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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

#251

Post by qaq »

b_tterc_p wrote: post #198
qaq wrote: post #95

Earlier quoted context omitted.

"There are now 1.90$ credited to both me and Bob, where before there was only 1$ credited to me. The 90 extra cents are now part of the money supply. They appeared out of thin air." I think you are confusing money supply and record keeping. The only spendable money is what bank actually has so if you and Bob where the only customers of that bank and bank loaned 90c of your 1 dollar to Bob the only money you could spe…

This is not true. You can spend up to a dollar, because you’re spending from your bank account and everyone trusts that you’re allowed to take up to a dollar. Dollars a fungible, so you’ll be taking someone else’s dollar, but that’s ok, because not everyone needs their dollar at once. Bob can spend 90 cents because he has 90 cents, though he is obligated to pay it back later. The bank can loan out (in this example) 8…

Do you understand what run on the bank is ? Do you understand a difference between physical world and a theory that is used for macro economic modeling? Because majority of people are under FDIC limits and basically attribute 0 counterparty risk when dealing with their own bank the net economic effect can be modeled using a theory that you are quoting in very simplified terms. Any given bank can only operate using deposits they have not loaned out if they run out of that FDIC will take over (greatly simplifying obviously banks can borrow money against their assets, loan portfolio etc.). So in real world terms the only bank that creates money out of thin air is FED.

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

#252

Post by gridlockd »

b_tterc_p wrote: post #247
gridlockd wrote: post #243

Earlier quoted context omitted.

I'm not justifying anything, I'm making an observation. I don't hold any Tethers nor do I have any intention to do so. I'm absolutely not saying Tether is "not as bad as a bank". However, as far as a cryptocurrency goes, Tether obviously works even when it's only backed by fractional reserves. Remember, most cryptocurrencies are backed by nothing . > It only lost 30% of my money so far! If I held any Tether, I could…

Ponzi schemes also hold value- for a while. Right now, we’re in the while. The peg has worked. It seems unlikely to me that it will continue to work. I suppose that’s the last I’ll say on the matter.

Ponzi schemes also need to produce persistent returns, Tether doesn't. Ponzi schemes aren't priced like free-floating currencies, Tether is.

If we look at the peg carefully, Tether has often traded above one dollar. That's because of Tether's utility as a cryptocurrency. Actual dollars are far harder to move around than Tether. Other cryptocurrencies are backed by nothing and often far more volatile.

The market is certainly pricing in the risk of the fractional reserve, but it priced it so low that it's almost imperceptible. In lieu of any catastrophic events, the peg will probably hold, because it held for the longest time, when it was unclear if there was any backing whatsoever.

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

#253

Post by village-idiot »

easymodex wrote: post #250
village-idiot wrote: post #223

Earlier quoted context omitted.

You're describing a different process. People lost their life savings because they purchased assets that went down, or they lost their jobs in the general economic downturn. Nobody lost their life savings because their bank suffered a run and their deposits were lost. To extend the metaphor, this is the difference in getting wiped out in the 2017-2018 crypto crash, and getting wiped out by Mt. Gox.

Im not describing a different process, they had their money in a savings account on a bank that went under, they have been liquidating it's assets since the 2008 crisis to repay people and it's still not done.

Which bank?

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

#254

Post by gridlockd »

perl4ever wrote: post #245
gridlockd wrote: post #235

Earlier quoted context omitted.

> 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 ci…

"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" If that was true, that every loan by a bank was multiplying assets by 10, because they're required to hold 10% in reserves, then we would instantly have runaway unimaginably huge inflation and everything would collapse. So even if you don't understand why it's not true, common se…

> If that was true, that every loan by a bank was multiplying assets by 10, because they're required to hold 10% in reserves...

It is true. Assuming that banks are exerting their full capacity for lending, banks would be multiplying the money supply by 10.

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

> ... then we would instantly have runaway unimaginably huge inflation and everything would collapse.

That isn't true. If you get loan to buy something, that isn't free money. You're going to have to not buy other things to pay back the loan.

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

#255

Post by perl4ever »

gridlockd wrote: post #254
perl4ever wrote: post #245

Earlier quoted context omitted.

"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" If that was true, that every loan by a bank was multiplying assets by 10, because they're required to hold 10% in reserves, then we would instantly have runaway unimaginably huge inflation and everything would collapse. So even if you don't understand why it's not true, common se…

> If that was true, that every loan by a bank was multiplying assets by 10, because they're required to hold 10% in reserves... It is true. Assuming that banks are exerting their full capacity for lending, banks would be multiplying the money supply by 10. https://en.wikipedia.org/wiki/Fractional-reserve_banking#Mon... > ... then we would instantly have runaway unimaginably huge inflation and everything would collaps…

You're saying it's free money for the bank. So the banks would have all the money and nobody else would have any and the economy would collapse.

Look, how do you know you're not the equivalent of a flat-earther? Is there any doubt in your mind about whether you have correctly understood the situation? When did you become convinced of your views?

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

#256

Post by gridlockd »

perl4ever wrote: post #255
gridlockd wrote: post #254

Earlier quoted context omitted.

> If that was true, that every loan by a bank was multiplying assets by 10, because they're required to hold 10% in reserves... It is true. Assuming that banks are exerting their full capacity for lending, banks would be multiplying the money supply by 10. https://en.wikipedia.org/wiki/Fractional-reserve_banking#Mon... > ... then we would instantly have runaway unimaginably huge inflation and everything would collaps…

You're saying it's free money for the bank . So the banks would have all the money and nobody else would have any and the economy would collapse. Look, how do you know you're not the equivalent of a flat-earther? Is there any doubt in your mind about whether you have correctly understood the situation? When did you become convinced of your views?

> You're saying it's free money for the bank.

I never said anything like that. I'm saying the bank is creating new money that is becoming part of the money supply. I gave you a Wikipedia link so that you can convince yourself.

> Look, how do you know you're not the equivalent of a flat-earther?

Wikipedia says what I am saying.

> Is there any doubt in your mind about whether you have correctly understood the situation?

That is a question that you really have to ask yourself.

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

#257

Post by Thorrez »

londons_explore wrote: post #150
Thorrez wrote: post #117

Earlier quoted context omitted.

5% isn't possible, but you can make over 2% on treasury bills currently. The risk of the US government defaulting on loans can be essentially ignored.

Except in the crypto industry, where US bonds are likely to be seized, and therefore probably have an average payout rate below parity.

Do you have any information about US bonds being seized like this? I don't understand how it could happen.

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

#258

Post by Thorrez »

dmix wrote: post #131
Thorrez wrote: post #117

Earlier quoted context omitted.

5% isn't possible, but you can make over 2% on treasury bills currently. The risk of the US government defaulting on loans can be essentially ignored.

This might be a dumb question but can you sell a treasury bond to a 3rd party before the terms are over without losing too much money?

This might not be exactly answering your question, but you can buy 4 week treasury bills. Even if you can't sell bonds, having money tied up for 4 weeks might not be a big problem.

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

#259

Post by v64 »

dragonwriter wrote: post #151
v64 wrote: post #22

Earlier quoted context omitted.

> Question -- why does this matter to me? If you don't trade cryptocurrency and aren't invested in the market day to day, it very likely doesn't matter. > As long as it facilitates short-term transactions and people are agreeable to trading it at 1 USD Right now this is the case because the US AG announcements have not fundamentally changed the day to day use of the token, as you stated. However, as the lawsuit moves…

> Right now this is the case because the US AG announcements NY AG, not the US AG.

Correct, thanks.

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

#260

Post by perl4ever »

gridlockd wrote: post #256
perl4ever wrote: post #255

Earlier quoted context omitted.

You're saying it's free money for the bank . So the banks would have all the money and nobody else would have any and the economy would collapse. Look, how do you know you're not the equivalent of a flat-earther? Is there any doubt in your mind about whether you have correctly understood the situation? When did you become convinced of your views?

> You're saying it's free money for the bank. I never said anything like that. I'm saying the bank is creating new money that is becoming part of the money supply. I gave you a Wikipedia link so that you can convince yourself. > Look, how do you know you're not the equivalent of a flat-earther? Wikipedia says what I am saying. > Is there any doubt in your mind about whether you have correctly understood the situation…

Do you think banks destroy money?
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