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Mizza

The question is what happens when more than 2.9% of people try to do that at the same time.

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What happens when everyone tries to withdraw their money from their banks at the same time?

Central bank prints a shitload of money

Printing money in real terms just means taking money from someone who holds it.

Not really, the entire function of central bank is that it can create money at will.

Imagine we own a company, I own 20 stocks, you own 10 stocks. I unilaterally decide to print 10 more stocks and give them to myself. Do you have the same amount of stocks? Yea, but in real terms now you have less stocks. The same thing with money. It doesn’t matter how much money you have, what matters is how much you have it relative to others.

I don't believe this would cause any additional inflation, since this is not scenario of creating money, but rather converting one class of money(bank deposit) into another class(reserve notes).

The people may even simply move money from one bank to another, it doesn’t matter. What matters is that the bank goes insolvent. So what you have now is a bunch of loans not supported by anything.

Depends entirely on the velocity of money. Remember also that central banks can remove money by raising interest rates.

If we're doing child-like examples, if the central bank prints a trillion dollars in notes and then sends them to the moon and promises never to use them, is anyone really poorer?

If that causes inflation then it is taking money from the existing holders.

@eloff I think our replies crossed. I think that the question is whether you are still at a net positive as a result of inflation (consider the counterfactual).

In what sense? In a world of fiat currency, post-Bretton Woods, what does money mean? I am not an expert by any means, but to me, it seems like the USD has value (ignore the rest of the world for a moment) because the US issues taxes that it says can only be paid with this wacky tokens called dollars and if you don't pay your taxes, then bad things happen. The rest follows from there. I think that you are saying (correct me if I'm wrong) that printing money leads to inflation which lowers what you can exchange your tokens for (maybe it takes more of them to buy apples). So, the first question is whether that is actually true. We have seen a fair amount of printing of money in recent years, but fairly low inflation. It's not obvious to me at what point that changes. The second question is whether inflation if it does occur is net bad/good and for who. I think we can agree Weimar Republic style hyperinflation is bad. However, let's say that inflation is 1% is that good or bad? For who? I think this question doesn't have meaning on an absolute scale. I think it has meaning relative to growth (and the productive capability of the full economy). Let's say that the economy is growing at say 6%, but we have 1% inflation--I'm fairly happy with that. But, let's say that we have 2% growth and 1% inflation--I'm less happy. Deflation is deadly (which has historically been the fate of gold based currencies), so we could argue that having a bit of inflation is insurance that we pay to avoid disaster. But, what about beyond that? The typical argument is that it helps drive consumption and encourages investment. Do you disagree?

It’s getting above my level of expertise but in addition to taxes, mortgages, corporate bonds, and state bonds also play a part.

Also inflation in the range of 1%-3% is considered a good thing because it helps encourage trade and prevents deflation. The amount of interest one can earn in a savings account or CD should also be taken into account.

> We have seen a fair amount of printing of money in recent years, but fairly low inflation.

The money weren’t distributed proportionally to the wealth of the people. Another reason, which though applies only in short- and mid-term, there are various nominal rigidities: contracts mostly use nominal values.

> The second question is whether inflation if it does occur is net bad/good and for who.

Well, that’s a whole nother question. You can create inflation using direct deposits to the holders of money.

They're guaranteed to get at least $250,000 back based on the FDIC based on each bank account. At least in the US.

Coinbase and Binance are insured by FDIC as well.

https://www.investopedia.com/binance-vs-coinbase-5120852

> FDIC-insured USD balances

> Binance security features also include [...] Like Coinbase, all USD balances are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) and held in custodial bank accounts.

Not sure why this is being downvoted. Also, gemini is FDIC is insured as well. https://www.gemini.com/legal/user-agreement#section-fdic-ins...

That is for USD only though, only deposits in USD are insured and only on bank failures.

Anything in a coin, even a stablecoin like Tether, USDC, DAI etc is not USD. Stablecoins really are not as "stable" as USD for the insurance reason. They are merely pegged to the USD.

Coinbase and Binance are not SPIC insured which covers some securities but not losses, only situations where the exchange, or bank, fails much like with FDIC.

Most brokerages are both FDIC for USD deposits, and then SPIC for deposits and some securities, not on losses on the market though [1]. Robinhood I believe is only SPIC still [2], but most brokerages are FDIC AND SPIC insured.

FDIC is backed by the US treasury. SPIC is a private company ultimately and not as backed as FDIC but it is the main securities insurance most brokerages use.

Tether is like an individual stock though, even if Coinbase, Binance or other exchanges had SPIC insurance, if Tether (USDT) fails it would be like a stock failing, there would be no insurance even then. The insurance is really at the bank/exchange level if they are insolvent or have no reserves/capital.

Side note: A good use of stablecoins is buying into that stablecoin and then converting to other coins you want, that minimizes fees but keeps tax hit at 1-to-1 since they are pegged to the USD, makes all the cost basis and other accounting easier. A common technique is buying into USDC or DAI and then converting to other coin to reduce purchase fees. Stablecoins are also a "home base" or refuge when the market is falling without going back to USD fully, that is why volume of USDC, DAI, and USDT is so immense right now.

[1] https://www.investopedia.com/articles/stocks/08/sipc-fdic-ba...

[2] https://www.cnbc.com/2018/12/14/robinhood-debate-highlights-...

But aren't those USD balances?

Isn't the idea that if many people try to convert USDT to USD, they won't be able to, So they won't have FDIC insured USD?

That would take months to play out.

It's not like the FDIC will honor your withdrawal request the same day you made it.

My bank went tits up in 2008 and I didn’t miss a beat. I eventually got atm cards and checks with a new logo.

The Federal government steps in as the lender of last resort to provide liquidity: https://en.wikipedia.org/wiki/Lender_of_last_resort

If Tether were not exchanging USDT for dollars it would be impossible to support the market prices on exchanges between Tether and other stablecoins. Kraken also has a real USD/USDT market that is quite liquid. There is no way that these could be operational and liquid if the company was not exchanging the stables for real dollars.

And none of these Tether hit pieces ever attempt to explain this in the slightest. Until they do, there's not really much to see here. The explanation given in the piece is utterly transparent nonsense.

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