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Where do you start? You start with company that builds a lemonade stand, and they dress it up like a life changing lemonade that's going to replace all other dr

by Yizahi 4y ago

Where do you start? You start with company that builds a lemonade stand, and they dress it up like a life changing lemonade that's going to replace all other drinks in 38 days or whatever. So let's ignore what it does, let's pretent is does literally nothing, it's just a stand. So what's next. This lemonade stand has some market price, it's probably not zero, right? Let's say it's 20 million dollars market price. Maybe in your world if you create a lemonade stand it's worth 180$. But in my world, when people create lemonade stand and twit about it, people are like "ooh, a Lemonade Stand! Noice!" and it's worth 20 millions. And all these sophisticated games go like "ohh, if there are 100 million dollars in the lemonade stand, then it's going to get 16 million dollars of profits this year. That's pretty good, let's put a little bit more into it.". And maybe that happens with the other 200 million dollars in the stand. So you know, sophisticated traders and cryptards or other similar parties decide to put 200 million dollars in the stand. And other people go like, "oh, this is a pretty cool lemonade stand, it's valuable stand, and who a re we to say it's wrong?". Lemonade stands can be great. I love lemonade as much as the next guy, right? And then people are recalibrating, "20 million dollars for this stand? that's it? it's probably valued at 1.5 billions at least!".

weard_beard 4y ago
To be fair, that is how the entire fractional reserve banking system started. Safe houses for gold handed out slips of paper to make it easier for the guys storing their gold to spend it and said, "hey, we'll actually pay you to let us hand these slips of paper out to people who want to borrow your gold. We just need you to stay quiet and be cool with us committing fraud and handing out WAY more borrow slips than there is gold. Cool? Cool." We as a society accept large scale fraud all the time and normalize it.
- Animats 4y ago
  That's the crypto community delusion about how fractional reserve banking works. The way fractional reserve banking actually works is that banks lend out money, and the loans are their major assets. This only works if there's heavy regulation on how sound the loans have to be. Without regulation of loan quality, there's a banking panic every few years. All the US banking crises since the 1920s have involved some form of deregulation.[1] [1] https://en.wikipedia.org/wiki/List_of_banking_crises https://en.wikipedia.org/wiki/List_of_banking_crises
  - weard_beard 4y ago
    The same could be said for FTX. There just needs to be regulation about how sound the self-created coin backing your margin needs to be. Without regulation of the soundness of the economic value of your self-created coin you get a crypto crash. Am I crazy? Are we not describing 2 identical problems and classifying 1 of them as fraud? The soundness of loans in a deregulated environment is no better than the soundness of a self-invented currency.
    - Animats 4y ago
      Here's a tutorial on how to analyze a bank's balance sheet.[1] Few of the crypto clowns publish their balance sheet. FTX, we now know, didn't even have a balance sheet. [1] https://www.wallstreetmojo.com/banks-balance-sheet/ https://www.wallstreetmojo.com/banks-balance-sheet/
      - weard_beard 4y ago
        Thanks for this, so far that's 2 points of difference stated: 1) Regulatory oversight. 2) Relative transparency. Legit differences between Crypto exchanges and traditional finance. Keep em' coming, I'm learning :)
      - UncleMeat 4y ago
        What, the big banks don't have "internal, poorly labeled fiat account" on their spreadsheet tracking their finances?
    - Eisenstein 4y ago
      Your original response was an insinuation that banking systems in general are based on fraud, and that gold should be the basis of monetary value. In fact, the case has been proven that gold is a poor basis of monetary value and that banking systems, when properly regulated, are not fraudulent, or are very rarely fraudulent. The reply to that was to explain that regulation was the key to maintaining a stable banking system. You then ignore all that an conflate unregulated banking and regulated banking as equal. I hope you understand that this makes your argument dishonest, and that you attempt to avoid this in the future.
d3nj4l 4y ago
I wonder what it says about me that I instanty recognized what this is referring to For the uninitiated: https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...

by Yizahi 4y ago

weard_beard 4y ago

To be fair, that is how the entire fractional reserve banking system started. Safe houses for gold handed out slips of paper to make it easier for the guys storing their gold to spend it and said, "hey, we'll actually pay you to let us hand these slips of paper out to people who want to borrow your gold. We just need you to stay quiet and be cool with us committing fraud and handing out WAY more borrow slips than there is gold. Cool? Cool." We as a society accept large scale fraud all the time and normalize it.

Animats 4y ago
That's the crypto community delusion about how fractional reserve banking works. The way fractional reserve banking actually works is that banks lend out money, and the loans are their major assets. This only works if there's heavy regulation on how sound the loans have to be. Without regulation of loan quality, there's a banking panic every few years. All the US banking crises since the 1920s have involved some form of deregulation.[1] [1] https://en.wikipedia.org/wiki/List_of_banking_crises https://en.wikipedia.org/wiki/List_of_banking_crises
- weard_beard 4y ago
  The same could be said for FTX. There just needs to be regulation about how sound the self-created coin backing your margin needs to be. Without regulation of the soundness of the economic value of your self-created coin you get a crypto crash. Am I crazy? Are we not describing 2 identical problems and classifying 1 of them as fraud? The soundness of loans in a deregulated environment is no better than the soundness of a self-invented currency.
  - Animats 4y ago
    Here's a tutorial on how to analyze a bank's balance sheet.[1] Few of the crypto clowns publish their balance sheet. FTX, we now know, didn't even have a balance sheet. [1] https://www.wallstreetmojo.com/banks-balance-sheet/ https://www.wallstreetmojo.com/banks-balance-sheet/
    - weard_beard 4y ago
      Thanks for this, so far that's 2 points of difference stated: 1) Regulatory oversight. 2) Relative transparency. Legit differences between Crypto exchanges and traditional finance. Keep em' coming, I'm learning :)
    - UncleMeat 4y ago
      What, the big banks don't have "internal, poorly labeled fiat account" on their spreadsheet tracking their finances?
  - Eisenstein 4y ago
    Your original response was an insinuation that banking systems in general are based on fraud, and that gold should be the basis of monetary value. In fact, the case has been proven that gold is a poor basis of monetary value and that banking systems, when properly regulated, are not fraudulent, or are very rarely fraudulent. The reply to that was to explain that regulation was the key to maintaining a stable banking system. You then ignore all that an conflate unregulated banking and regulated banking as equal. I hope you understand that this makes your argument dishonest, and that you attempt to avoid this in the future.

d3nj4l 4y ago

I wonder what it says about me that I instanty recognized what this is referring to For the uninitiated: https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...