6 ms·

My stance has always been "Tether is a scam, but no worse than the US dollar and normal banking fractional reserves... and even if it collapses, who cares, ther

My stance has always been "Tether is a scam, but no worse than the US dollar and normal banking fractional reserves... and even if it collapses, who cares, there are other stablecoins not built on a house of cards." I don't see that stance changing.

chromaton 5y ago
2 differences: 1. You have to have USD to pay taxes, which most Americans have to do. 2. The feds will bail out depositors in banks that have screwed up badly.
- arcticbull 5y ago
  Also fractional reserve lending is both how new money is created and how it's backed. When you borrow money from the bank, they create a positive balance in your account and a negative balance in theirs. As you repay the loan, the new money disappears. The money in circulation is backed by the demand created for that dollar at issuance (in that the loan must be repaid).
  - chromaton 5y ago
    Banks also take hard assets as collateral. They can send guys with guns to collect if need be.
    - deleted 5y ago
      [deleted]
  - ItsMonkk 5y ago
    And yet, during the recession of 2008 the M2 went up by a 1000 billion dollars, despite the fact that there were millions of houses foreclosed on, their assets tanked, and millions of loans defaulted. Curious how that works. Tether is much worse than the Fed(or would be if equivalent scale), but the Fed is no sweetheart.
    - arcticbull 5y ago
      The money supply is protected by the Fed, yes - that's kind of the point. The supply is adjusted to maintain the 2% inflation target. Generally in big financial crises, velocity of money drops so the supply is increased to offset it - and avoid a deflationary spiral. It's pretty logical right? If the economy is imploding around you, your natural response is to save your money - out of fear - and not spend it. However, that has knock-on effects. If everyone starts saving, prices go down to tempt people to buy, which means less revenue for the business, which means salary cuts and layoffs, which means folks have less money to spend - and so on. To avoid this situation, the Fed increases the money supply. This happened in COVID too. The fed IMO deserves a ton of credit for saving the American economy from a massive depression - twice so far since 2008. By the way those bailouts earned a $15B profit for the government [1]. [1] https://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008 https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...
      - ItsMonkk 5y ago
        I know you know about Moral Hazard. I know you know about small bubbles allowed to get bigger getting out of control. I'm sure you know the phrase "Privatized gains and Socialized losses." These all apply here. The mark of a successful Fed is in reducing not just the frequency of banking issues but also the amplitudes. Every time the Fed is forced to step in, the interest rate cuts get bigger, the debt they create gets bigger, the Congressional action larger. The mark of a successful Fed is in stepping in ahead of time before the bubble gets out of control. If a Fed needs to take drastic action, they've already failed. CO-VID, being the first non-financially caused recession in 50 years, is a special case, and for that I give them leniency.
        arcticbull 5y ago
        I agree with all that broadly, but I would push back and say the Fed's responsibility wasn't to stop the subprime crisis. That was Congress' responsibility. It's not the fire fighters job to stop people building houses made of paper. That's the fire marshal, the city planning department, the inspectors, and so on.
- liuliu 5y ago
  Regarding 2, if crytocurrencies fire up all cylinders and get not only many traditional market makers, hedge funds, but also FOF involvement and with-hold tens of millions people's savings. They can potentially get buyout like traditional banks do.
  - chromaton 5y ago
    Maybe someday.
- cinquemb 5y ago
  > 1. You have to have USD to pay taxes, which most Americans have to do. 61% of Americans paid no federal income taxes in 2020[0], up from 47%[1] in 2019 and the long term chart seems like the non paying number will get higher regardless of what people "have to have" and "have to do". > 2. The feds will bail out depositors in banks that have screwed up badly. Ignoring the moral hazards at play, this really only considers on shore dollar denominated deposits, not dollar denominated deposits held overseas and will only work if its only a few banks and not something systemic. So none of this really means anything to in the tail risk scenarios people are opining about because its all just SSDD at the margins, crypto or non crypto (because everything is connected and getting more so everyday). [0] https://taxfoundation.org/us-households-paying-no-income-tax/ https://taxfoundation.org/us-households-paying-no-income-tax... [1] https://www.forbes.com/sites/howardgleckman/2019/08/06/remember-the-47-percent-who-pay-no-income-taxes-they-are-not-who-you-think/?sh=4e03739a47d7 https://www.forbes.com/sites/howardgleckman/2019/08/06/remem...
arcticbull 5y ago
I gave a breakdown of why that statement belies a lack of understanding of fractional reserve lending here: (https://news.ycombinator.com/item?id=28880063 https://news.ycombinator.com/item?id=28880063)
AlexandrB 5y ago
> Tether is a scam, but no worse than the US dollar and normal banking fractional reserves... So tether insures up to $100,000 for every depositor?
- christopherwxyz 5y ago
  The U.S. government insures its own currency using its own currency or security. Tether can’t do that without hurting the stability guarantee.
  - bpodgursky 5y ago
    Tether can absolutely insure its own currency by printing more Tether as needed -- it's identical to what the US government will do to protect bank deposits, by printing more dollars!
- mikeyouse 5y ago
  That's actually out of date.. a decade ago, the US FDIC upped the limit to $250k per depositor.
pcwalton 5y ago
I really would like to see an attempt to defend Tether (and by extension most of the cryptocurrency ecosystem in practice) that doesn't require me to buy into ultra-libertarian ideology. Most people, including me, do not in fact believe that the US dollar is a scam.
- bpodgursky 5y ago
  The point re: tether directly is that it doesn't matter if tether is backed 1-1 or .05-1 or .01-1 as long as people trust it as a stablecoin. The point re: the ecosystem is that there are a lot of stablecoins and you can pick the one that isn't a scam. You can use crypto and not touch tether at all. There's no need to tie the ecosystem to it.
- hackingforfun 5y ago
  I don't think that the US dollar is a scam but I think The Fed is struggling to keep it afloat. Also, the ever increasing debt of the US concerns me, as well as all the money printing. I just wonder, where does it end? How does it end? Just borrow more and print more? Drop rates to 0%, and then go negative if there's no further to go? Does all that seem sustainable? I do hope inflation will drop when / if The Fed raises rates again. Maybe that will bring some sort of balance. We'll have to see what happens. I don't think the US debt could ever possibly be paid off now though, and we'll have to keep raising the debt ceiling or remove it. There's also some absurd ideas like minting a trillion dollar platinum coin [1]. I just don't think this ends well. [1] https://en.wikipedia.org/wiki/Trillion-dollar_coin https://en.wikipedia.org/wiki/Trillion-dollar_coin
- NicoJuicy 5y ago
  I think it's mostly because it fits their views.
johanneskanybal 5y ago
Not sure if it's bots or hackernews sentiment changing but pretty much this. I guess that's what happens when the disruptors become the corporate. But yes it's like the classic democracy quote about it being the worst but better than all the other alternatives. If this is the slap for running an unregulated exchange for 10-15 years which today traded $350 mil everyone here not building that including me is the idiot.
EugeneG 5y ago
Tether isn’t some new innovation that is it’s own animal. We know what to compare it to. The right comparison isn’t “the US Dollar.” The right comparison is money market funds - they are very highly regulated. If a money market fund said “we are backed by very highly rated short term debt,” but they weren’t, that is 100pct a scam that has huge fines. Just because Tether is in the crypto world doesn’t mean it’s now a magical novel currency. Still just a money market fund in a slightly different form.

chromaton 5y ago

2 differences: 1. You have to have USD to pay taxes, which most Americans have to do. 2. The feds will bail out depositors in banks that have screwed up badly.

arcticbull 5y ago
Also fractional reserve lending is both how new money is created and how it's backed. When you borrow money from the bank, they create a positive balance in your account and a negative balance in theirs. As you repay the loan, the new money disappears. The money in circulation is backed by the demand created for that dollar at issuance (in that the loan must be repaid).
- chromaton 5y ago
  Banks also take hard assets as collateral. They can send guys with guns to collect if need be.
  - deleted 5y ago
    [deleted]
- ItsMonkk 5y ago
  And yet, during the recession of 2008 the M2 went up by a 1000 billion dollars, despite the fact that there were millions of houses foreclosed on, their assets tanked, and millions of loans defaulted. Curious how that works. Tether is much worse than the Fed(or would be if equivalent scale), but the Fed is no sweetheart.
  - arcticbull 5y ago
    The money supply is protected by the Fed, yes - that's kind of the point. The supply is adjusted to maintain the 2% inflation target. Generally in big financial crises, velocity of money drops so the supply is increased to offset it - and avoid a deflationary spiral. It's pretty logical right? If the economy is imploding around you, your natural response is to save your money - out of fear - and not spend it. However, that has knock-on effects. If everyone starts saving, prices go down to tempt people to buy, which means less revenue for the business, which means salary cuts and layoffs, which means folks have less money to spend - and so on. To avoid this situation, the Fed increases the money supply. This happened in COVID too. The fed IMO deserves a ton of credit for saving the American economy from a massive depression - twice so far since 2008. By the way those bailouts earned a $15B profit for the government [1]. [1] https://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008 https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...
    - ItsMonkk 5y ago
      I know you know about Moral Hazard. I know you know about small bubbles allowed to get bigger getting out of control. I'm sure you know the phrase "Privatized gains and Socialized losses." These all apply here. The mark of a successful Fed is in reducing not just the frequency of banking issues but also the amplitudes. Every time the Fed is forced to step in, the interest rate cuts get bigger, the debt they create gets bigger, the Congressional action larger. The mark of a successful Fed is in stepping in ahead of time before the bubble gets out of control. If a Fed needs to take drastic action, they've already failed. CO-VID, being the first non-financially caused recession in 50 years, is a special case, and for that I give them leniency.
      - arcticbull 5y ago
        I agree with all that broadly, but I would push back and say the Fed's responsibility wasn't to stop the subprime crisis. That was Congress' responsibility. It's not the fire fighters job to stop people building houses made of paper. That's the fire marshal, the city planning department, the inspectors, and so on.
liuliu 5y ago
Regarding 2, if crytocurrencies fire up all cylinders and get not only many traditional market makers, hedge funds, but also FOF involvement and with-hold tens of millions people's savings. They can potentially get buyout like traditional banks do.
- chromaton 5y ago
  Maybe someday.
cinquemb 5y ago
> 1. You have to have USD to pay taxes, which most Americans have to do. 61% of Americans paid no federal income taxes in 2020[0], up from 47%[1] in 2019 and the long term chart seems like the non paying number will get higher regardless of what people "have to have" and "have to do". > 2. The feds will bail out depositors in banks that have screwed up badly. Ignoring the moral hazards at play, this really only considers on shore dollar denominated deposits, not dollar denominated deposits held overseas and will only work if its only a few banks and not something systemic. So none of this really means anything to in the tail risk scenarios people are opining about because its all just SSDD at the margins, crypto or non crypto (because everything is connected and getting more so everyday). [0] https://taxfoundation.org/us-households-paying-no-income-tax/ https://taxfoundation.org/us-households-paying-no-income-tax... [1] https://www.forbes.com/sites/howardgleckman/2019/08/06/remember-the-47-percent-who-pay-no-income-taxes-they-are-not-who-you-think/?sh=4e03739a47d7 https://www.forbes.com/sites/howardgleckman/2019/08/06/remem...

arcticbull 5y ago

I gave a breakdown of why that statement belies a lack of understanding of fractional reserve lending here: (https://news.ycombinator.com/item?id=28880063 https://news.ycombinator.com/item?id=28880063)

AlexandrB 5y ago

> Tether is a scam, but no worse than the US dollar and normal banking fractional reserves... So tether insures up to $100,000 for every depositor?

christopherwxyz 5y ago
The U.S. government insures its own currency using its own currency or security. Tether can’t do that without hurting the stability guarantee.
- bpodgursky 5y ago
  Tether can absolutely insure its own currency by printing more Tether as needed -- it's identical to what the US government will do to protect bank deposits, by printing more dollars!
mikeyouse 5y ago
That's actually out of date.. a decade ago, the US FDIC upped the limit to $250k per depositor.

pcwalton 5y ago

I really would like to see an attempt to defend Tether (and by extension most of the cryptocurrency ecosystem in practice) that doesn't require me to buy into ultra-libertarian ideology. Most people, including me, do not in fact believe that the US dollar is a scam.

bpodgursky 5y ago
The point re: tether directly is that it doesn't matter if tether is backed 1-1 or .05-1 or .01-1 as long as people trust it as a stablecoin. The point re: the ecosystem is that there are a lot of stablecoins and you can pick the one that isn't a scam. You can use crypto and not touch tether at all. There's no need to tie the ecosystem to it.
hackingforfun 5y ago
I don't think that the US dollar is a scam but I think The Fed is struggling to keep it afloat. Also, the ever increasing debt of the US concerns me, as well as all the money printing. I just wonder, where does it end? How does it end? Just borrow more and print more? Drop rates to 0%, and then go negative if there's no further to go? Does all that seem sustainable? I do hope inflation will drop when / if The Fed raises rates again. Maybe that will bring some sort of balance. We'll have to see what happens. I don't think the US debt could ever possibly be paid off now though, and we'll have to keep raising the debt ceiling or remove it. There's also some absurd ideas like minting a trillion dollar platinum coin [1]. I just don't think this ends well. [1] https://en.wikipedia.org/wiki/Trillion-dollar_coin https://en.wikipedia.org/wiki/Trillion-dollar_coin
NicoJuicy 5y ago
I think it's mostly because it fits their views.

johanneskanybal 5y ago

Not sure if it's bots or hackernews sentiment changing but pretty much this. I guess that's what happens when the disruptors become the corporate. But yes it's like the classic democracy quote about it being the worst but better than all the other alternatives. If this is the slap for running an unregulated exchange for 10-15 years which today traded $350 mil everyone here not building that including me is the idiot.

EugeneG 5y ago

Tether isn’t some new innovation that is it’s own animal. We know what to compare it to. The right comparison isn’t “the US Dollar.” The right comparison is money market funds - they are very highly regulated. If a money market fund said “we are backed by very highly rated short term debt,” but they weren’t, that is 100pct a scam that has huge fines. Just because Tether is in the crypto world doesn’t mean it’s now a magical novel currency. Still just a money market fund in a slightly different form.