11 ms·

At one point their T&S explicitly said that tether had no obligation to buy back tether at any price at any time. They then changed it to be more opaque.

jerf 7y ago
If there's any financial idea the crypto people just do not get, it's the idea of "backing". A currency is not backed by dollars unless I can convert that currency freely back into dollars. It does not constitute "backing" to have the money nominally somewhere in existence, but not actually available. Heck, who'd like a few hundred thousand jerfcoins? Come and get 'em! They're backed by dollars, in the sense that I guarantee there exists in the world many hundreds of thousands of dollars. jerfcoins don't give you any claim to those dollars, of course, but they're backed by them just the same! ("But jerf, what are US dollars backed by?" Purchasing from the US government the right to not be arrested and thrown in jail for lack of payment on taxes. Just 11 days ago, many people completed trading in their dollars for the year for that backing, so it's definitely a transaction that can done by real people. It may not be an aesthetically pleasing form of backing, but it seems to be working.)
- paganel 7y ago
  > But jerf, what are US dollars backed by I agree with you almost 100%, just wanted to add that no current Government/State can back the nominal monetary mass flowing through its economy with real money, no matter the amount of taxes they're collecting. The reason being that the nominal monetary mass it's pretty big (to use an euphemism) compared to the real money flowing through the real economy. For example in 2008 the CDS market alone was at some point "valued" at close to $36 trillion [1], while for comparison the US GDP back then I'd say was around $14-15 trillion (give or take a few trillion). Yeas, I know the CDS market back then was a financial abomination, and I do know that a lot of those $36 trillion were probably money counted twice or thrice or even more, but the idea remains. And that's just one market. What indeed still keeps this whole house of cards still standing, what keeps any financial system standing, is trust. And, as you very well put it, once you have the power to put people in jail (or launch inter-continental ballistic missiles) you kind of have a lot of trust by default. But there are moments when no matter how powerful you are you still manage to lose that trust, see the USSR post 1989 or the Spanish Empire during and after the rule of Philip II [2], that's when things turn nasty: > Charles V had left his son Philip with a debt of about 36 million ducats and an annual deficit of 1 million ducats. This debt caused Phillip II to default on loans in 1557, 1560, 1575, and 1596 (including debt to Poland, known as Neapolitan sums). Lenders had no power over the King and could not force him to repay his loans. These defaults were just the beginning of Spain's economic troubles as its kings would default six more times in the next 65 years.[9] Aside from reducing state revenues for overseas expeditions, the domestic policies of Philip II further burdened the Spanish kingdoms and would, in the following century, contribute to its decline, as maintained by some historians.[10] [1] https://www.bis.org/publ/qtrpdf/r_qt1806/images/graph-1.jpg https://www.bis.org/publ/qtrpdf/r_qt1806/images/graph-1.jpg [2] https://en.wikipedia.org/wiki/Philip_II_of_Spain#Economy https://en.wikipedia.org/wiki/Philip_II_of_Spain#Economy
  - panarky 7y ago
    It's a zombie idea that fiat currencies are somehow "backed" by tax collection, or the military, or the "legal tender" text on the banknote. No matter how many times we go through the refutation, zombie ideas like this just never die. Money is purely a social construct. It only has value because people collectively find it useful. There is no backing.
    - tim333 7y ago
      I'm not convinced it's a zombie. Name a currency that's existed a few decades and does not have backing from any of those.
      - chipotle_coyote 7y ago
        I think the point being made is that the exchange rates of any currency -- whether from currency A to currency B, or currency B to "hot dog, fries and soda" -- are essentially set by shared belief, not by some kind of intrinsic value, no matter what the currency is ostensibly backed by. The idea that currency needs to be backed by anything in the sense it's being used here (e.g., a tether backed by a dollar, or a dollar backed by a fixed amount of metal) is a convenient fiction that requires trusting all the entities explicitly or implicitly involved in the transaction. I'm aware bitcoin and other blockchain-based "currency" tries to expunge the need for trust, but in practice it seems like most of them succeed more in expunging accountability. The argument that state-issued currencies have value because they're the only currency you can use to pay taxes back to the state is true in some sense, but the value is still essentially arbitrary and the trust is still required. (e.g., if I owe money come April 15th, I have to trust my bank, Visa, and TurboTax, probably, even before it gets to the IRS).
      - johnrgrace 7y ago
        The one exception would be the Canadian Tire dollar, it existed for 40 years with only the backing of a major retailer. I've read a few academic economics papers on the Canadian Tire dollar because it's an exception.
- nradov 7y ago
  The US Government will not arrest and throw you in jail for lack of payment on taxes, as long as you have accurately declared all of your income. Failure to pay is a civil violation, not a criminal offense. However they will garnish your wages and forcibly seize your assets to settle large tax debts.
  - jerf 7y ago
    It's true that the first failure to pay is just civil, absolutely. In fact the government and I are currently involved in a mostly-friendly dispute about my 2016 taxes, and I'm not currently worried about the men-with-guns. However, if you defy them on payment, and then defy them by hiding your income from them, and defy them on the next thing they do, and defy them by failing to pay your civil violation penalties, etc., they will eventually come after you violently. The wage garnishment and forcible (note the word) asset siezures are themselves backed by men with guns. If they tried to just go around and sieze assets politely, while never threatening a fly, it wouldn't take long before people figured out there's no particular reason to let them have it.
- mfatica 7y ago
  where can I buy these jerfcoins? they sound interesting
Scoundreller 7y ago
I was excited for the concept of DOWN banking: Deposit Often, Withdraw Never.
- jandrese 7y ago
  One advantage of this is Ponzi schemes never have to fall apart. As long as people are willing to HODL forever your crows never have to come in to roost.

jerf 7y ago

If there's any financial idea the crypto people just do not get, it's the idea of "backing". A currency is not backed by dollars unless I can convert that currency freely back into dollars. It does not constitute "backing" to have the money nominally somewhere in existence, but not actually available. Heck, who'd like a few hundred thousand jerfcoins? Come and get 'em! They're backed by dollars, in the sense that I guarantee there exists in the world many hundreds of thousands of dollars. jerfcoins don't give you any claim to those dollars, of course, but they're backed by them just the same! ("But jerf, what are US dollars backed by?" Purchasing from the US government the right to not be arrested and thrown in jail for lack of payment on taxes. Just 11 days ago, many people completed trading in their dollars for the year for that backing, so it's definitely a transaction that can done by real people. It may not be an aesthetically pleasing form of backing, but it seems to be working.)

paganel 7y ago
> But jerf, what are US dollars backed by I agree with you almost 100%, just wanted to add that no current Government/State can back the nominal monetary mass flowing through its economy with real money, no matter the amount of taxes they're collecting. The reason being that the nominal monetary mass it's pretty big (to use an euphemism) compared to the real money flowing through the real economy. For example in 2008 the CDS market alone was at some point "valued" at close to $36 trillion [1], while for comparison the US GDP back then I'd say was around $14-15 trillion (give or take a few trillion). Yeas, I know the CDS market back then was a financial abomination, and I do know that a lot of those $36 trillion were probably money counted twice or thrice or even more, but the idea remains. And that's just one market. What indeed still keeps this whole house of cards still standing, what keeps any financial system standing, is trust. And, as you very well put it, once you have the power to put people in jail (or launch inter-continental ballistic missiles) you kind of have a lot of trust by default. But there are moments when no matter how powerful you are you still manage to lose that trust, see the USSR post 1989 or the Spanish Empire during and after the rule of Philip II [2], that's when things turn nasty: > Charles V had left his son Philip with a debt of about 36 million ducats and an annual deficit of 1 million ducats. This debt caused Phillip II to default on loans in 1557, 1560, 1575, and 1596 (including debt to Poland, known as Neapolitan sums). Lenders had no power over the King and could not force him to repay his loans. These defaults were just the beginning of Spain's economic troubles as its kings would default six more times in the next 65 years.[9] Aside from reducing state revenues for overseas expeditions, the domestic policies of Philip II further burdened the Spanish kingdoms and would, in the following century, contribute to its decline, as maintained by some historians.[10] [1] https://www.bis.org/publ/qtrpdf/r_qt1806/images/graph-1.jpg https://www.bis.org/publ/qtrpdf/r_qt1806/images/graph-1.jpg [2] https://en.wikipedia.org/wiki/Philip_II_of_Spain#Economy https://en.wikipedia.org/wiki/Philip_II_of_Spain#Economy
- panarky 7y ago
  It's a zombie idea that fiat currencies are somehow "backed" by tax collection, or the military, or the "legal tender" text on the banknote. No matter how many times we go through the refutation, zombie ideas like this just never die. Money is purely a social construct. It only has value because people collectively find it useful. There is no backing.
  - tim333 7y ago
    I'm not convinced it's a zombie. Name a currency that's existed a few decades and does not have backing from any of those.
    - chipotle_coyote 7y ago
      I think the point being made is that the exchange rates of any currency -- whether from currency A to currency B, or currency B to "hot dog, fries and soda" -- are essentially set by shared belief, not by some kind of intrinsic value, no matter what the currency is ostensibly backed by. The idea that currency needs to be backed by anything in the sense it's being used here (e.g., a tether backed by a dollar, or a dollar backed by a fixed amount of metal) is a convenient fiction that requires trusting all the entities explicitly or implicitly involved in the transaction. I'm aware bitcoin and other blockchain-based "currency" tries to expunge the need for trust, but in practice it seems like most of them succeed more in expunging accountability. The argument that state-issued currencies have value because they're the only currency you can use to pay taxes back to the state is true in some sense, but the value is still essentially arbitrary and the trust is still required. (e.g., if I owe money come April 15th, I have to trust my bank, Visa, and TurboTax, probably, even before it gets to the IRS).
    - johnrgrace 7y ago
      The one exception would be the Canadian Tire dollar, it existed for 40 years with only the backing of a major retailer. I've read a few academic economics papers on the Canadian Tire dollar because it's an exception.
nradov 7y ago
The US Government will not arrest and throw you in jail for lack of payment on taxes, as long as you have accurately declared all of your income. Failure to pay is a civil violation, not a criminal offense. However they will garnish your wages and forcibly seize your assets to settle large tax debts.
- jerf 7y ago
  It's true that the first failure to pay is just civil, absolutely. In fact the government and I are currently involved in a mostly-friendly dispute about my 2016 taxes, and I'm not currently worried about the men-with-guns. However, if you defy them on payment, and then defy them by hiding your income from them, and defy them on the next thing they do, and defy them by failing to pay your civil violation penalties, etc., they will eventually come after you violently. The wage garnishment and forcible (note the word) asset siezures are themselves backed by men with guns. If they tried to just go around and sieze assets politely, while never threatening a fly, it wouldn't take long before people figured out there's no particular reason to let them have it.
mfatica 7y ago
where can I buy these jerfcoins? they sound interesting

Scoundreller 7y ago

I was excited for the concept of DOWN banking: Deposit Often, Withdraw Never.

jandrese 7y ago
One advantage of this is Ponzi schemes never have to fall apart. As long as people are willing to HODL forever your crows never have to come in to roost.