6 ms·

Context: One week ago, there were precisely two US banks serving crypto companies, Silvergate and Signature. As of today there are zero.

EGreg 4y ago
They always attack Chinese "ghost cities" and Chinese "real estate bubble / Evergrand" and Chinese "central planning" ... But in fact, USDT and Binance are kicking while USDC and US Banks are starting to wobble. And it has to do with the irresponsibility of the central planners HERE in the USA (the Fed raising interest rates from 0.38% to 5% in a year!) https://www.investing.com/news/cryptocurrency-news/binance-ceo-mocks-critics-as-two-us-banks-crumble-within-a-week-3028065 https://www.investing.com/news/cryptocurrency-news/binance-c... Seriously, my theory is (different from the Austrians) that the Fed creates the problems and depressions mostly by raising interest rates. Instead, keep them at zero and let the market figure things out. I am fine with printing money as long as you raise taxes to remove it from the system. Raising interest rates is far worse and a depression is far worse than any inflation. https://www.bostonglobe.com/2022/09/21/opinion/fed-wants-you-lose-your-job/ https://www.bostonglobe.com/2022/09/21/opinion/fed-wants-you... Well, I guess somehow the reputation of USA of being an "economically free" country versus China lets them get away with central planning and soon the CBDCs and the national IDs for everyone. Not that I like that in China either!
- FpUser 4y ago
  >"far worse than any inflation." In 1923 the exchange rate has reached 1 trillion DM for 1USD. We all know how it had ended.
  - EGreg 4y ago
    Nearly every hyperinflation example (there are very few, in fact) has something additional to that stuff. In the case of Weimar Germany, there was the little matter of THE VERSAILLES TREATY that required them to endlessly pay war reparations and punitive payments in gold. Britain told France to cut it out, but France was mad enough at the Germans that they continued. This led to the rise of the Nazis and WW2. https://www.history.com/news/treaty-of-versailles-world-war-ii-german-guilt-effects https://www.history.com/news/treaty-of-versailles-world-war-... You should read more economic viewpoints, such as Walter Mosler on hyperinflations: https://moslereconomics.com/wp-content/uploads/2020/11/Weimar-Republic-Hyperinflation-through-a-Modern-Monetary-Theory-Lens.pdf https://moslereconomics.com/wp-content/uploads/2020/11/Weima... Oh, and meanwhile there was a "free money miracle" going on in nearby Austria, and clearly did not lead to hyperinflation, quite the opposite: everyone paid off their taxes due to the demurrage of the free money... keep in mind this was while all around them there was a growing depression... even Mises institute grudgingly agrees! https://mises.org/library/free-money-miracle https://mises.org/library/free-money-miracle
    - FpUser 4y ago
      >"but France was mad enough at the Germans that they continued. This led to the rise of the Nazis and WW2." Oh I know that. My argument was rather pedantic. Now since you've mentioned it I wonder if the situation with Russia might to the same outcome eventually.
      - deleted 4y ago
        [deleted]
    - bfdm 4y ago
      Warren* Mosler, one of yhe founders of Modern Monetary Theory. Lead author was Phil Armstrong, and he did a great discussiom of the paper on the MMT podcast.
      - astrange 4y ago
        Rather, he is Modern Monetary Theory. MMT doesn't have an actual theory of the economy; it uses the standard model and just has a different vibe. So it's just whatever he and Stephanie Kelton feel like saying at the time. The most notable different policy prescription (job guarantee) is odd because it's originally a right-wing program they just decided is left-wing.
        citizen_friend 4y ago
        Just because they don't completely redefine economic models from the start doesn't mean MMT isn't a theory. They clearly have different ideas about how policy should be implemented and what will happen. Their description of how government issued currency, coercion, and tax act as a tool to capture services from the economy (as opposed to filling up a treasury for the government to spend) is extremely underrated in mainstream economics. > right-wing program they just decided is left-wing. Why would MMT be limited to traditionally left/right boundaries?
        astrange 4y ago
- AnonMO 4y ago
  all countries have their flaws. Evergrand basically defaulted on their loans and was the equivalent of SVB for real-estate in china even the AUM were similar. The real-estate market is probably the most important market in china especially for the wealthy.also the market should be able to adjust to any rate not only 0 if it’s truly free.
- Scoundreller 4y ago
  Gresham's law: "Bad money drives out good [money]" https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law
- kccqzy 4y ago
  If you raise taxes enough, you can actually reduce inflation and solve the problem. But which country has the legal structure in place to raise taxes essentially every few months, on demand? Even if they did, almost no companies are ready to handle tax rates that change by the month.
  - hattmall 4y ago
    When there's no meaningful limit on government spending inflation is a tax.
PheonixPharts 4y ago
Given the amount of people planning on easy arbitrage with USDC tomorrow morning, do you know if Signature under the Fed will be able to handle this demand coming from Circle?
- Blackthorn 4y ago
  Easy arbitrage? It's already back to 0.995.
  - PheonixPharts 4y ago
    Presumably part of the record number of people buying on Saturday want to cash out to USD tomorrow. I guess they could exchange with BTC or ETH and then to USD but that seems like it removes the "riskless" part. So my working assumption is that many of those people are going to try to cash out Monday morning.
    - loaph 4y ago
      You can sell USDC for dollars at other exchanges, no need to go through BTC/ETC/whatever. For example Gemini has a USD/USDC pair. It won't be pegged to a dollar, like if you redeem through circle but getting $.99+ on the dollar is probably good enough for a lot of people.
      - riskneutral 4y ago
        > You can sell USDC for dollars at other exchanges, no need to go through BTC/ETC/whatever. For example Gemini has a USD/USDC pair. It won't be pegged to a dollar, like if you redeem through circle but getting $.99+ on the dollar is probably good enough for a lot of people. Wow, this is scary. It reminds me of the history of monetary economics in the US during the 19th century, a period known for "wild cat" banks and a system where any bank could print their own private currency. In that system, currency was discounted the further away it was physically from the bank which issued it. The system was divided between "city banks" and "country banks." The more remote the location, the less up-to-date information was available about the health of distant banks, and so the more distant currencies were discounted more heavily. The modern crypto wild west version of this is going to end in a result of going from "getting $0.99+ on the dollar is probably good enough for a lot of people" can turn into "getting 0.01+ on the dollar is as good as it gets" within minutes, if and when there is a run on crypto stablecoins.
pmorici 4y ago
Is that really true? USDC competitor GUSD has its cash with State Street Bank. They are quite large and still in business.
- collegeburner 4y ago
  that's custodial. it's different. cash/assets don't sit on the bank's balance sheet. they're in individual accounts, not usually lent out, and you pay a fee to keep there.
- riskneutral 4y ago
  This is the end of the road for crypto's intersection with the official banking system. After the recent financial disasters at FTX, Silicon Valley Bank, Signature Bank, Silvergate Bank, etc, etc, I expect that there is going to a long period where and banks and regulators are no longer keen to experiment with allowing crypto to go more mainstream in the financial system. The tide will turn the other way, and for good reason. It's great that you're all having fun with dog coins or whatever but the financial system is an essential utility to the very survival and stability of human civilization itself, like the electrical grid, or GPS, or plumbing, and I think people will get the picture now about what "innovating" with allowing crazy private currencies to intersect with the official banking system leads to.
riskneutral 4y ago
And now we know where the next bank run after SVB is going to happen. It isn't going happen at a traditional bank, because the Fed/FDIC/US Treasury have that covered now. There's going to be a run on crypto stablecoins. Hopefully the coming economic calamity will be contained within the cryptobro sphere.
- hattmall 4y ago
  Tether is backed by something like 1/3rd Latin American treasuries, good luck liquidating those at par value, if they even exist.
3np 4y ago
Kraken is supposedly (opening) a bank. https://blog.kraken.com/post/6241/kraken-wyoming-first-digital-asset-bank/ https://blog.kraken.com/post/6241/kraken-wyoming-first-digit... https://support.kraken.com/hc/en-us/articles/360055126131-What-is-Kraken-Bank- https://support.kraken.com/hc/en-us/articles/360055126131-Wh...
- deleted 4y ago
  [deleted]

EGreg 4y ago

They always attack Chinese "ghost cities" and Chinese "real estate bubble / Evergrand" and Chinese "central planning" ... But in fact, USDT and Binance are kicking while USDC and US Banks are starting to wobble. And it has to do with the irresponsibility of the central planners HERE in the USA (the Fed raising interest rates from 0.38% to 5% in a year!) https://www.investing.com/news/cryptocurrency-news/binance-ceo-mocks-critics-as-two-us-banks-crumble-within-a-week-3028065 https://www.investing.com/news/cryptocurrency-news/binance-c... Seriously, my theory is (different from the Austrians) that the Fed creates the problems and depressions mostly by raising interest rates. Instead, keep them at zero and let the market figure things out. I am fine with printing money as long as you raise taxes to remove it from the system. Raising interest rates is far worse and a depression is far worse than any inflation. https://www.bostonglobe.com/2022/09/21/opinion/fed-wants-you-lose-your-job/ https://www.bostonglobe.com/2022/09/21/opinion/fed-wants-you... Well, I guess somehow the reputation of USA of being an "economically free" country versus China lets them get away with central planning and soon the CBDCs and the national IDs for everyone. Not that I like that in China either!

FpUser 4y ago
>"far worse than any inflation." In 1923 the exchange rate has reached 1 trillion DM for 1USD. We all know how it had ended.
- EGreg 4y ago
  Nearly every hyperinflation example (there are very few, in fact) has something additional to that stuff. In the case of Weimar Germany, there was the little matter of THE VERSAILLES TREATY that required them to endlessly pay war reparations and punitive payments in gold. Britain told France to cut it out, but France was mad enough at the Germans that they continued. This led to the rise of the Nazis and WW2. https://www.history.com/news/treaty-of-versailles-world-war-ii-german-guilt-effects https://www.history.com/news/treaty-of-versailles-world-war-... You should read more economic viewpoints, such as Walter Mosler on hyperinflations: https://moslereconomics.com/wp-content/uploads/2020/11/Weimar-Republic-Hyperinflation-through-a-Modern-Monetary-Theory-Lens.pdf https://moslereconomics.com/wp-content/uploads/2020/11/Weima... Oh, and meanwhile there was a "free money miracle" going on in nearby Austria, and clearly did not lead to hyperinflation, quite the opposite: everyone paid off their taxes due to the demurrage of the free money... keep in mind this was while all around them there was a growing depression... even Mises institute grudgingly agrees! https://mises.org/library/free-money-miracle https://mises.org/library/free-money-miracle
  - FpUser 4y ago
    >"but France was mad enough at the Germans that they continued. This led to the rise of the Nazis and WW2." Oh I know that. My argument was rather pedantic. Now since you've mentioned it I wonder if the situation with Russia might to the same outcome eventually.
    - deleted 4y ago
      [deleted]
  - bfdm 4y ago
    Warren* Mosler, one of yhe founders of Modern Monetary Theory. Lead author was Phil Armstrong, and he did a great discussiom of the paper on the MMT podcast.
    - astrange 4y ago
      Rather, he is Modern Monetary Theory. MMT doesn't have an actual theory of the economy; it uses the standard model and just has a different vibe. So it's just whatever he and Stephanie Kelton feel like saying at the time. The most notable different policy prescription (job guarantee) is odd because it's originally a right-wing program they just decided is left-wing.
      - citizen_friend 4y ago
        Just because they don't completely redefine economic models from the start doesn't mean MMT isn't a theory. They clearly have different ideas about how policy should be implemented and what will happen. Their description of how government issued currency, coercion, and tax act as a tool to capture services from the economy (as opposed to filling up a treasury for the government to spend) is extremely underrated in mainstream economics. > right-wing program they just decided is left-wing. Why would MMT be limited to traditionally left/right boundaries?
        astrange 4y ago
AnonMO 4y ago
all countries have their flaws. Evergrand basically defaulted on their loans and was the equivalent of SVB for real-estate in china even the AUM were similar. The real-estate market is probably the most important market in china especially for the wealthy.also the market should be able to adjust to any rate not only 0 if it’s truly free.
Scoundreller 4y ago
Gresham's law: "Bad money drives out good [money]" https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law
kccqzy 4y ago
If you raise taxes enough, you can actually reduce inflation and solve the problem. But which country has the legal structure in place to raise taxes essentially every few months, on demand? Even if they did, almost no companies are ready to handle tax rates that change by the month.
- hattmall 4y ago
  When there's no meaningful limit on government spending inflation is a tax.

PheonixPharts 4y ago

Given the amount of people planning on easy arbitrage with USDC tomorrow morning, do you know if Signature under the Fed will be able to handle this demand coming from Circle?

Blackthorn 4y ago
Easy arbitrage? It's already back to 0.995.
- PheonixPharts 4y ago
  Presumably part of the record number of people buying on Saturday want to cash out to USD tomorrow. I guess they could exchange with BTC or ETH and then to USD but that seems like it removes the "riskless" part. So my working assumption is that many of those people are going to try to cash out Monday morning.
  - loaph 4y ago
    You can sell USDC for dollars at other exchanges, no need to go through BTC/ETC/whatever. For example Gemini has a USD/USDC pair. It won't be pegged to a dollar, like if you redeem through circle but getting $.99+ on the dollar is probably good enough for a lot of people.
    - riskneutral 4y ago
      > You can sell USDC for dollars at other exchanges, no need to go through BTC/ETC/whatever. For example Gemini has a USD/USDC pair. It won't be pegged to a dollar, like if you redeem through circle but getting $.99+ on the dollar is probably good enough for a lot of people. Wow, this is scary. It reminds me of the history of monetary economics in the US during the 19th century, a period known for "wild cat" banks and a system where any bank could print their own private currency. In that system, currency was discounted the further away it was physically from the bank which issued it. The system was divided between "city banks" and "country banks." The more remote the location, the less up-to-date information was available about the health of distant banks, and so the more distant currencies were discounted more heavily. The modern crypto wild west version of this is going to end in a result of going from "getting $0.99+ on the dollar is probably good enough for a lot of people" can turn into "getting 0.01+ on the dollar is as good as it gets" within minutes, if and when there is a run on crypto stablecoins.

pmorici 4y ago

Is that really true? USDC competitor GUSD has its cash with State Street Bank. They are quite large and still in business.

collegeburner 4y ago
that's custodial. it's different. cash/assets don't sit on the bank's balance sheet. they're in individual accounts, not usually lent out, and you pay a fee to keep there.
riskneutral 4y ago
This is the end of the road for crypto's intersection with the official banking system. After the recent financial disasters at FTX, Silicon Valley Bank, Signature Bank, Silvergate Bank, etc, etc, I expect that there is going to a long period where and banks and regulators are no longer keen to experiment with allowing crypto to go more mainstream in the financial system. The tide will turn the other way, and for good reason. It's great that you're all having fun with dog coins or whatever but the financial system is an essential utility to the very survival and stability of human civilization itself, like the electrical grid, or GPS, or plumbing, and I think people will get the picture now about what "innovating" with allowing crazy private currencies to intersect with the official banking system leads to.

riskneutral 4y ago

And now we know where the next bank run after SVB is going to happen. It isn't going happen at a traditional bank, because the Fed/FDIC/US Treasury have that covered now. There's going to be a run on crypto stablecoins. Hopefully the coming economic calamity will be contained within the cryptobro sphere.

hattmall 4y ago
Tether is backed by something like 1/3rd Latin American treasuries, good luck liquidating those at par value, if they even exist.

3np 4y ago

Kraken is supposedly (opening) a bank. https://blog.kraken.com/post/6241/kraken-wyoming-first-digital-asset-bank/ https://blog.kraken.com/post/6241/kraken-wyoming-first-digit... https://support.kraken.com/hc/en-us/articles/360055126131-What-is-Kraken-Bank- https://support.kraken.com/hc/en-us/articles/360055126131-Wh...

deleted 4y ago
[deleted]