> At this point, I think I'd honestly rather put my money with Facebook than many of those actual banks out there.
This is so ridiculous that I don't even know how to argue with it.
This is so ridiculous that I don't even know how to argue with it.
To be clear, I wouldn't prefer to put my money with either. But if push comes to shove, would you prefer to have an account at a failed bank that holds 10% in reserves, or a private company that holds close to 100% of reserves, because it is not a bank?
Before you answer, please imagine for a second that you had a decent amount of money to retire on, not whatever FDIC and the already bankrupt state promises to reimburse you with.
Thus, a user faces systemic banking system risks plus all firm/stablecoin-provider risks. That combined risk will almost certainly be strictly larger than the systemic banking system risk you'd face by just depositing funds in a bank account that you directly control.
Otherwise, you do have a point, a systematic bank failure would likely cause issues here as well. However, I highly doubt they'd be storing significant amounts of money as cash deposits in banks for the interest. There's better options, such as short-term treasury bonds.
Storing serious amounts of money in any of these stablecoins for any real length of time is economically irrational because by exiting their walled garden, you can obtain a higher return in exchange for reduced risk. Withdrawing is even better than a risk-free reward; it's a risk-reducing reward.
My point is that bank deposits aren't as safe as people like to believe they are, at least beyond what is insured.
In a systemic crisis, chances are the government will just print whatever money needs to exist and bonds too will take a hit as a result. Plus, whatever happens in the US will impact the whole world. You can't realistically hedge against this with any currency/bond.
I am with parent on this one.
Now imagine that same situation, but with Facebook at the helm. Either Facebook is in risk of insolvency, or private speculation with zuckbucks going south. Do you think Facebook will just go bancrupt in order to protect the zuckbuck owners? Or will they more probably recreate Cyprus, but way worse for the zuckbuck holders?
As for this new cryptocurrency, it's designed not to go insolvent, because it is more or less fully backed with actual currency/bonds. It has nothing to do with Facebook's financials.
By contrast, besides insurance for a modest amount, a bank deposit is only "backed" mostly by securities and loans years into the future, most of which can go bad in a crisis.
People willfully risked risked their capital to target above-average returns. That didn't work out, which, when looked at from a distance, is perfectly fine - other market participants made better decisions, end of story. What isn't perfectly fine is people then trying to socialize their losses afterwards. You can't have a cake and eat it, too.