4 ms·
There is actually a mechanism for creating money. It's debt. The mechanism here is facilitating commerce. A simple analogy is: You're selling oranges. I'm sel
by bluelightning2k 4y ago
There is actually a mechanism for creating money. It's debt.
The mechanism here is facilitating commerce.
A simple analogy is:
You're selling oranges. I'm selling apples. Bartering is inefficient so we invented currency.
I don't have any money right now. I buy your orange with debt, you buy my apple, the fruit is used instead of rotting, etc.
Essentially we only make a deal because we want what we're getting more than what we have. So we're getting something worth (to us) e.g. 130% of what we're giving.
So every trade multiplies the effective resource by e.g. 30%. Debt facilitates the trade, while simultaneously creating the value.
Up. to. a. point.
Without spoiling the ending that everyone knows is coming... crypto is not this. Crypto is not facilitating any (legal) economic activity. Nobody is taking this and buying machinery with a resource-generating payback period.
- danuker 4y agoOn the contrary, Tether DID take investor money (in the form of USD), provided them with an IOU, and proceeded to buy hopefully-productive "real"-economy bonds with it. Debt only creates value if it can be repaid. If Tether can not maintain the peg, it represents insolvency, and a net loss for the investors (rather than a win-win as a loan is supposed to be). Seeing they also own non-USD-denominated bonds, it is not guaranteed that the principal returned will be the same dollar amount, even if held until maturity. https://www.cnbc.com/2022/05/19/tether-claims-usdt-stablecoin-is-backed-by-non-us-bonds.html https://www.cnbc.com/2022/05/19/tether-claims-usdt-stablecoi...
- gitfan86 4y agoGreat Example. Imagine if you gave me your oranges and I gave you a picture I drew of an orange and told you that this picture gives you the exclusive rights to all pictures of oranges in the world. That is a NFT.