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Federal Reserve was crafted in a secret meeting on Jekyll Island (https://en.m.wikipedia.org/wiki/Federal_Reserve https://en.m.wikipedia.org/wiki/Federal_Reserv

Federal Reserve was crafted in a secret meeting on Jekyll Island (https://en.m.wikipedia.org/wiki/Federal_Reserve https://en.m.wikipedia.org/wiki/Federal_Reserve) between industry and government. Still exists and functions today. Lot of people don’t like it, but it’s there regardless. Even if the origin, operation of Tether is highly suspicious: if it functions, is widely adopted and does what is expected … may last longer than people think. Best response is more open stable coin equivalents.

xur17 5y ago
> Even if the origin, operation of Tether is highly suspicious: if it functions, is widely adopted and does what is expected … may last longer than people think. I think you're right about this point, and I've been trying to imagine what might cause Tether to collapse - you really need a run on the bank situation triggered by something causing them to become insolvent.
- rossdavidh 5y ago
  Like, say, a bunch of Chinese firms who need cash quickly to pay dollar-denominated bonds, all selling their Tether at the same time?
- Traster 5y ago
  The real question is basically how much is it leveraged. We learned this from so many other frauds/crashes. It's not so much that "as long as there isn't a run on the bank it's fine" it's that an outflow of a tiny percentage could effectively be a run on the bank, since they may only be backed by a tiny fraction of what they claim to be backed by. It's one thing if they have 90% backing. What happens if it turns out it's only backed 0.05%? A run on the bank won't kill them, an averagely bad few days could see it all collapse. This is exactly why banks have regulations.
- perl4ever 5y ago
  A run on a bank can make it insolvent? I thought that insolvency was when they don't have the assets to cover their liabilities. My understanding of a bank run is it happens when a bank is solvent, but doesn't have enough in reserves - liquid, short term assets. But if they simply don't have at least 100% of their liabilities in assets, then they are bust because they can never pay people back barring a miracle.
  - marvin 5y ago
    > But if they simply don't have at least 100% of their liabilities in assets, then they are bust. Only when we find out!
    - Closi 5y ago
      Well usually banks have huge audit requirements and are covered in regulation to avoid this happening (after learning what happens when you have entirely unregulated financial institutions)
  - deleted 5y ago
    [deleted]
  - stevage 5y ago
    Insolvent literally means liabilities exceed assets. There are various ways a company can trade while insolvent, including being a Ponzi scheme.
- the_optimist 5y ago
  Liquidity squeezes and credit crises are correlated: inability to repay happens at the same time as unwillingness to lend. In practice, you get a commercial paper default at the same time you get increased liquidity demands. All you need is one event; one fraud, one excess-risk taking that doesn't pay off. If Tether is investing reserves, it is only timing until they default. There is no exception, and everyone sophisticated in finance knows this. Banks play the same games with probability distributions on risk assets; this 'social science' still reliably fails and banks are accordingly bailed out. Tether has no such recourse.
- PKop 5y ago
  A crash in the corporate paper they hold, which would destroy the rest of the economy even more. Tether would be a footnote to that event.
  - wpietri 5y ago
    That they claim to hold. They won't prove it, and many financial industry insiders have suggested they couldn't possibly hold what is normally thought of as "commercial paper" in the quantities they claim.
  - jfrunyon 5y ago
    What corporate paper? People always bring this up as though they've ever actually proven to hold reserves as they say. Even though it's been repeatedly proven that they DON'T.
adrr 5y ago
Didn't they pay a huge fine for lying about actually being fully backed by assets? This is crypto's biggest problem, the amount of scams.
Breza 5y ago
The fights over the Bank of the United States and the Federal Reserve have been public and well documented. Congress has as much oversight as it wants to grant itself. That's very different from Tether.
perl4ever 5y ago
When people say "hey, Tether is no worse than the existing financial system" I wonder if they don't understand the difference between holding a fraction of deposited money as reserves, and only having a fraction of deposited money as assets, period. As far as I know, when the latter happens in a real bank, they get shut down, shareholders lose their money, and only the FDIC saves the depositors. Just because that's the primary factoid I know about banking.
- dnautics 5y ago
  Moreover the Fed implicitly has the authority to do the bullshit that it does. Arguably that makes it more pernicious and evil, but short of political collective action there's also not much as an individual you can do about it. You can certainly do things about the tether situation, e.g. exit crypto, short tether (this may be stupid, lol), etc.
- Dma54rhs 5y ago
  I've never held any coin but why can't it be true? The money is imaginary anyway and while you can talk about backing dollars with tanks and bomb at the end of the day is there are believers there is a market snd one market can outlive another. Saving depositors in regular banking is pure belief as well.
  - wpietri 5y ago
    > Saving depositors in regular banking is pure belief as well. Not in the same way. FDIC insurance goes back more than 90 years. Its value has been proven through major financial crises. It is pretty transparent about what it does, and it's accountable to the public. There is also arms-length regulatory verification between banks and their various regulators to make sure that they aren't taking on too much risk. Tether, on the other hand is intentionally opaque, run by a small number of people, has mysterious relationships with other players, and has been caught lying about their backing. It has never been tested by a serious crisis. And of course there's no real regulation, so you basically have to take the word of people who have demonstrated they're not trustworthy.
  - 5y ago

xur17 5y ago

> Even if the origin, operation of Tether is highly suspicious: if it functions, is widely adopted and does what is expected … may last longer than people think. I think you're right about this point, and I've been trying to imagine what might cause Tether to collapse - you really need a run on the bank situation triggered by something causing them to become insolvent.

rossdavidh 5y ago
Like, say, a bunch of Chinese firms who need cash quickly to pay dollar-denominated bonds, all selling their Tether at the same time?
Traster 5y ago
The real question is basically how much is it leveraged. We learned this from so many other frauds/crashes. It's not so much that "as long as there isn't a run on the bank it's fine" it's that an outflow of a tiny percentage could effectively be a run on the bank, since they may only be backed by a tiny fraction of what they claim to be backed by. It's one thing if they have 90% backing. What happens if it turns out it's only backed 0.05%? A run on the bank won't kill them, an averagely bad few days could see it all collapse. This is exactly why banks have regulations.
perl4ever 5y ago
A run on a bank can make it insolvent? I thought that insolvency was when they don't have the assets to cover their liabilities. My understanding of a bank run is it happens when a bank is solvent, but doesn't have enough in reserves - liquid, short term assets. But if they simply don't have at least 100% of their liabilities in assets, then they are bust because they can never pay people back barring a miracle.
- marvin 5y ago
  > But if they simply don't have at least 100% of their liabilities in assets, then they are bust. Only when we find out!
  - Closi 5y ago
    Well usually banks have huge audit requirements and are covered in regulation to avoid this happening (after learning what happens when you have entirely unregulated financial institutions)
- deleted 5y ago
  [deleted]
- stevage 5y ago
  Insolvent literally means liabilities exceed assets. There are various ways a company can trade while insolvent, including being a Ponzi scheme.
the_optimist 5y ago
Liquidity squeezes and credit crises are correlated: inability to repay happens at the same time as unwillingness to lend. In practice, you get a commercial paper default at the same time you get increased liquidity demands. All you need is one event; one fraud, one excess-risk taking that doesn't pay off. If Tether is investing reserves, it is only timing until they default. There is no exception, and everyone sophisticated in finance knows this. Banks play the same games with probability distributions on risk assets; this 'social science' still reliably fails and banks are accordingly bailed out. Tether has no such recourse.
PKop 5y ago
A crash in the corporate paper they hold, which would destroy the rest of the economy even more. Tether would be a footnote to that event.
- wpietri 5y ago
  That they claim to hold. They won't prove it, and many financial industry insiders have suggested they couldn't possibly hold what is normally thought of as "commercial paper" in the quantities they claim.
- jfrunyon 5y ago
  What corporate paper? People always bring this up as though they've ever actually proven to hold reserves as they say. Even though it's been repeatedly proven that they DON'T.

adrr 5y ago

Didn't they pay a huge fine for lying about actually being fully backed by assets? This is crypto's biggest problem, the amount of scams.

Breza 5y ago

The fights over the Bank of the United States and the Federal Reserve have been public and well documented. Congress has as much oversight as it wants to grant itself. That's very different from Tether.

perl4ever 5y ago

When people say "hey, Tether is no worse than the existing financial system" I wonder if they don't understand the difference between holding a fraction of deposited money as reserves, and only having a fraction of deposited money as assets, period. As far as I know, when the latter happens in a real bank, they get shut down, shareholders lose their money, and only the FDIC saves the depositors. Just because that's the primary factoid I know about banking.

dnautics 5y ago
Moreover the Fed implicitly has the authority to do the bullshit that it does. Arguably that makes it more pernicious and evil, but short of political collective action there's also not much as an individual you can do about it. You can certainly do things about the tether situation, e.g. exit crypto, short tether (this may be stupid, lol), etc.
Dma54rhs 5y ago
I've never held any coin but why can't it be true? The money is imaginary anyway and while you can talk about backing dollars with tanks and bomb at the end of the day is there are believers there is a market snd one market can outlive another. Saving depositors in regular banking is pure belief as well.
- wpietri 5y ago
  > Saving depositors in regular banking is pure belief as well. Not in the same way. FDIC insurance goes back more than 90 years. Its value has been proven through major financial crises. It is pretty transparent about what it does, and it's accountable to the public. There is also arms-length regulatory verification between banks and their various regulators to make sure that they aren't taking on too much risk. Tether, on the other hand is intentionally opaque, run by a small number of people, has mysterious relationships with other players, and has been caught lying about their backing. It has never been tested by a serious crisis. And of course there's no real regulation, so you basically have to take the word of people who have demonstrated they're not trustworthy.
- 5y ago