> stop advocating that people be treated like children
Stablecoins are money market funds. Those initially came about due to regulatory limits on deposit-account interest rates and risk thresholds. They nearly took out the real economy in 2008. Stablecoins are recreating that structure, guaranteeing a peg against a portfolio of risky assets inextricably tied to the mainline financial system. (This is a summary of the article.)
The interest bearing accounts on the stablecoins are the (edit: things analogous to) MMFs, not the stablecoins themselves — at least for backed ones like GUSD and USDC.
Edit: not sure why a basic point is downvoted, I updated to clarify.
> interest bearing accounts on the stablecoins are the (edit: things analogous to) MMFs, not the stablecoins themselves
Sorry, I was speaking metaphorically. Stablecoins are collateralized by money market assets. This backs their "guarantee" of convertibility. Money market funds used to provide a similar liquidity-risk transformation guarantee--they would never "break the buck," i.e. trade for less than $1/unit. Until they did in 2008, which created a credit crisis in the money markets as those funds all fire sold commercial paper at the same time to maintain their peg.
So we changed the rules. No fake pegs. If you find yourself in a credit crisis, you trade your fund at 98¢ instead of incurring 50¢ of liquidation costs to defend a magic number. In exchange, no marketing your funds as being as stable as deposit accounts.
No, I don't see the "rhyme" about how USDC and GUSD lack actual cash to back them 100%, because they do in fact have such cash.
Bottom line, you're painting with too broad a brush to say all stablecoins work like a MMF. At most, you're describing particular ones like Tether and Dai.
No they didn't. The government nearly took out the real economy.
In the decade before the financial crisis, regulatory pressure was used to force banks to issue more subprime mortgages. This article from 2000 warns of the consequences:
Government sponsored enteprises, which underwrite 50% of the entire US mortgage market, started massively increasing their subprime loan guarantees at the same time.
And then you have Federal Reserve mouthpiece, New York Times columnist Paul Krugman, advocating in this 2002 article that the Federal Reserve create a housing bubble:
"To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."
This revisionist account of the causes of the financial crisis is just these same powerful forces, who are receiving billions in kickbacks from all of this corruption, pinning the blame for the financial crisis on the mythical deregulation-bogeyman.
The person you're replying to isn't talking about the housing market collapse. The credit crunch that happened after was the much bigger threat to the global economy, and that was entirely caused by businesses operating with zero cash due to the assumption that commercial paper and other types of short-turnaround overnight loans were close to risk free even though they were not.
The housing market collapse is the reason for the misassessment of risk, and the over-extension of credit. Mortgage-backed securities were considered AAA assets, which is why so little in cash reserves were maintained.
>>Had Tether been around in '08, it would have been accumulating hordes of that stuff to back itself up.
That's irrelevant, because every one, including regulators, would have considered that adequate collateral. There was a systemic misassessment, due to the systemic impact that government intervention had on the housing and sub-prime mortgage market.
The narrative you're outlining was known as "the big lie" before Trump came up with an even bigger lie in 2020.
> Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.
> Indeed, the arguments these folks make fail to withstand even casual scrutiny. But that has not stopped people who should know better from repeating them.
Stablecoins are money market funds. Those initially came about due to regulatory limits on deposit-account interest rates and risk thresholds. They nearly took out the real economy in 2008. Stablecoins are recreating that structure, guaranteeing a peg against a portfolio of risky assets inextricably tied to the mainline financial system. (This is a summary of the article.)