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> Prior to these changes, bank runs and financial crises occurred about every twenty to thirty years. That isn't in itself a bad thing. There needs to be a mec

by roenxi 3y ago

> Prior to these changes, bank runs and financial crises occurred about every twenty to thirty years. That isn't in itself a bad thing. There needs to be a mechanism to punish people who give their money to charlatans and to reign in malinvestment. If there aren't occasional bank runs then that suggests an excessively cautious investment environment that is destroying potential wealth. Or a lot off government bailouts to cover excessive risk. As you point out in a few lines with the "risk means nothing to them" comment, a situation has been set up where only the government cares about whether the risk profile being taken on is appropriate. Bankers don't care because it isn't their money, depositors don't care because it isn't their problem. That is a very poor outcome, everyone should care about that. People are presently empowering incompetents by flooding money into stupid ventures and they get no feedback about the damage they are doing. Mass voting once every few years combined with committees of professional bureaucrats is an ineffective way of doing risk assessment. This has to be something that people work out with their bankers on an ongoing basis. The US would look completely different and probably a lot better to live in if these incentives were corrected. It is interesting that in the crypto space a group of people have gotten so sick of this that they're going and making their own financial system (with hookers and blackjack, one suspects). It is a really interesting ongoing experiment because if the situation plays out in the obvious way, we're going to see a much healthier system in crypto. We've already seen any number of frauds cleaned out that'd probably have gotten away with it in traditional finance. And the way Tether eventually explodes will be a really interesting case study.

ttfkam 3y ago
Previous generations learned the hard way that when you lose your life savings, once is too often. A lot of folks never recovered after the first time it happened to them. Identifying a huckster isn't as easy as you say. A lot of folks lost everything in a local savings and loan, not some fly-by-night penny stock broker. Crypto will not stop this. Crypto has no intrinsic value. A car has intrinsic value. A house has intrinsic value. Farmland has intrinsic value. If everyone decided all these things had zero currency value, you can still transport using the car. You can still keep the rain out in a house. Crypto leaves you with electron patterns in a box. When the US dollar has dipped (and gold has gotten stronger), has the measured value of any crypto "currency" increased proportionally? No. Often it dips along with the dollar. When folks feel the crunch, they sell their crypto to pay bills. The reduced demand lowers the value of crypto. When the dollar is strongest and employment is robust, folks buy more crypto with their increased disposable income, raising demand and proportionally the price. It's a Ponzi scheme. A Ponzi scheme with a much higher fraudster-to-legit ratio than other financial options. There ain't no FDIC for Bitcoin. Be prepared for crypto's 1929 moment.
- roenxi 3y ago
  If you add all the pieces in your first paragraph together, the obvious answer is people need to stop giving all their money to 1 institution that they can't assess the creditworthiness of. It is a bad idea. Even if the money is then backstopped. The current system encourages them to do this. And you say "lost their life savings" as though the current system doesn't do that. Anyone who has attempted to hold their life savings in a bank is being gently wiped out by inflation. We traded "might happen" for "government policy that this will happen". They're losing most of the value in their cash every 25 years. The official policies are consistently inflation combined with low interest rates. > Be prepared for crypto's 1929 moment. Hasn't it has already lost 80% of its value more than once? I'd hope people are prepared with a history like that.
  - ttfkam 3y ago
    > the obvious answer is people need to stop giving all their money to 1 institution that they can't assess the creditworthiness of. You literally just described everyone who has a bank account. The finance sector is anything but transparent. See: Bear Sterns. > I'd hope people are prepared with a history like that. People play the lottery. Humans are REALLY bad at probability. There's an argument that the human brain itself is bad at it. Human perception is the source of optical illusions, sleight of hand, logical fallacies, etc. We are not biologically primed to handle these kinds of problems. Snake on the ground is a threat? Excellent. Monty Hall Problem? Even after explaining it, a majority of folks still reject the solution because it isn't naturally intuitive.
    - roenxi 3y ago
      roenxi: "This is a terrible idea" ttfkam: "You literally just described everyone who has a bank account." In some sense, well spotted. That is why I think the system is a bit cooked. People can't just put hand their money over to one institution, ignore what is done with it and expect to get a good outcome. This is a good way to get vast capital misallocations and, eventually, a lot of people ending up poor. More people than the alternative of the occasional bank run. I can see an argument for setting up full-reserve banks. But if people are going to lend their money to institutions that on-lend it, we should be seeing banking institutes get rolled up regularly and depositors losing at least some of their money. People shouldn't be allowed to ignore what is done with their money; it leads to some of the worst incentives in the modern economy. But technically no, some people have their money spread over a few institutions. And most people don't seem to have cash savings these days anyway (which is rational given the inflation regime).
ttfkam 3y ago
Oh yeah, and Bitcoin mining alone is 2% of all electricity consumption in the US. Nonsense. Absolute insanity. The definition of wasted resources. Those are all EV vehicle charging numbers. https://arstechnica.com/science/2024/02/over-2-percent-of-the-uss-electricity-generation-now-goes-to-bitcoin/ https://arstechnica.com/science/2024/02/over-2-percent-of-th...
- roenxi 3y ago
  If people would rather burn 2% of the electricity in the US rather than deal with financial regulations, that does say something about the financial regulations. Although at this stage it is a bit unclear exactly what.
  - ttfkam 3y ago
    Bitcoin and other crypto get big enough, regulation will follow shortly after. That said, the first to flee regulation in the financial sector are much more heavily weighted toward the grifters and fraudsters. See: Mt. Gox People flocked to Bitcoin because they saw people get rich. That's it. Real estate is very heavily regulated by comparison and yet folks were buying, selling, and flipping like crazy. People want money. Regulations are an excuse, not the primary motivator.

by roenxi 3y ago

ttfkam 3y ago

Previous generations learned the hard way that when you lose your life savings, once is too often. A lot of folks never recovered after the first time it happened to them. Identifying a huckster isn't as easy as you say. A lot of folks lost everything in a local savings and loan, not some fly-by-night penny stock broker. Crypto will not stop this. Crypto has no intrinsic value. A car has intrinsic value. A house has intrinsic value. Farmland has intrinsic value. If everyone decided all these things had zero currency value, you can still transport using the car. You can still keep the rain out in a house. Crypto leaves you with electron patterns in a box. When the US dollar has dipped (and gold has gotten stronger), has the measured value of any crypto "currency" increased proportionally? No. Often it dips along with the dollar. When folks feel the crunch, they sell their crypto to pay bills. The reduced demand lowers the value of crypto. When the dollar is strongest and employment is robust, folks buy more crypto with their increased disposable income, raising demand and proportionally the price. It's a Ponzi scheme. A Ponzi scheme with a much higher fraudster-to-legit ratio than other financial options. There ain't no FDIC for Bitcoin. Be prepared for crypto's 1929 moment.

roenxi 3y ago
If you add all the pieces in your first paragraph together, the obvious answer is people need to stop giving all their money to 1 institution that they can't assess the creditworthiness of. It is a bad idea. Even if the money is then backstopped. The current system encourages them to do this. And you say "lost their life savings" as though the current system doesn't do that. Anyone who has attempted to hold their life savings in a bank is being gently wiped out by inflation. We traded "might happen" for "government policy that this will happen". They're losing most of the value in their cash every 25 years. The official policies are consistently inflation combined with low interest rates. > Be prepared for crypto's 1929 moment. Hasn't it has already lost 80% of its value more than once? I'd hope people are prepared with a history like that.
- ttfkam 3y ago
  > the obvious answer is people need to stop giving all their money to 1 institution that they can't assess the creditworthiness of. You literally just described everyone who has a bank account. The finance sector is anything but transparent. See: Bear Sterns. > I'd hope people are prepared with a history like that. People play the lottery. Humans are REALLY bad at probability. There's an argument that the human brain itself is bad at it. Human perception is the source of optical illusions, sleight of hand, logical fallacies, etc. We are not biologically primed to handle these kinds of problems. Snake on the ground is a threat? Excellent. Monty Hall Problem? Even after explaining it, a majority of folks still reject the solution because it isn't naturally intuitive.
  - roenxi 3y ago
    roenxi: "This is a terrible idea" ttfkam: "You literally just described everyone who has a bank account." In some sense, well spotted. That is why I think the system is a bit cooked. People can't just put hand their money over to one institution, ignore what is done with it and expect to get a good outcome. This is a good way to get vast capital misallocations and, eventually, a lot of people ending up poor. More people than the alternative of the occasional bank run. I can see an argument for setting up full-reserve banks. But if people are going to lend their money to institutions that on-lend it, we should be seeing banking institutes get rolled up regularly and depositors losing at least some of their money. People shouldn't be allowed to ignore what is done with their money; it leads to some of the worst incentives in the modern economy. But technically no, some people have their money spread over a few institutions. And most people don't seem to have cash savings these days anyway (which is rational given the inflation regime).

ttfkam 3y ago

Oh yeah, and Bitcoin mining alone is 2% of all electricity consumption in the US. Nonsense. Absolute insanity. The definition of wasted resources. Those are all EV vehicle charging numbers. https://arstechnica.com/science/2024/02/over-2-percent-of-the-uss-electricity-generation-now-goes-to-bitcoin/ https://arstechnica.com/science/2024/02/over-2-percent-of-th...

roenxi 3y ago
If people would rather burn 2% of the electricity in the US rather than deal with financial regulations, that does say something about the financial regulations. Although at this stage it is a bit unclear exactly what.
- ttfkam 3y ago
  Bitcoin and other crypto get big enough, regulation will follow shortly after. That said, the first to flee regulation in the financial sector are much more heavily weighted toward the grifters and fraudsters. See: Mt. Gox People flocked to Bitcoin because they saw people get rich. That's it. Real estate is very heavily regulated by comparison and yet folks were buying, selling, and flipping like crazy. People want money. Regulations are an excuse, not the primary motivator.