Every time there's a tether story here, the inevitable discussion of fraudulent activity comes up because Tether seems like an outright scam. I'm inclined to believe all that from what I've read and however little I can make sense of. However, I can't really tell how this ends. They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right.
Eventually, that's bound to catch up, but I suspect it's going to hurt a lot more than just those with crypto assets and hurt a lot of those without crypto assets, no?
Of course but you could give people some free money nevertheless and it would make the world a better place.
What do you think would happen if you gave 1000 dollars to each person in America every month? I think a lot of good would come from that and not much bad.
A UBI doesn’t necessarily result in inflation. The later is a combination of monetary policy and expectations. UBIs can be paid by means other than printing money.
The thing is, inflation caused by printing money AND distributing it directly and every to all people is fine… it’s just the most efficient / progressive wealth tax!
Even if (printing and then) giving everybody $40K/yr caused, say, 40% inflation, anybody making under $100K/year would be better off. You actually wouldn’t need any taxes if the government just printed all money it needed, hopefully most of which is in the form of direct checks to all residents/citizens.
>it’s just the most efficient / progressive wealth tax!
no, it's not a wealth tax. it's a cash tax. if you printed money and caused 100% inflation, that'll just cause every scarce asset (eg. houses, stocks, gold) to double in price. Since the rich hold most of their wealth in assets, not cash, I doubt it will be fair or progressive.
> Stocks aren't scarce assets. They're infinitely dividable, so the price per share going up doesn't cause them to be harder to buy.
That doesn't make any sense. Stocks ultimately represent ownership in an enterprise that consists of people, equipment, and intellectual property. Those are scarce. Just because the ownership units is infinitely divisible, doesn't mean they aren't scarce. If people only bought stocks so they could hang a fancy certificate on their wall, you'd be right. But people don't do that, they buy stocks to get dibs on a certain fraction of future production. That's the scarce part.
>Houses aren't really either, it's the land that is. Thanks Henry George.
1. seems like a nitpick? When people talk buying "houses", they generally talk about buying the combo of house + land it sits on.
2. houses are still scarce[1]. we can't will infinite houses into existence. they're more plentiful than original picasso paintings, but that doesn't make them not scarce (at least according to the economic definition).
Well, the other reason stocks aren't scarce is that the company can print new ones. You'd expect this to reduce valuation and therefore have shareholders oppose it, but in practice that doesn't seem to happen lately.
> If people only bought stocks so they could hang a fancy certificate on their wall, you'd be right.
This is highly underrated as a reason. What's the fundamental improvement in Gamestop and Tesla causing their stock price to go up this year?
> 1. seems like a nitpick? When people talk buying "houses", they generally talk about buying the combo of house + land it sits on.
Many people don't seem to understand how to separate them, leading to beliefs like "luxury apartments cost more because they have granite countertops" and "gentrification can be prevented by not building new buildings". You can't build houses forever, but you sure can build many more of them than the US does right now.
> Well, the other reason stocks aren't scarce is that the company can print new ones. You'd expect this to reduce valuation and therefore have shareholders oppose it, but in practice that doesn't seem to happen lately.
If you're doing this in an above-board way, it's still scarce, because the whole reason why companies even issue new shares is to raise capital. When you're doing that, you're trading one scarce resource (capital) for shares, which means that the shares are also scarce. You can make an infinite amount of TVs given infinite raw materials, but TVs are still scarce.
>This is highly underrated as a reason. What's the fundamental improvement in Gamestop and Tesla causing their stock price to go up this year?
Any evidence that people bought exactly one share TSLA/GME just so they could hang on their wall and/or feel smug about it? In both cases it's far more likely they bought into it because of expectation of future profits (from greater fools or actual operating profits).
>Many people don't seem to understand how to separate them, leading to beliefs like "luxury apartments cost more because they have granite countertops" and "gentrification can be prevented by not building new buildings". You can't build houses forever, but you sure can build many more of them than the US does right now.
While there might certainly be people who think the housing crisis is caused by "developers only building luxury condos" or whatever, I doubt this is a popular view on HN. Any time a housing-related thread shows up on HN, that explanation almost never shows up, and the NIMBY/zoning explanation almost always does. I'm sure a decade+ member like yourself can see this. Therefore I don't really see much point in arguing this distinction, because you'd be preaching to the choir.
Except IF the money is being printed to be distributed to everybody, there’s going to be more money in the hands of people who can’t afford picassos and Malibu real estate, and less going to those who can, so I would expect in that scenario the increase in price of those assets would likely have a hard time keeping up with inflation.
The taxes are what gives the official currency its value. If you didn't have to pay sales tax in USD for every transaction, it would be equally or more convenient to pay in other currencies, but this keeps it all in USD.
I think it might be hard to bootstrap this system without tax maybe, but the usd is pretty well established now and I bet they could make the switch and people would keep using it!
Prices only go up if the demand approaches or exceeds supply. If there is capacity in the system all is good, more jobs. This is how Franklin D. Roosevelt brought an end to the Great Depression.
If the economy is running at capacity and you wanted a UBI taxes would have to increase to prevent inflation. This would end up being wealth redistribution.
Only if there’s a bread cartel. Otherwise it’ll sell at a much lower equilibrium price, as anyone who can undercut him will take all his sales while still profiting (as marginal cost of additional bread production is well below $1000).
> I think a lot of good would come from that and not much bad.
Here something that'd happen - the homeless in encampments would get hoovered up by slumlords who put them in squalor and consume their $1k checks. Poor people would have more children because each child = $1k/mo, even if they have to wait 18 years. Abduction would be easy - the ransom pays itself over time. Fraud would be rampant. The ultra poor underclass who are undocumented would still get nothing, further exacerbating the divide.
“ Abduction would be easy - the ransom pays itself over time. Fraud would be rampant.”
Do we have any evidence that abduction and fraud is rampant in countries in Western Europe, known for the very generous social programs? Are they exploding with poor people having kids??? Is it dangerous to live in, idk, Sweden because someone is gonna kidnap you for your social bux? I’m genuinely asking because the notion of rampant abducting and child having hasn’t happened in countries I know of with very generous social programs.
The USA actually does have laws against creating anything that might be interpreted as competing with the official currency. This is the most likely avenue for violence to come in, as people try to resist devalued money by using substitutes.
There are generally no laws in the USA against creating and using alternative currencies. I can buy and sell using Euros or Monopoly money or whatever if I can find a willing counterparty. However, if those transactions are taxable then I have to report them at the US Dollar fair market value equivalent and pay any taxes due in US Dollars. And if someone owes me a debt I am required to accept US Dollars for settlement.
> There are generally no laws in the USA against creating and using alternative currencies.
This is not correct. If you try minting coins, you can be shut down. You can buy and sell using whatever you want, yes. There aren't laws against using alternative currencies. But there very much are laws against creating them.
If you don't intend to be hyperinflationary, the printing of money has to be associated with the acquisition of value or the assumption of debt. The debt is repaid through taxation.
Grandparent comment is referring to the position that taxes are extracted via threat of force. This is an extremely emotionally fraught position, and it's difficult to discuss rationally.
So, the reasoning goes, if you have to tax to print money, it is done by resort to force or threat thereof.
So to paraphrase, "Printing money is inflationary, which I believe is bad, and I believe the only way to rectify that is through taxation (violence)." That means you are the one who is proposing violence, not the commenter suggesting that we print money. They never said anything about taxation.
I would argue it is taken from people (yes with violence if needed) in exchange for goods and services provided, part of an implicit contract you are forced to make when you are a citizen.
I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it, which is generally something the left very much dislikes.
As already seen with covid aid, people wouldn't work in low wage jobs any more. This would lead to inflation or disappearance of some amenities. E.g. you might have to put your groceries into your bag yourself, or might have to pay a dollar extra for that service. This isn't something negative though, just a neutral change I guess.
It would help a lot of poor and suffering people, but note that even in countries with good unemployment benefits, homeless people still exist.
> I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it
What do you mean by “strict” and why is this inaginee5 to be necessary? Note that UBI is usually envisioned with a defined population but the absence of means or behavior testing within that population, either “citizens” or “citizens and LPRs” or “citizens and aliens with work authorization” or “citizens and aliens with satisfactory immigration status in a specific set of visa categories based on basis and duration” would all be valid populations, with wildly different impacts on the viability of UBI with any given immigration policy.
> I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it,
COVID aid isn't like UBI, critically, key parts of it (enhanced unemployment) are conditioned on absence of work or reduction of it below pre-benefits levels, and thus forces people to choose between benefits and work. This is the kind of incentive with means tested benefits that UBI is intended to fix.
To your first point, regardless of which class of people you consider for UBI inclusion, even if you only consider citizens of the USA, it will have a tremendously attractive effect for billions of people around the globe. Even now quite many people want to immigrate in to the USA and the USA has multiple systems designed to keep them out, but UBI will make this way worse, which is why I said that enforcement needs to be very strict.
Plus I'd say it would be even more unfair for the undocumented immigrants than it is now because they would not get any UBI. But if you gave UBI to the undocumented, way more people would attempt to become undocumented immigrants, by overstaying their visas, etc. Which then probably will lead to you having to issue less short term visas, or actually deporting undocumented immigrants.
COVID aid was designed to discourage (some kinds of) work because we literally didn't want people to (do that kind of) work; that being the point of closing the stores. It was more like disaster relief than anything else.
It also didn't create new money insofar as it was used to pay existing debts like rent; what it did was avoid a financial crisis.
Other kind of aid designs don't do this very much; demand is infinite and won't go away if you give people some money.
"Poverty" is not about how much money you have, income or wealth. The only reason money matters to poverty or to human well-being is when that money can buy something meaningful. If we find we are able to forget this, it stands as a testament to the remarkable stability of modern fiat currency.
Marking arbitrary large numbers in digital ledgers, blockchain or otherwise, does not cause prosperity. When everyone has infinite money, no one has any money at all, they just have their things.
Beyond the fraud allegations, the idea that an organisation can just print extra money as they see fit, doesn’t that go against the principles of crypto finance? I am genuinely curious why people think that is a sustainable idea.
You can't keep traders from trading bitcoin. That doesn't mean bitcoin is unprincipled. It's in the whitepaper and the design of bitcoin. For example, the 21M btc supply limit. Bitcoin's design reflects a certain ideology about money.
>Bitcoin: by limiting issuance to 21M we have made price manipulation of our currency impossible
At what point did people claim that "price manipulation of [bitcoin]" was "impossible"? I think you're mistaking "price manipulation" with "dilution" (eg. quantitative easing or debasing).
Dilution is still possible either by forking it (and having normal non-Austrians accept the new one) or by starting lending programs (since banks create money by lending it.)
Technologies don't have principles, people who use them have principles; the people who buy and sell bitcoin are mostly the same as the other cryptocoins.
Satoshi intended certain principles with the creation of bitcoin, but these are not the predominant driver of its use in actuality.
Bitcoin really is defined by its principles. A fork that violates its principles (say, changing the 21M cap or violating the transaction history which hashes back to the genesis block) wouldn't be bitcoin, just like no amount of people believing the earth is flat would make it flat.
so by "principled" you just mean "has algorithmic constraints?"
that's not what most people mean by principled. Also, in that sense, crypto also has principles in that most altcoins are built on ethereum, which also has algorithmic constraints.
Bitcoin has principles the way most people mean the term. Ethereum does not. I've already given examples that make it clear.
Ethereum's algorithmic constraints are merely algorithmic constraints that can be changed easily, whereas bitcoin's key algorithmic constraints also are actually principles; changing them results in a non-bitcoin fork.
The principles of crypto finance? Cryptocurrencies are not built on principles, they are built on technologies. The only unifying principle across all cryptocurrencies that I've noticed is that you access your assets through a cryptographic hash. You could launch USD+SEPA+your banks online banking interface today and call it a cryptocurrency, it's as much a cryptocurrency as for example Ripple is.
edit: ok the other "principle" might be that all (most?) cryptocurrencies are independent from government, they are owned and managed by individuals, companies and groups of people/devices (if you're lucky).
>Beyond the fraud allegations, the idea that an organisation can just print extra money as they see fit, doesn’t that go against the principles of crypto finance?
or maybe the crypto community isn't a monolith, and all the cryptoanarchists aren't the people who hold/support tether?
They might not be a monolith, but I've yet to see participants advocating for Tether to show audited financials like anybody else in their position would be obliged to.
They appear to all be playing by the rules Tether is setting.
> What makes you sure that at least some of the "tether is a scam (or is at least shady)" people aren't also crypto "participants"?
I imagine there are many people that believe in crypto and participate in the markets, but dislike that Tether is behaving like the fiat central bankers they abhor so much.
> Or maybe they're voting with their feet and moving to an exchange that doesn't deal in USDT, and so won't be subject to tether's rules?
Unbacked Tether inflates the price of any coin that it's used to purchase, so what you're describing would have no effect. When Tether's $1bn pump pushes up BTC's price from it's 20% overnight decline, are the theoretical USDT-free exchanges going to reflect bid/ask prices as they were pre-pump? Of course not.
There are many crypto currencies with different goals and approaches to handling market dynamics. And there are some where doing such a think is fully against there principles and would brake their marked dynamics. But not necessary for other reasons. But this also means you need to look at the specific crypto system in question to decide why it might or might not work.
I don't know much about Tether specifically, but lets say you have a new arbitrary crypto currency you try to make price stable, but like many crypto currencies it end up having deflationary tendencies (more demand, money getting "locked" in, etc.). In which case minting new coins would not only be sustainable but likely necessary.
Yes, Tether comes with a ton of suspicious circumstances and leadership that just nervously repeats the phrase "the money is there!" in interviews. A YouTube channel named Coffeezilla has been doing some great reporting & investigations on it (and many other crypto scams). It's insane what's going down on the crypto market, including influencers selling unmarked ads for currencies.
" They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right."
For the most part the crypto market being unregulated means that there can't be any consequences, except for market consequences. And market consequences are vaaaaastly worse. It's basically like having no one make you wear a seat belt. Sure seems fine until you're just dead.
It's still a great deal for the perpetrators to only make 1MM in liquid capital after defrauding billions. Non-market consequences of theft include jail time and forefeiture of funds outside of an LLC.
They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right.
Tether and bitcoin have been very robust, bitcoin has crashed and recovered many times now. But I have to say that every single bubble has involved the statement "so far, they've been right." as the follow-up to "this time things are different".
Right now I think a good analogy is it's like musical chairs. The game is fine as long as the music is playing. When the music stops, someone's gonna lose big.
The problem is when the music stops and there's a run on crypto. People are trying to get out of $USDT and convert it into cash. Exchanges have to have buyers of $USDT so they can exchange $USDT back into cash for anyone that wants to. But they can't just create dollars out of thin air. If there's no buyers for $USDT anymore than the "currency" flatlines, it's no longer tied to the dollar.
If Tether were truly backed 1:1, Tether itself could just buy $USDT with its own cash on any exchange, and that would be enough to keep their currency afloat and stop the run.
>But there is a fair probability it becomes worthless, meaning that you gain from it.
>While you need to pay premiums in the interim, for something with an indefinite timeframe, that risk seems fairly minor for the potential reward.
1. the chance of collapse might be lower than you think. the "tether is going to collapse any day now" sentiment has been around for years now, but collapse has proved elusive.
2. borrowing costs are high. I searched around and it looks like the APY for lending out tether is around 9%. The cost for borrowing tether is certainly higher. If you held a $100 short position for 5 years, and there was a total collapse at the end of year 5, then you'd make $65 (factoring in interest payments). That sounds good, but chances are thether probably has more money in the bank than $0. If it only collapsed to $60 (ie. they went bankrupt but had 60 cents of real money for every dollar issued), then you'd only make $5.
3. there are rumors/conspiracy theories that tether/bitfinex/tether affiliated exchanges force USDT/USD rates up periodically to force liquidation of tether short sellers. If you're caught in one, you'd lose money and be forced to rebuy tethers at an unfavorable price.
I work with a blockchain project that lends a lot of USDT, USDC, and DAI. The cost at this moment to borrow USDT on the blockchain is 4%-5% for any amount, or 3.75% in bulk while playing defi games. The two biggest to lend it are Compound [0] and AAVE[1].
Unfortunately that scenario only works if there’s a ‘fair’ long/short game beneath the fraud, but the fraud is such that that is not the case:
Remember Folks: Don't short Tether, once the exchange leaks your position to their buddies, Bitfinex shareholders will organize to liquidate you by working with their wash trading bots.
If USDT collapses it will take out multiple exchanges with it, and the fact that you have a winning position won't matter if the the people running the exchange it was on have entirely disappeared to sandy beaches somewhere. Counterparty risk during the systemic "banking" collapse will be very high, and completely uninsured.
If you have extracted the cash in dollars somehow before the crash, then it would work, but you have to move your money out of the exchange as fast as you can.
All exchanges require staff interaction for large withdrawals. You can be sure that in a very volatile market, friends of exchange operators will get priority.
The collapse of Tether is likely to be right in the middle of the crash and the exchanges will have suspended withdrawals already, and everyone will be looking for a lifeboat.
You have a database entry showing that you have a large amount of winnings that you can see on your screen.
You are going to have to deal with corrupt human beings on other end, who are outside of your jurisdiction, and are assuming they are just going to wire your bank account money based on that database entry, when you have no leverage over them at all, and when they will be better able to see the writing on the wall than you do.
Even within your jurisdiction, for something like Coinbase, if it becomes completely insolvent then you become an unsecured creditor in the bankruptcy liquidation process.
You'll be stuck yelling into the ether making twitter posts shaming them for not wiring you your winnings. And whatever actual cash you sent them to make those bets will be long gone and you'll lose everything.
Even assuming you could find some form of betting market outside of the crypto exchanges to place bets with other people that Tether would collapse the interest you have to pay should more than offset the eventual winnings. This is similar to how using options for portfolio insurance is a poor idea because by the time you're worried about your portfolio losing value everyone else can see the issue as well and wants a premium to write you that insurance.
And there's no sure bet that Tether/crypto collapses in the near term. I suspect that crypto will likely pop to a new bubble blow-off peak in 2022 and then 2022/2023 there will be another systemic test of crypto that could lead to its failure. But there's many billionaires with a vested interest in seeing the game continue who will do whatever they can to kick the can further down the road. I thought that it would fail in 2018 and was wrong (but the transcripts with bitfinex showed that it was probably on the brink). You could wind up betting Tether collapses for so long that by the time it finally does you've spent more on those bets than you've won back.
For a while I had a 5x leveraged tether short (with a USDC long deposit reserve) on a decentralized exchange. I was briefly making money through this on arbitrage but it fluctuates rapidly.
It costs about 9% per year to short it on most exchanges but about 4-5% on many DeFi platforms. Since most fractional banks live off of a 10% reserve ratio, you could very well be keeping Tether alive and prevent it from ever going under by shorting it.
They are profiting from all of the tether FUD nonsense by being able to lend their coins at a higher rate.
> Since most fractional banks live off of a 10% reserve ratio, you could very well be keeping Tether alive and prevent it from ever going under by shorting it.
Some might say that FDIC made the banks super rich -- it wasn't the services that made the banks profitable, as it was the bank had a sudden and large influx of government backed cash to make loans from.
In the US, it's not just reserves it's that 95% of account holders will be FDIC insured. And because the accounts are insured, there's rigorous banking regulations around the bank so FDIC doesn't have to pay out constantly.
So at what point does a run on $USDT happen? When the Chinese commercial paper market goes belly up? When they bitfinex files for bankruptcy or is charged with RICO? Sure there's a lot of FUD but if you read the tea leaves, I think China already sees systemic risk.
Tether has been manipulating the market since 2018 through using wash sales to prop up the price through apparent demand.
Tether has most of its liabilities backed with unsecured commercial paper from China.
China has had issues with their real estate companies being in too much debt and offering too much commercial paper to keep them running day to day.
China also has moved against crypto currencies recently, and regulating the real estate companies to move forward to pay back their debt.
So this strikes me as systemic risk. If USDT goes, so does the Chinese Commercial Paper Market, and vice versa. Who knows what gets taken out at that point. Tesla? Coinbase? Nvidia and AMD for losing sales to mining rigs? I don't know.
At least in musical chairs some others get to keep their chairs. When a currency fails, you can't sell it because nobody else will touch it. Everyone loses… save the first out.
Eventually, that's bound to catch up, but I suspect it's going to hurt a lot more than just those with crypto assets and hurt a lot of those without crypto assets, no?
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