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> No, I mean like when a bank buys government bonds, company bonds, or loans money to customers and businesses. Did you see the asset sheets on VMFXX? Its all

> No, I mean like when a bank buys government bonds, company bonds, or loans money to customers and businesses. Did you see the asset sheets on VMFXX? Its all government bonds, loans, and so forth. There's no "cash" just sitting there. Its all, completely composed of various kinds of loans (averaging 11-days in maturity). I've given you a "real bank" (Vanguard, an investment bank specifically but yes, a bank), that's conducting these "loans" / bonds that you're talking about. I've also brought up SWVXX, Schwab's competitor fund, is a "prime" MMF that consists _mostly_ of commecial paper (ie: loans to non-government entities), with higher levels of risk involved. -------- Based on how this discussion is going, perhaps I should focus on SWVXX instead. http://hosted.rightprospectus.com/SF/MMD/Fund.aspx?cu=808515605 http://hosted.rightprospectus.com/SF/MMD/Fund.aspx?cu=808515... There's even "less cash" here than in VMFXX. That's why I'm talking about these money-market funds. These are... the things you're trying to talk about, right? These banks / entities that are making a ton of loans / bonds to each other? I'm thinking of real-world entities and trying to match them up to what you're talking about. These things have names ya know. They're not just mysterious "banks" out there. People invest into SWVXX or VMFXX, or other such tickers / funds. > Weighted Average Maturity: 9 days You see that? It will take 9 days for most of those funds to mature and turn into cash, on the average for SWVXX today. This isn't "cash", its a pile of loans. Very short-term high-quality loans, but its a pile of loans. Is this not what you were trying to talk about? > That's the kind of business that leads to bankruptcy if all your customers suddenly ask for their money back (which you have been lending behind their backs). Yes. That's why there's strict liquidity tests, liquidity reserves, and publication requirements for entities such as SWVXX. The risk is real, and we need to keep an eye on it to make sure that Schwab and Vanguard aren't cheating the books. Those publication requirements simply do not exist for Binance or Coinbase. There's no asset sheet vs liabilities sheets. There's no reporting guidelines. There's nothing.

wizeman 4y ago
> I've given you a "real bank" (Vanguard, an investment bank specifically but yes, a bank), that's conducting these "loans" / bonds that you're talking about. Investment banks are not problematic because the customer is the one who decides how much and where their money is getting invested (therefore he knows how much he is risking, and how it is getting risked). This is unlike what happens with traditional banks, which is what I was referring to when talking about the crappy loans and bonds business (and lending the customer's funds behind their backs, even if the customer is aware of it and does not consent). > Those publication requirements simply do not exist for Binance or Coinbase. There's no asset sheet vs liabilities sheets. There's no reporting guidelines. There's nothing. If that's the case, then I agree, this should change. I would prefer if exchanges themselves would do this and customers would verify this, but even though I'm a libertarian, I wouldn't object to the government requiring reasonable, periodic financial audits of crypto exchanges by reputable financial audit firms because I am in favor of complete transparency[0] (be it regarding government or companies) and I recognize that too many bad apples are entering the crypto business and ruining its reputation (and customers of crypto exchanges are obviously not doing sufficient due diligence). [0] More transparency can greatly increase the benefits of market-based capitalism, because it works more efficiently (i.e. market participants make better decisions and get more value out of it) when the participants are acting with more information than when they are acting with less information.
- dragontamer 4y ago
  > Investment banks are not problematic because the customer is the one who decides how much and where their money is getting invested (therefore he knows how much he is risking, and how it is getting risked). Do... you know what a MMF is? (money market fund) A MMF is a federally regulated investment product where 1-share equals $1. Investors invest into MMFs because they are "safe", and have a huge amount of federal regulations to almost-guarantee the 1-share == $1 price point. (but not "totally" guarantee). Small levels of risk are acceptable. Yes, they're offered by investment banks rather than traditional banks. But the "fundamental trust" that 1-share in VMFXX == $1 is extremely deep. That's why I keep bringing up this comparison. MMFs are allowed to loan out their money and partake in various investment schemes to generate a yield. HOWEVER, there's reporting requirements, there's investment requirements, there's rating requirements, there's transparency, etc. etc. All of this giant exercise with crytocoins trying to "make a stablecoin", where 1-stablecoin == $1 all the time is just a crazy scheme to recreate MMFs. That's my overall point and viewpoint.
  - wizeman 4y ago
    > That's why I keep bringing up this comparison. MMFs are allowed to loan out their money and partake in various investment schemes to generate a yield. HOWEVER, there's reporting requirements, there's investment requirements, there's rating requirements, there's transparency, etc. etc. I think that's a good thing, although there are 2 things I disagree with: 1) I believe the investment requirements are a scheme that is unfair and can lead to forced (and unnatural) inequality. I would replace this with (sufficiently strict) tests of investment knowledge for new investors. 2) In practice the ratings agencies have a less than stellar record, as the way they are set up, they have an inherent conflict of interest. This leads to a false sense of security. So I would just get rid of these, but I don't see anything wrong with the rest in general (I'm sure there would be some specifics I would disagree with). > All of this giant exercise with crytocoins trying to "make a stablecoin", where 1-stablecoin == $1 all the time is just a crazy scheme to recreate MMFs. That's my overall point and viewpoint. It's quite different, as stablecoins can be traded in a completely decentralized way (i.e. peer-to-peer) with blockchain protocols using cryptographic assurances. But yes, in theory an MMF-backed stablecoin could be traded on a blockchain, and I see nothing wrong with that. That said, an MMF-backed stablecoin would be a bit more risky than a USD-backed stablecoin, due to an MMF being inherently a bit more risky than the USD. However, yeah.. another point is that the companies that issue stablecoins are also quite far from being sufficiently transparent. They also need to be subject to the same periodic financial audit requirements by a reputable firm as a crypto exchange should!

wizeman 4y ago

> I've given you a "real bank" (Vanguard, an investment bank specifically but yes, a bank), that's conducting these "loans" / bonds that you're talking about. Investment banks are not problematic because the customer is the one who decides how much and where their money is getting invested (therefore he knows how much he is risking, and how it is getting risked). This is unlike what happens with traditional banks, which is what I was referring to when talking about the crappy loans and bonds business (and lending the customer's funds behind their backs, even if the customer is aware of it and does not consent). > Those publication requirements simply do not exist for Binance or Coinbase. There's no asset sheet vs liabilities sheets. There's no reporting guidelines. There's nothing. If that's the case, then I agree, this should change. I would prefer if exchanges themselves would do this and customers would verify this, but even though I'm a libertarian, I wouldn't object to the government requiring reasonable, periodic financial audits of crypto exchanges by reputable financial audit firms because I am in favor of complete transparency[0] (be it regarding government or companies) and I recognize that too many bad apples are entering the crypto business and ruining its reputation (and customers of crypto exchanges are obviously not doing sufficient due diligence). [0] More transparency can greatly increase the benefits of market-based capitalism, because it works more efficiently (i.e. market participants make better decisions and get more value out of it) when the participants are acting with more information than when they are acting with less information.

dragontamer 4y ago
> Investment banks are not problematic because the customer is the one who decides how much and where their money is getting invested (therefore he knows how much he is risking, and how it is getting risked). Do... you know what a MMF is? (money market fund) A MMF is a federally regulated investment product where 1-share equals $1. Investors invest into MMFs because they are "safe", and have a huge amount of federal regulations to almost-guarantee the 1-share == $1 price point. (but not "totally" guarantee). Small levels of risk are acceptable. Yes, they're offered by investment banks rather than traditional banks. But the "fundamental trust" that 1-share in VMFXX == $1 is extremely deep. That's why I keep bringing up this comparison. MMFs are allowed to loan out their money and partake in various investment schemes to generate a yield. HOWEVER, there's reporting requirements, there's investment requirements, there's rating requirements, there's transparency, etc. etc. All of this giant exercise with crytocoins trying to "make a stablecoin", where 1-stablecoin == $1 all the time is just a crazy scheme to recreate MMFs. That's my overall point and viewpoint.
- wizeman 4y ago
  > That's why I keep bringing up this comparison. MMFs are allowed to loan out their money and partake in various investment schemes to generate a yield. HOWEVER, there's reporting requirements, there's investment requirements, there's rating requirements, there's transparency, etc. etc. I think that's a good thing, although there are 2 things I disagree with: 1) I believe the investment requirements are a scheme that is unfair and can lead to forced (and unnatural) inequality. I would replace this with (sufficiently strict) tests of investment knowledge for new investors. 2) In practice the ratings agencies have a less than stellar record, as the way they are set up, they have an inherent conflict of interest. This leads to a false sense of security. So I would just get rid of these, but I don't see anything wrong with the rest in general (I'm sure there would be some specifics I would disagree with). > All of this giant exercise with crytocoins trying to "make a stablecoin", where 1-stablecoin == $1 all the time is just a crazy scheme to recreate MMFs. That's my overall point and viewpoint. It's quite different, as stablecoins can be traded in a completely decentralized way (i.e. peer-to-peer) with blockchain protocols using cryptographic assurances. But yes, in theory an MMF-backed stablecoin could be traded on a blockchain, and I see nothing wrong with that. That said, an MMF-backed stablecoin would be a bit more risky than a USD-backed stablecoin, due to an MMF being inherently a bit more risky than the USD. However, yeah.. another point is that the companies that issue stablecoins are also quite far from being sufficiently transparent. They also need to be subject to the same periodic financial audit requirements by a reputable firm as a crypto exchange should!