. If you really want to be pedantic, sure, maybe bank 1 has $1 + interest and bank 2 has $0.90. That’s also possible But it’s important to get that money is not blindly created. It’s done because value is created at a faster rate than physical dollars. You can view b…
> It’s done because value is created at a faster rate than physical dollars.
[citation desperately needed]
I think you're just letting your imagination run wild on how things work and why that makes sense.
> You yourself can create “new money” by making a loan yourself.
No I can't. If I make a loan to myself, there is no new money to circulate. If a bank makes a loan on fractional reserves it is new money than can circulate and that can itself be the basis for new money creation.
> The new money is just the result of value creation.
The new money is the result of fractional reserve lending, period. Whether "value" is created along the way is absolutely not a given.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#236Earlier quoted context omitted.
Why would anybody buy Tethers for $1.00 from Tether if someone else is selling them for $0.99?
well why do you buy currency and pay a commission?
There is no commission in the example, or alternatively any commission is priced into the numbers given.
Unless Tether can buy Tethers cheaper than anyone else (through some unspecified mechanism) then they can't profit from arbitrage any more than anyone else.
Of course Tether can charge a fee to mint new Tethers, or to exchange Tethers for actual dollars. That's exactly what they do.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#237Earlier quoted context omitted.
> but it wasn't always like that, Insurance and regulation is good for you as a consumer, and yeah that is new. But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Tether is not a bank. You have no guarantee of being allowed to exchange tether for dollars. It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything
> But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Greater or equal face value , not actual value. Tether is basically making the same claim. > Tether is not a bank. I never said that Tether was a bank. > You have no guarantee of being allowed to exchange tether for dollars. To be pedantic, no such guarantee exists for bank deposits either. > It’s just... a weir…
The guarantee you can withdraw funds from a bank account does exist, it’s the FDIC. Tethers terms of service specifically state you’re buying funbucks / chuck-e-cheese tokens and they have no redemption value. A unit of value in your bank account represents a claim you have against the assets held in the bank backed by the weight of the US government. A Tether is worth whatever you can get the next guy to buy your bags for representing no obligations on anyone.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#238Earlier quoted context omitted.
You're stretching the definition of reserve too far. Banks are fractionally liquid , but they're actually fully backed by non-cash assets, such as mortgages, business loans, and bonds. The reserve requirements and risk levels are tightly regulated and they pay insurance (FDIC) to protect against the risk of sudden withdrawal demands or market downturns. In practice this has been working for a very long time, with run…
Uh, I think you are the one now stretching. Tether can meet 74% of their liabilities all at once. Where a bank can only meet 3% or 10% of their liabilities all at once. Tether is way more liquid than a bank.
Liquid and solvent are different things.
Tether is more liquid, if you trust that the 74% are actually in "cash equivalent securities" and not loaned to themselves (again), but they're absolutely insolvent.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#239Earlier quoted context omitted.
> but it wasn't always like that, Insurance and regulation is good for you as a consumer, and yeah that is new. But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Tether is not a bank. You have no guarantee of being allowed to exchange tether for dollars. It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything
> But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Greater or equal face value , not actual value. Tether is basically making the same claim. > Tether is not a bank. I never said that Tether was a bank. > You have no guarantee of being allowed to exchange tether for dollars. To be pedantic, no such guarantee exists for bank deposits either. > It’s just... a weir…
From my perspective you’re just justifying tether’s failure to keep its promises by saying it’s not as bad as banks, but also saying it’s not a bank when it’s pointed out how it utterly fails as a bank replacement; when it’s then pointed out that tether doesn’t serve any real purpose and is just a temporary store of value before it eventually collapses, you go back to the fractional reserve comparison.
It also feels like you’re jumping on a worn out bridge and telling me it hasn’t broke yet. Look! It only lost 30% of my money so far!
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#240Earlier quoted context omitted.
I never said that Crypto was any good or that fractional reserve was bad. It obviously works for the banks (until it doesn't), it seems to work for Tether as well. I'm just pointing out the parallels, which are far more striking than the differences. People here point out that fractional reserves is backed by loans and securities of (supposedly) equal value, or that it's all regulated and insured, but it wasn't alway…
> but it wasn't always like that, Insurance and regulation is good for you as a consumer, and yeah that is new. But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Tether is not a bank. You have no guarantee of being allowed to exchange tether for dollars. It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything
Tether works great in the actual goal: give shady exchanges access to USD without having to do all the KYC/AML it takes to get access to traditional financing.