Why does this really matter? As a user of USDT the only thing that matters is that the people in the market amicably agree to trade it at around 1 USD, which they seem to be doing.
Being "backed" by something is a concept of a bygone century that doesn't really apply to the Gen Z economy. What is USD backed by anyway?
Tether is backed by a shady company who's been caught lying numerous times. The claim that 1 USDT is backed by 1 USD is what was meant to establish it as creditworthy. This has been walked back so many times - it's not USD, it's a basket of goods. Those goods might include cryptocurrencies. Those cryptocurrencies might include coins we've minted. Et cetera. It is not reasonable to have faith in their statements. It is not reasonable to consider them creditworthy.
You can't keep USDT pegged to $1 if the organization backing it can't be trusted.
Why should I have faith in the government?
> USG has a 200 year history of paying it's debts
Wait what? https://www.worldometers.info/us-debt-clock/
Yes, the national debt is rising. Debt is being issued faster than it is being paid. So what? Are coupon payments being missed? Is there any reason to believe that the government will default?
Because you’re allowed to be this naive on a computer forum on an international network of high-tech computing devices, some of which you own, openly call for economic reforms you don’t understand, and not find yourself up against a wall with seconds to live. That’s why.
Your ability to study crypto instead of working a field to feed your family under the watch of rifles, crypto’s entire existence (arguably), the fact that you’re ostensibly literate, the food in your stomach, and countless other secondary concerns that add up to you making this comment right now only happened because you are subject to a government that permitted it and created an existence for you where you can have all of those things. The other side of that wall has guns pointed at it. Note that specifying status quo does not communicate an opinion on it.
There are real concerns with every world government. On the other hand, it’s naive young people who assume their comfortable existence is “just the way it is” for everyone universally and their ethnicity and sovereign power has nothing to do with it. You don’t have to trust the government to tell you the truth. You do have to implicitly trust that governments worth paying attention to can, and will, exercise actual power when they consider it necessary and consequently create a free existence where you are allowed to flourish. Those are different things. That’s what “backed by the full faith” means. Not that we trust the government to be honest about who it’s talking to late at night on Snapchat. The world implicitly trusts the Third Fleet.
“What has the government done for me?”, you’re essentially asking, on the downstream consequences of a decentralized government command and control network experiment which also happened to feed you your entire economic worldview in a society where limits on education are mostly forgotten, particularly by you.
But I might be wrong. I'm just a lay-person in this or whatever. Maybe I'm misunderstanding things.
Addition: also the democratic principle should be kept in mind. Sovereign currencies are a resource of their respective people.
What are they currently doing wrong, in your view, and what should they be doing better?
Lots of fed hate on HN nowadays. I personally think that they are doing a so-much better job than '08 and am happy that academic economists seem to at least be learning a few lessons.
As you've mentioned, I don't think deciding what industries we should focus on/invest in is within the purview of the Fed.
Btw, I don’t think there’s a simple solution here, and banks aren’t necessarily to blame here. They’re merely reacting to the incentive structure. To solve the problem we need deep structural changes in how we view economics. I’m one of those people that like aspects of both MMT and crypto assets.
Addition: since my comment is a bit too light on practical solutions, I think we should have a decentralized way in which local communities can direct money creation towards productive long term projects that help that community. And the same can be done at the federal level for very big projects (rockets, dams, infrastructure etc)
This may seem pedantic but that's because economics is pedantic - things can appear to be running fine for a long time but if some basic assumptions are violated the whole thing can topple like a house of cards.
Now that is obviously supported by the US Military. But to state without context 'it's the US Army' is just false.
There's a lot of question marks about how Central Banks do money supply, but it's part of governance, their books are public, at least now they are.
That Tether can still exist even though it's a proven fraud is at the core of the problem: the new RobinHood Armies (not just them of course) are keeping everything buoyed up.
Nikola is a similar thing - they have vapour, and yet are worth billions.
A lot of this froth exist in regular stocks as well, across the board, but even in Google, Tesla etc..
It's a problem.
A lot of this might go away with slightly higher interest rates. When things get close to 0 then a lot of weird leverage things happen.
2% -> 1% interest is one thing, but 1% -> 0% (or negative) and systems start to go weird.
https://www.worldometers.info/us-debt-clock/
I don't see a whole lot of difference between this and USDT honestly.
It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. You try to break the embargo, we sink your ships. You try to make your own regional currency, we assassinate you. This is why you can afford to purchase expensive goods yet the people who produce them can't.
This is the fundamental basis of the modern world. That more people aren't actively aware of this is the powerful result of ideology.
This is mostly a conspiracy theory.
And this: "It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. "
Is essentially not true in any broad sense.
Also, there is no such thing as a 'world reserve currency'.
The US does use some leverage to require that Oil is traded in USD, particularly with Saudi Arabia, but that's the price of effectively keeping that nation relatively stable, which is not unreasonable.
Outside of Oil, there's really no reason for any nation to transact in USD or to keep reserves other than for what makes sense to them.
Oil is a key issue in the equation, but it's not actually essential.
The USD is mostly a reserve currency because of the size, openness, and relatively integrity of the US system.
The Euro is definitely a 'reserve currency' along with UK pound, but proportionally so.
The RMB isn't really a reserve currency because of lack of transparency in China, that said, the sheer power of China means that nations that trade with it will adopt it as a reserve on some level.
Cryptos unfortunately don't really solve the problems in this geopolitical equation.
But someday, they may help to.
> Outside of Oil, there's really no reason for any nation to transact in USD or to keep reserves other than for what makes sense to them.
This, however, is fundamentally wrong, and smacks of naive libertarianism. In a "rational" universe, where gravity of a feather falling to earth is frictionless and I trade my two eggs for your bottle of wine, maybe, sure. In the real world, no. The reason is violence. We won the war and we got to set the rules which benefited us at the expense of others. This is undeniable.
Other nations transact and hold reserves in dollars, and occasionally Euros, because of the system of force I described earlier. This why the IMF exists. Everything else is ideology.
China's Belt and Road initiative is their own alternative to the IMF. They are able to do this because they have a military force which they believe is now capable of standing up to the United States, by which I mean they will be able to impose their violence rather than ours.
[1] https://en.wikipedia.org/wiki/List_of_countries_by_public_de...
If people disregard this article as irrelevant because we're all just amicably agreeing that one USDT is still worth one USD then there isn't a problem (today - the potential for a problem doesn't go away). Economics is like 90% whatever people say it is, and if we say this isn't a problem then it isn't - if we say it is that's when people start accepting USDT at fractional values of what USD is and then USDT will quickly hit hyper inflation and become worthless... down to a limit! And that limit is the reserve they have, which is why a 100% guaranteed currency backing for a coin like this is so critical since, if users start refusing to accept coins at 80% of USD value then middle men will step in to happily execute the transaction at full value in a different medium and the only result will be that the consumers that refuse to accept the coin at stated value will lose their ability to compete with consumers that do accept that value due to losses from arbitrage.
If confidence is done and the backing isn't there then we can expect to see a quick inflation - if the confidence isn't done or the backing is there then we're safe. But if we're relying on confidence alone then at some point that rug will be pulled from under our feet - and this effect will be accelerated if the company loses confidence dramatically fast (i.e. by being exposed as fraudulent).
Also, whenever this happens it's not unlikely that the fuse will be partially lit by some people that are hedging bets against USDT by having, for instance, outstanding options to buy as part of an ongoing non-instantaneous transaction.
- Hype IS value. Investors mostly invest in hype. Bring something of scientific or humanitarian value to the table without some fancy story and they 100% won't invest in that. Doesn't matter if it's stock market public investors or crypto investors or private investors, they all go after the hype, time after time, demonstrating with their wallet that hype IS in fact what they value.
- Currencies don't operate around scarcity, and their value is not fully correlated with scarcity, their value is more correlated with the intrinsic value they provide as a product, e.g. dApps and NFTs; USD provides none of that
- Manipulation is legal, part of the game rules, embrace it. Manipulation and trick shots are legal in table tennis, too, the only rules are physical.
- Money itself is a joke, for the most part
- We are in the midst of a revolution in which we are exploring new models for financial governance
Don’t tie these thoughts to a generation as if everyone in the generation expects the outcome you do. I have a hard time believing everyone in Gen Z understands what you’re saying, much less wants what you do. There is no watershed moment for uprooting the world economy that only people of a certain age understand. Revolutions do not happen on Medium. You’re discussing the economy. There are militaries involved.
You are interacting with forces far beyond yourself and acting like you have all the answers. Our entire existence is defined by the economy, and rejecting it wholesale is interesting for a blog post but a complete nonstarter for actual reform. Since humans mostly subsist as a product of economies, you realize poor economic reform kills people, right?
I’m going to reiterate that last point in clearer terms because it needs to get into that bubble with purpose. Say the world stops being stupid and sees your light. Now you need a phone to eat. Do you think those people you just starved to death are going to go “well, Gen Z economy!” or do you think they’re going to arm themselves and start killing everyone involved? History is a guide here and human subsistence is not something a bit of Go can just fuck with because you say so. Good luck!
If it didn't matter then why make the promise in the first place?
If it's so unimportant then why did Tether lie about it? This, on its own, seems like a pretty big red flag to me. The kind of red flag that smashes you in the face.
Will your bank?
What about the Tax Man?
In the case of USDT, everyone accepts them, so why shouldn't I?
You and I have very different ideas of what "everyone" means. USDT is not even accepted by everyone that deals with crypto, even less if you actually start thinking about the financial institutions that are looking into crypto, and the amount of people who would take USDT is infinitesimally small compared to those that would accept greenbacks in a regular transaction.
USDT is only accepted at shady exchanges that couldn't find a banking partner and their ignorant/SOL users who were forced or "incentivized" into taking USDT for a premium.
Elon Musk's "net worth" is 146 billion, is that backed by something? No, TSLA shares are manufactured just like USDT.