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Every time there's a tether story here, the inevitable discussion of fraudulent activity comes up because Tether seems like an outright scam. I'm inclined to be

Every time there's a tether story here, the inevitable discussion of fraudulent activity comes up because Tether seems like an outright scam. I'm inclined to believe all that from what I've read and however little I can make sense of. However, I can't really tell how this ends. They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right. Eventually, that's bound to catch up, but I suspect it's going to hurt a lot more than just those with crypto assets and hurt a lot of those without crypto assets, no?

peakaboo 5y ago
This also means that nobody needs to be poor. Anyone can just get some money since its tied to nothing.
- rp1 5y ago
  Relative scarcity is a necessity for any currency.
  - kwertyoowiyop 5y ago
    The previous commenter thought he could get away with omitting “/s” and has been proven wrong.
  - peakaboo 5y ago
    Of course but you could give people some free money nevertheless and it would make the world a better place. What do you think would happen if you gave 1000 dollars to each person in America every month? I think a lot of good would come from that and not much bad.
    - secondcoming 5y ago
      A loaf of bread would cost $100
      - atdrummond 5y ago
        A UBI doesn’t necessarily result in inflation. The later is a combination of monetary policy and expectations. UBIs can be paid by means other than printing money.
        dragonwriter 5y ago
        > A UBI doesn’t necessarily result in inflation. The later is a combination of monetary policy and expectations. All fiscal policy is monetary policy; government spending its own fiat is money creation. UBI is expansionary monetary policy. (Of course, it can be offset with money destruction, e.g., taxation.)
        AnthonyMouse 5y ago
        They're also the best (and possibly only equitable) way of distributing money that you're going to print anyway for e.g. economic stimulus.
        rzz3 5y ago
        Yes, providing money without any attached good or service or unit of value definitely won’t cause inflation/s WHAT?
        atdrummond 5y ago
        Huh? Do you think welfare transfer payments cause inflation?
        zhoujianfu 5y ago
        The thing is, inflation caused by printing money AND distributing it directly and every to all people is fine… it’s just the most efficient / progressive wealth tax! Even if (printing and then) giving everybody $40K/yr caused, say, 40% inflation, anybody making under $100K/year would be better off. You actually wouldn’t need any taxes if the government just printed all money it needed, hopefully most of which is in the form of direct checks to all residents/citizens.
    - sombremesa 5y ago
      > I think a lot of good would come from that and not much bad. Here something that'd happen - the homeless in encampments would get hoovered up by slumlords who put them in squalor and consume their $1k checks. Poor people would have more children because each child = $1k/mo, even if they have to wait 18 years. Abduction would be easy - the ransom pays itself over time. Fraud would be rampant. The ultra poor underclass who are undocumented would still get nothing, further exacerbating the divide.
      - atdrummond 5y ago
        Not a single legitimate theoretical or experimental economics research paper supports these extreme claims for the effect of a UBI.
        deleted 5y ago
        [deleted]
      - SamoyedFurFluff 5y ago
        “ Abduction would be easy - the ransom pays itself over time. Fraud would be rampant.” Do we have any evidence that abduction and fraud is rampant in countries in Western Europe, known for the very generous social programs? Are they exploding with poor people having kids??? Is it dangerous to live in, idk, Sweden because someone is gonna kidnap you for your social bux? I’m genuinely asking because the notion of rampant abducting and child having hasn’t happened in countries I know of with very generous social programs.
        deleted 5y ago
        [deleted]
      - tonguez 5y ago
        Your first sentence is grammatically incorrect and incoherent. "Poor people would have more children because each child = [$$$]" A lot of poor people already do this for this exact reason. "The ultra poor underclass who are undocumented would still get nothing" Should a person be allowed to enter Japan, refuse to leave and then demand the Japanese people pay them $1k a month?
    - opinion-is-bad 5y ago
      That’s not free money; it’s money taken from people under threat of violence.
      - SantalBlush 5y ago
        Not agreeing with the parent comment, but I fail to see how printing money and distributing it involves violence.
        thaumasiotes 5y ago
        The USA actually does have laws against creating anything that might be interpreted as competing with the official currency. This is the most likely avenue for violence to come in, as people try to resist devalued money by using substitutes.
        SantalBlush 5y ago
        Holding crypto is legal in the US, so again, I fail to see how this involves violence.
        nradov 5y ago
        There are generally no laws in the USA against creating and using alternative currencies. I can buy and sell using Euros or Monopoly money or whatever if I can find a willing counterparty. However, if those transactions are taxable then I have to report them at the US Dollar fair market value equivalent and pay any taxes due in US Dollars. And if someone owes me a debt I am required to accept US Dollars for settlement.
        thaumasiotes 5y ago
        > There are generally no laws in the USA against creating and using alternative currencies. This is not correct. If you try minting coins, you can be shut down. You can buy and sell using whatever you want, yes. There aren't laws against using alternative currencies. But there very much are laws against creating them.
    - est31 5y ago
      I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it, which is generally something the left very much dislikes. As already seen with covid aid, people wouldn't work in low wage jobs any more. This would lead to inflation or disappearance of some amenities. E.g. you might have to put your groceries into your bag yourself, or might have to pay a dollar extra for that service. This isn't something negative though, just a neutral change I guess. It would help a lot of poor and suffering people, but note that even in countries with good unemployment benefits, homeless people still exist.
      - dragonwriter 5y ago
        > I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it What do you mean by “strict” and why is this inaginee5 to be necessary? Note that UBI is usually envisioned with a defined population but the absence of means or behavior testing within that population, either “citizens” or “citizens and LPRs” or “citizens and aliens with work authorization” or “citizens and aliens with satisfactory immigration status in a specific set of visa categories based on basis and duration” would all be valid populations, with wildly different impacts on the viability of UBI with any given immigration policy. > I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it, COVID aid isn't like UBI, critically, key parts of it (enhanced unemployment) are conditioned on absence of work or reduction of it below pre-benefits levels, and thus forces people to choose between benefits and work. This is the kind of incentive with means tested benefits that UBI is intended to fix.
        est31 5y ago
        To your first point, regardless of which class of people you consider for UBI inclusion, even if you only consider citizens of the USA, it will have a tremendously attractive effect for billions of people around the globe. Even now quite many people want to immigrate in to the USA and the USA has multiple systems designed to keep them out, but UBI will make this way worse, which is why I said that enforcement needs to be very strict. Plus I'd say it would be even more unfair for the undocumented immigrants than it is now because they would not get any UBI. But if you gave UBI to the undocumented, way more people would attempt to become undocumented immigrants, by overstaying their visas, etc. Which then probably will lead to you having to issue less short term visas, or actually deporting undocumented immigrants.
    - elzbardico 5y ago
      Where did it came from? From taxes? Then ok, it probably would work. Now if it came out of thin air, right from the printing presses, a whole lotta hurt of inflation
- analog31 5y ago
  The major government money systems are tied to the short term expected behavior of major governments.
- fennecfoxen 5y ago
  "Poverty" is not about how much money you have, income or wealth. The only reason money matters to poverty or to human well-being is when that money can buy something meaningful. If we find we are able to forget this, it stands as a testament to the remarkable stability of modern fiat currency. Marking arbitrary large numbers in digital ledgers, blockchain or otherwise, does not cause prosperity. When everyone has infinite money, no one has any money at all, they just have their things.
- nradov 5y ago
  “How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.” “If you would allow me to continue..." Ford nodded dejectedly. “Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.” -Douglas Adams, The Restaurant at the End of the Universe https://www.goodreads.com/quotes/685739-if-the-management-consultant-said-tersely-we-could-for-a https://www.goodreads.com/quotes/685739-if-the-management-co...
wmf 5y ago
I just realized Tether is now bigger than Madoff.
superjan 5y ago
Beyond the fraud allegations, the idea that an organisation can just print extra money as they see fit, doesn’t that go against the principles of crypto finance? I am genuinely curious why people think that is a sustainable idea.
- aaronax 5y ago
  What are the principles of crypto finance? Who thinks Tether is sustainable? Tether is just someone with digital Monopoly (game) money basically.
- deleted 5y ago
  [deleted]
- javert 5y ago
  Bitcoin is principled. Crypto is not principled.
  - beaconstudios 5y ago
    Bitcoin is also not principled. Plenty of people are just speculating and trying to not be the bagholder.
    - javert 5y ago
      You can't keep traders from trading bitcoin. That doesn't mean bitcoin is unprincipled. It's in the whitepaper and the design of bitcoin. For example, the 21M btc supply limit. Bitcoin's design reflects a certain ideology about money.
      - threepio 5y ago
        Bitcoin: by limiting issuance to 21M we have made price manipulation of our currency impossible Tether: hold my beer
        gruez 5y ago
alpaca128 5y ago
Yes, Tether comes with a ton of suspicious circumstances and leadership that just nervously repeats the phrase "the money is there!" in interviews. A YouTube channel named Coffeezilla has been doing some great reporting & investigations on it (and many other crypto scams). It's insane what's going down on the crypto market, including influencers selling unmarked ads for currencies.
Eji1700 5y ago
" They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right." For the most part the crypto market being unregulated means that there can't be any consequences, except for market consequences. And market consequences are vaaaaastly worse. It's basically like having no one make you wear a seat belt. Sure seems fine until you're just dead.
- lumost 5y ago
  It's still a great deal for the perpetrators to only make 1MM in liquid capital after defrauding billions. Non-market consequences of theft include jail time and forefeiture of funds outside of an LLC.
joe_the_user 5y ago
They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right. Tether and bitcoin have been very robust, bitcoin has crashed and recovered many times now. But I have to say that every single bubble has involved the statement "so far, they've been right." as the follow-up to "this time things are different".
bb88 5y ago
Right now I think a good analogy is it's like musical chairs. The game is fine as long as the music is playing. When the music stops, someone's gonna lose big. The problem is when the music stops and there's a run on crypto. People are trying to get out of $USDT and convert it into cash. Exchanges have to have buyers of $USDT so they can exchange $USDT back into cash for anyone that wants to. But they can't just create dollars out of thin air. If there's no buyers for $USDT anymore than the "currency" flatlines, it's no longer tied to the dollar. If Tether were truly backed 1:1, Tether itself could just buy $USDT with its own cash on any exchange, and that would be enough to keep their currency afloat and stop the run.
- notjesse 5y ago
  This makes me think; what if you shorted USDT? There seems to be almost no scenario where USDT becomes more valuable than the USD, and the worst case is it continues to be worth the same. But there is a fair probability it becomes worthless, meaning that you gain from it. While you need to pay premiums in the interim, for something with an indefinite timeframe, that risk seems fairly minor for the potential reward.
  - gruez 5y ago
    >But there is a fair probability it becomes worthless, meaning that you gain from it. >While you need to pay premiums in the interim, for something with an indefinite timeframe, that risk seems fairly minor for the potential reward. 1. the chance of collapse might be lower than you think. the "tether is going to collapse any day now" sentiment has been around for years now, but collapse has proved elusive. 2. borrowing costs are high. I searched around and it looks like the APY for lending out tether is around 9%. The cost for borrowing tether is certainly higher. If you held a $100 short position for 5 years, and there was a total collapse at the end of year 5, then you'd make $65 (factoring in interest payments). That sounds good, but chances are thether probably has more money in the bank than $0. If it only collapsed to $60 (ie. they went bankrupt but had 60 cents of real money for every dollar issued), then you'd only make $5. 3. there are rumors/conspiracy theories that tether/bitfinex/tether affiliated exchanges force USDT/USD rates up periodically to force liquidation of tether short sellers. If you're caught in one, you'd lose money and be forced to rebuy tethers at an unfavorable price.
rasz 5y ago
They print $Billions, so much money they can buy anyone 100 times over.

peakaboo 5y ago

This also means that nobody needs to be poor. Anyone can just get some money since its tied to nothing.

rp1 5y ago
Relative scarcity is a necessity for any currency.
- kwertyoowiyop 5y ago
  The previous commenter thought he could get away with omitting “/s” and has been proven wrong.
- peakaboo 5y ago
  Of course but you could give people some free money nevertheless and it would make the world a better place. What do you think would happen if you gave 1000 dollars to each person in America every month? I think a lot of good would come from that and not much bad.
  - secondcoming 5y ago
    A loaf of bread would cost $100
    - atdrummond 5y ago
      A UBI doesn’t necessarily result in inflation. The later is a combination of monetary policy and expectations. UBIs can be paid by means other than printing money.
      - dragonwriter 5y ago
        > A UBI doesn’t necessarily result in inflation. The later is a combination of monetary policy and expectations. All fiscal policy is monetary policy; government spending its own fiat is money creation. UBI is expansionary monetary policy. (Of course, it can be offset with money destruction, e.g., taxation.)
      - AnthonyMouse 5y ago
        They're also the best (and possibly only equitable) way of distributing money that you're going to print anyway for e.g. economic stimulus.
      - rzz3 5y ago
        Yes, providing money without any attached good or service or unit of value definitely won’t cause inflation/s WHAT?
        atdrummond 5y ago
        Huh? Do you think welfare transfer payments cause inflation?
        zhoujianfu 5y ago
        The thing is, inflation caused by printing money AND distributing it directly and every to all people is fine… it’s just the most efficient / progressive wealth tax! Even if (printing and then) giving everybody $40K/yr caused, say, 40% inflation, anybody making under $100K/year would be better off. You actually wouldn’t need any taxes if the government just printed all money it needed, hopefully most of which is in the form of direct checks to all residents/citizens.
  - sombremesa 5y ago
    > I think a lot of good would come from that and not much bad. Here something that'd happen - the homeless in encampments would get hoovered up by slumlords who put them in squalor and consume their $1k checks. Poor people would have more children because each child = $1k/mo, even if they have to wait 18 years. Abduction would be easy - the ransom pays itself over time. Fraud would be rampant. The ultra poor underclass who are undocumented would still get nothing, further exacerbating the divide.
    - atdrummond 5y ago
      Not a single legitimate theoretical or experimental economics research paper supports these extreme claims for the effect of a UBI.
      - deleted 5y ago
        [deleted]
    - SamoyedFurFluff 5y ago
      “ Abduction would be easy - the ransom pays itself over time. Fraud would be rampant.” Do we have any evidence that abduction and fraud is rampant in countries in Western Europe, known for the very generous social programs? Are they exploding with poor people having kids??? Is it dangerous to live in, idk, Sweden because someone is gonna kidnap you for your social bux? I’m genuinely asking because the notion of rampant abducting and child having hasn’t happened in countries I know of with very generous social programs.
      - deleted 5y ago
        [deleted]
    - tonguez 5y ago
      Your first sentence is grammatically incorrect and incoherent. "Poor people would have more children because each child = [$$$]" A lot of poor people already do this for this exact reason. "The ultra poor underclass who are undocumented would still get nothing" Should a person be allowed to enter Japan, refuse to leave and then demand the Japanese people pay them $1k a month?
  - opinion-is-bad 5y ago
    That’s not free money; it’s money taken from people under threat of violence.
    - SantalBlush 5y ago
      Not agreeing with the parent comment, but I fail to see how printing money and distributing it involves violence.
      - thaumasiotes 5y ago
        The USA actually does have laws against creating anything that might be interpreted as competing with the official currency. This is the most likely avenue for violence to come in, as people try to resist devalued money by using substitutes.
        SantalBlush 5y ago
        Holding crypto is legal in the US, so again, I fail to see how this involves violence.
        nradov 5y ago
        There are generally no laws in the USA against creating and using alternative currencies. I can buy and sell using Euros or Monopoly money or whatever if I can find a willing counterparty. However, if those transactions are taxable then I have to report them at the US Dollar fair market value equivalent and pay any taxes due in US Dollars. And if someone owes me a debt I am required to accept US Dollars for settlement.
        thaumasiotes 5y ago
        > There are generally no laws in the USA against creating and using alternative currencies. This is not correct. If you try minting coins, you can be shut down. You can buy and sell using whatever you want, yes. There aren't laws against using alternative currencies. But there very much are laws against creating them.
  - est31 5y ago
    I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it, which is generally something the left very much dislikes. As already seen with covid aid, people wouldn't work in low wage jobs any more. This would lead to inflation or disappearance of some amenities. E.g. you might have to put your groceries into your bag yourself, or might have to pay a dollar extra for that service. This isn't something negative though, just a neutral change I guess. It would help a lot of poor and suffering people, but note that even in countries with good unemployment benefits, homeless people still exist.
    - dragonwriter 5y ago
      > I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it What do you mean by “strict” and why is this inaginee5 to be necessary? Note that UBI is usually envisioned with a defined population but the absence of means or behavior testing within that population, either “citizens” or “citizens and LPRs” or “citizens and aliens with work authorization” or “citizens and aliens with satisfactory immigration status in a specific set of visa categories based on basis and duration” would all be valid populations, with wildly different impacts on the viability of UBI with any given immigration policy. > I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it, COVID aid isn't like UBI, critically, key parts of it (enhanced unemployment) are conditioned on absence of work or reduction of it below pre-benefits levels, and thus forces people to choose between benefits and work. This is the kind of incentive with means tested benefits that UBI is intended to fix.
      - est31 5y ago
        To your first point, regardless of which class of people you consider for UBI inclusion, even if you only consider citizens of the USA, it will have a tremendously attractive effect for billions of people around the globe. Even now quite many people want to immigrate in to the USA and the USA has multiple systems designed to keep them out, but UBI will make this way worse, which is why I said that enforcement needs to be very strict. Plus I'd say it would be even more unfair for the undocumented immigrants than it is now because they would not get any UBI. But if you gave UBI to the undocumented, way more people would attempt to become undocumented immigrants, by overstaying their visas, etc. Which then probably will lead to you having to issue less short term visas, or actually deporting undocumented immigrants.
  - elzbardico 5y ago
    Where did it came from? From taxes? Then ok, it probably would work. Now if it came out of thin air, right from the printing presses, a whole lotta hurt of inflation
analog31 5y ago
The major government money systems are tied to the short term expected behavior of major governments.
fennecfoxen 5y ago
"Poverty" is not about how much money you have, income or wealth. The only reason money matters to poverty or to human well-being is when that money can buy something meaningful. If we find we are able to forget this, it stands as a testament to the remarkable stability of modern fiat currency. Marking arbitrary large numbers in digital ledgers, blockchain or otherwise, does not cause prosperity. When everyone has infinite money, no one has any money at all, they just have their things.
nradov 5y ago
“How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.” “If you would allow me to continue..." Ford nodded dejectedly. “Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.” -Douglas Adams, The Restaurant at the End of the Universe https://www.goodreads.com/quotes/685739-if-the-management-consultant-said-tersely-we-could-for-a https://www.goodreads.com/quotes/685739-if-the-management-co...

wmf 5y ago

I just realized Tether is now bigger than Madoff.

superjan 5y ago

Beyond the fraud allegations, the idea that an organisation can just print extra money as they see fit, doesn’t that go against the principles of crypto finance? I am genuinely curious why people think that is a sustainable idea.

aaronax 5y ago
What are the principles of crypto finance? Who thinks Tether is sustainable? Tether is just someone with digital Monopoly (game) money basically.
deleted 5y ago
[deleted]
javert 5y ago
Bitcoin is principled. Crypto is not principled.
- beaconstudios 5y ago
  Bitcoin is also not principled. Plenty of people are just speculating and trying to not be the bagholder.
  - javert 5y ago
    You can't keep traders from trading bitcoin. That doesn't mean bitcoin is unprincipled. It's in the whitepaper and the design of bitcoin. For example, the 21M btc supply limit. Bitcoin's design reflects a certain ideology about money.
    - threepio 5y ago
      Bitcoin: by limiting issuance to 21M we have made price manipulation of our currency impossible Tether: hold my beer
      - gruez 5y ago

alpaca128 5y ago

Yes, Tether comes with a ton of suspicious circumstances and leadership that just nervously repeats the phrase "the money is there!" in interviews. A YouTube channel named Coffeezilla has been doing some great reporting & investigations on it (and many other crypto scams). It's insane what's going down on the crypto market, including influencers selling unmarked ads for currencies.

Eji1700 5y ago

" They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right." For the most part the crypto market being unregulated means that there can't be any consequences, except for market consequences. And market consequences are vaaaaastly worse. It's basically like having no one make you wear a seat belt. Sure seems fine until you're just dead.

lumost 5y ago
It's still a great deal for the perpetrators to only make 1MM in liquid capital after defrauding billions. Non-market consequences of theft include jail time and forefeiture of funds outside of an LLC.

joe_the_user 5y ago

They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right. Tether and bitcoin have been very robust, bitcoin has crashed and recovered many times now. But I have to say that every single bubble has involved the statement "so far, they've been right." as the follow-up to "this time things are different".

bb88 5y ago

Right now I think a good analogy is it's like musical chairs. The game is fine as long as the music is playing. When the music stops, someone's gonna lose big. The problem is when the music stops and there's a run on crypto. People are trying to get out of $USDT and convert it into cash. Exchanges have to have buyers of $USDT so they can exchange $USDT back into cash for anyone that wants to. But they can't just create dollars out of thin air. If there's no buyers for $USDT anymore than the "currency" flatlines, it's no longer tied to the dollar. If Tether were truly backed 1:1, Tether itself could just buy $USDT with its own cash on any exchange, and that would be enough to keep their currency afloat and stop the run.

notjesse 5y ago
This makes me think; what if you shorted USDT? There seems to be almost no scenario where USDT becomes more valuable than the USD, and the worst case is it continues to be worth the same. But there is a fair probability it becomes worthless, meaning that you gain from it. While you need to pay premiums in the interim, for something with an indefinite timeframe, that risk seems fairly minor for the potential reward.
- gruez 5y ago
  >But there is a fair probability it becomes worthless, meaning that you gain from it. >While you need to pay premiums in the interim, for something with an indefinite timeframe, that risk seems fairly minor for the potential reward. 1. the chance of collapse might be lower than you think. the "tether is going to collapse any day now" sentiment has been around for years now, but collapse has proved elusive. 2. borrowing costs are high. I searched around and it looks like the APY for lending out tether is around 9%. The cost for borrowing tether is certainly higher. If you held a $100 short position for 5 years, and there was a total collapse at the end of year 5, then you'd make $65 (factoring in interest payments). That sounds good, but chances are thether probably has more money in the bank than $0. If it only collapsed to $60 (ie. they went bankrupt but had 60 cents of real money for every dollar issued), then you'd only make $5. 3. there are rumors/conspiracy theories that tether/bitfinex/tether affiliated exchanges force USDT/USD rates up periodically to force liquidation of tether short sellers. If you're caught in one, you'd lose money and be forced to rebuy tethers at an unfavorable price.

rasz 5y ago

They print $Billions, so much money they can buy anyone 100 times over.