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We will not pursue the potential acquisition of FTX

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Re: We will not pursue the potential acquisition of FTX

#421

Post by eitland »

Godel_unicode wrote: post #418
eitland wrote: post #415

Earlier quoted context omitted.

Apples and oranges. The original comment that I answered is technically false if there exist a single mortgage that isn't a gamble. Now, if only a single such mortgage existed you’d still have a point, but the fact is millions of loans are given and paid back every year without any complications at all: there is plenty of income and plenty of security for very many loans. IIRC, what Lehman did was to deliberately tra…

Nope, just smaller apples and bigger apples. There’s no such thing as a mortgage that isn’t a gamble. At best you can say there are mortgages which are safer (even much much safer) than others. “There’s no risk here” is what causes financial crises and bank runs, which is the larger point.

If I cannot pay my bank get my house, which is worth significantly more than what I have borrowed.

It means the bank can be sure to recover their money and their costs.

That isn't a gamble.

Re: We will not pursue the potential acquisition of FTX

#422

Post by Godel_unicode »

eitland wrote: post #421
Godel_unicode wrote: post #418

Earlier quoted context omitted.

Nope, just smaller apples and bigger apples. There’s no such thing as a mortgage that isn’t a gamble. At best you can say there are mortgages which are safer (even much much safer) than others. “There’s no risk here” is what causes financial crises and bank runs, which is the larger point.

If I cannot pay my bank get my house, which is worth significantly more than what I have borrowed. It means the bank can be sure to recover their money and their costs. That isn't a gamble.

You clearly weren’t in the real estate market in 2008, I suggest you google “real estate short sale”.

If you loan someone money to buy a house, you are betting that either they will be able to pay or that the market will appreciate enough that all of the costs of foreclosure and resale will be less than the sale price of the house.

Both things being false at the same time in 2008 ruined Lehman brothers because they had the same thought you’re expressing here. Their gamble didn’t pay off.

Re: We will not pursue the potential acquisition of FTX

#423

Post by PathOfEclipse »

mstipetic wrote: post #417
PathOfEclipse wrote: post #406

Earlier quoted context omitted.

At what point in the world's history has wealth not been concentrated? What, therefore, is your argument or evidence that wealth inequity isn't natural? Even in video games with an online economy and trade that resets periodically, within a week of a reset you'll see massive disparity in wealth between the top and everyone else that only grows over time. And I mean massive . You should read "Wealth, Poverty, and Poli…

What is this magical wealth you speak of? Who is ensuring it, who is guarding it? It’s a game that people play until they feel it gives them a reasonable chance to live. Once that’s gone all bets are off and your magical numbers on a computer don’t mean much.

From Merriam-Webster, wealth is:

a: all property that has a money value or an exchangeable value

b: all material objects that have economic utility

I'm not sure what' you're talking about with regards to "ensuring" or "guarding" it. But in general, wealth is produced in various forms by people. That's generally the goal of work! Just as important, wealth decays over time. And, like with everything else in this universe, everything related to the production and maintenance of wealth is unevenly distributed, including:

1) Physical resources

2) knowledge and skills

3) cultural and moral values

4) geopolitical landscape

5) personality and personal productive capacity

6) social circumstances

7) dumb luck

Given that none of this is evenly distributed between individuals, groups, nations, etc., it's absurd to expect wealth to be evenly distributed, even in a hypothetically just world. In fact, based on what we know, we should expect differential wealth to be a simple and indisputable fact of life.

In a functioning economy, people earn money by creating value for others. This generally means that even as the rich get richer, so do the poor. It is hardly disputable that capitalism has done more to lift more people out of poverty than any other economic system. Also, because wealth decays, to maintain wealth one must invest it to produce more of it. It is through this investment that society can benefit as a whole.

The problems with wealth redistribution include:

1) By taking wealth from people who know generally able to best produce it, you reduce their ability to invest wealth to produce more of it. All of society suffers for this as overall wealth decreases for everyone.

2) When giving wealth to people who aren't producing anything, they take the wealth and spend it without creating any more wealth. Overall wealth decreases for everyone. It is hardly disputable that welfare programs in Western countries have led to far more dependence and far more able-bodied people not working than before these programs existed.

It is not an accident that wealth redistribution makes countries poorer, ultimately harming the poor that the redistribution is meant to help. We should be focusing less on wealth equity and more on wealth production and maintenance.

https://www.northwood.edu/afeu/when-free-to-choose/how-to-en...

Re: We will not pursue the potential acquisition of FTX

#424

Post by acdha »

eitland wrote: post #421
Godel_unicode wrote: post #418

Earlier quoted context omitted.

Nope, just smaller apples and bigger apples. There’s no such thing as a mortgage that isn’t a gamble. At best you can say there are mortgages which are safer (even much much safer) than others. “There’s no risk here” is what causes financial crises and bank runs, which is the larger point.

If I cannot pay my bank get my house, which is worth significantly more than what I have borrowed. It means the bank can be sure to recover their money and their costs. That isn't a gamble.

If you think that isn’t a gamble, learning some history is in order. Real estate markets can go down, often in highly correlated events – for example, in San Diego in the 90s prices fell and stayed down for years because Cold War defense contractors laid off a ton of people & nobody needed a nice house near a closed plant. The market in San Diego did recover eventually but a bank would have to be prepared to maintain that property & pay taxes for years before selling it at a profit.

During the subprime crisis, the entire US market went down by 30% and in some places sales basically halted for months. Many thousands of people lost homes, and almost all of them had equity on paper before the bubble popped.

Individual actions also matter. Maybe the reason you can’t pay your bank is because you developed a mental illness or drug problem, and they now need to replace a large amount of damage before anyone will pay what you paid.

Those aren’t constant high risks but they are why smart bankers calculate the odds and plan for what they’ll do when something inevitably goes wrong.

Re: We will not pursue the potential acquisition of FTX

#425

Post by chii »

JumpCrisscross wrote: post #405
chii wrote: post #321

Earlier quoted context omitted.

> When a bank makes a loan, it creates money. The bank must reach some level of capital requirement to make this loan. In other words, if the bank does not have enough reserves, they cannot make this loan. The bank can use customer deposits as part of their reserves. They can also borrow from another bank (presumably, paying them interest). Lastly, i think central banks also have a reserve borrowing method (but not s…

> bank must reach some level of capital requirement to make this loan No, they don’t. We force them to through fiat. But credit isn’t created from money—credit is money. Left to their own devices, financial systems create as much credit as the market will bear, then the market shifts, money vanishes and voila, a panic.

and after said panic, you end up with "some level of capital requirement to make this loan".

"we force them through fiat", is just the same as "we force everybody to not murder and steal".

Re: We will not pursue the potential acquisition of FTX

#426

Post by vba616 »

arcticbull wrote: post #379
vba616 wrote: post #319

Earlier quoted context omitted.

Don't you have that backwards? My mortgage is the bank's asset . My checking or savings account is the bank's liability.

When you bring money to a bank, that money is treated as both a liability (to you) and also as collateral against which the bank can lend money to others. When a bank lends money to you, it's net neutral. A $100,000 mortgage creates a -$100,000 position on the bank's liabilities list and a $100,000 deposit in your bank account. They create $100K in new money to fund this loan collateralized by both the reserves on de…

>A $100,000 mortgage creates a -$100,000 position on the bank's liabilities list

On a financial statement of a real, 120 year old bank on sec.gov, loans are in the asset section of the "Consolidated Statements of Condition". The deposits are in the liabilities section, and there are no negative numbers in either part.

>and a $100,000 deposit in your bank account.

Is that what happened the last time you applied for a mortgage?

Re: We will not pursue the potential acquisition of FTX

#427

Post by vba616 »

chii wrote: post #403
patrickthebold wrote: post #400

Earlier quoted context omitted.

Not gp but I've so many questions! We'll I'll just ask two: Suppose to buy my house the seller wants cash. I take out my cash and give it to the seller. Ok fine, but the bank is creating money out of thin air, where does the cash come from if lots of people do the same? Follow up: more realistically, I wire money to the seller, what actually happens between the banks? It seems like bank A creates money from nothing a…

> where does the cash come from if lots of people do the same? the cash comes from the gov't printing it. It's a mere fraction of all spendable money. Banks store some amount of it, just for such cases where you wish to withdraw it. If everyone demands their deposit as cash, the bank would run out of physical notes very quickly. They would, in all likelihood, ask the central bank to print the cash (in exchange for th…

>They are creating money only via lending, and there are laws regarding how much they're allowed to lend out (called reserve requirements).

I thought "reserve" literally meant to set aside part of your assets.

If I have to set aside, X% of the money I create, how does that stop me from creating infinite money? I just create enough to reserve part of it.

Re: We will not pursue the potential acquisition of FTX

#428

Post by chii »

vba616 wrote: post #427
chii wrote: post #403

Earlier quoted context omitted.

> where does the cash come from if lots of people do the same? the cash comes from the gov't printing it. It's a mere fraction of all spendable money. Banks store some amount of it, just for such cases where you wish to withdraw it. If everyone demands their deposit as cash, the bank would run out of physical notes very quickly. They would, in all likelihood, ask the central bank to print the cash (in exchange for th…

>They are creating money only via lending, and there are laws regarding how much they're allowed to lend out (called reserve requirements). I thought "reserve" literally meant to set aside part of your assets. If I have to set aside, X% of the money I create, how does that stop me from creating infinite money? I just create enough to reserve part of it.

> I just create enough to reserve part of it.

but you cannot create enough, because before you created, you did not have enough reserve to legally create the loan. The newly created loan cannot be part of the reserve to which you count towards your original reserve requirement to qualify to make the new loans!

otherwise, this would just be a loophole in the reserve requirement laws.

And these monies are not cash - they are loans. If these loans default, and the bank somehow cannot collect the collateral for it, the bank will lose equity. Aka, the shareholders of the bank takes the loss. If this loss is great enough, the bank becomes insolvent. That's why banks do not lend to risky people, or takes a larger collateral.

Re: We will not pursue the potential acquisition of FTX

#429

Post by mstipetic »

PathOfEclipse wrote: post #423
mstipetic wrote: post #417

Earlier quoted context omitted.

What is this magical wealth you speak of? Who is ensuring it, who is guarding it? It’s a game that people play until they feel it gives them a reasonable chance to live. Once that’s gone all bets are off and your magical numbers on a computer don’t mean much.

From Merriam-Webster, wealth is: a: all property that has a money value or an exchangeable value b: all material objects that have economic utility I'm not sure what' you're talking about with regards to "ensuring" or "guarding" it. But in general, wealth is produced in various forms by people. That's generally the goal of work! Just as important, wealth decays over time. And, like with everything else in this univer…

Yeah go tell Jack Ma or any Russian “billionaire” how great their wealth is. There are people (police, army) that ensure ownership is respected. What happens when they refuse to do it? You have such a naive understanding of things I don’t know why I’m even having this discussion.

Re: We will not pursue the potential acquisition of FTX

#430

Post by matheusmoreira »

pjc50 wrote: post #387
matheusmoreira wrote: post #333

Earlier quoted context omitted.

This isn't a cryptocurrency problem though. It's a cryptocurrency exchange problem. As you noted, they have essentially reinvented centralized fractional reserve banking with none of the benefits and all of the drawbacks. They're all unregulated banks in disguise. Cryptocurrencies were meant to put an end to such things. Ironic how corporations ended up reinventing it all on top of crypto. Exchanges are everything th…

> Exchanges are everything that's wrong with this space. Exchanges are the space. Without them, there's no way for people to buy into the system with real money in the first place!

> Without them, there's no way for people to buy into the system with real money in the first place!

Of course there is: mining. It's a very simple proceds: fiat => energy => processor => cryptocurrency.

Yet another thing that failed. Everyone was supposed to be able to mine cryptocurrency using their own computers. Instead things got so competitive that massive centralized operations using specialized hardware became the norm.

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