3 ms·

Why couldn't you use short-term fed paper? Even a 0.5% yearly yield would be more than enough.

• jerf 4y ago
  But why would you use short-term fed paper to make money with your stake, when you could just plain buy short-term fed paper, without the risk of people "redeeming" it from you? Backing a currency isn't about taking deposits from people. You can't back with deposits because your liabilities = assets then. You have to put your own stuff up, but then all you are doing is running the risk that people will redeem it away from you. Backing a currency is basically just giving your stuff away with extra steps.
  • sudosysgen 4y ago
    Because you can get interest on the fed paper from money that isn't yours? And if people redeem from you, just add a clause where if the liquidity pool is gone you have to wait X days before getting it redeemed.
    • jerf 4y ago
      It is yours. Again, you can't back with "deposits". If you have deposits, the depositors have a claim that encumbers the assets; you can't then "back" something with encumbered assets. You can only back a currency with unencumbered assets. And if you have unencumbered assets, why would you use them to back a currency?
      • sudosysgen 4y ago
        Sure, I understand what you mean. It is still beneficial to the holder of deposits on which a small but nonzero yield is being received.