FTX

[dyqik]

Anyway, I have no idea what any of this has to do with FTX, or even Crypto.

Start a new thread if you need a beginners guide to economics.

[Bird on a Fire]

No I don't.

If you personally have divested than that's very cool, and I'd be interested in hearing more about the process.

Nevertheless, pensions are often brought up when I mention fossil fuel investments. Many high street retail banks are routinely backing new fossil fuel extraction projects as part of their portfolio. Is the market just decades behind the science in issuing a correction, or do enough of the market bros just have so little faith in humanity that an outcome involving the deaths of millions of people, and displacement of billions, seems like a good investment?

Mate, you were arguing for government subsidises of fossil fuel burning just a few weeks ago, so you can basically f.ck off.

No, I was arguing for progressive pricing with the goal of reducing total consumption (by targeting consumers with most discretionary use). Continuing to lie about this across multiple threads makes you look dishonest and/or thick, and you're normally neither so do please sort it out.

As for the process of investing in ESG funds, it's as simple as clicking the ESG fund options. Because pensions are tightly regulated and have industry best practice guidelines, there's transparency where every investment fund gets an ESG rating and has to disclose what it is doing. Anyone can read the ratings or pick and choose or just click the funds with the best ratings.

And it may well pay off financially, because research suggests the higher ranked ESG investments outperform the lower ranked. For example
https://www.fidelityinternational.com/e ... ce135-en5/

That's very good news, as I've just started to have a pension plan with my new job and I've got some options so I'll check that out. Thanks.

There's still a lot of people with (perhaps poorly-performing as a result) fossil-investing pensions, despite the fact that many of those assets will be stranded. But "all of you" was too strong.

[EACLucifer]

Because it's a delusional description of a complex system.

The only rational response to it involves pictures of shrimp.

I'd be interested in your non-delusional description of who's running capitalism currently, and how, in one sentence, as a counterpoint?

Add a shrimp if you really must.

First you need to tell me what you mean by "running capitalism".

Or indeed what you mean by "capitalism". Because what I mean by it is not a thing that is run.

The idea that someone or a group of someones is "running capitalism" is the root of a number of conspiracy theories, many of them very unpleasant.

Anyway, BOAF, you are running capitalism. So's Dyqik. So am I. And while we're doing it, we're also engaging in class struggle. Even when we think we aren't.

[Woodchopper]

Highly financialised late-stage capitalism with state backing is a Ponzi scheme run by sociopathic bros who take advantage of "morons" who pay no attention to the man behind the curtain.

To start with it isn’t a Ponzi scheme.

A Ponzi scheme is one in which the sole source of returns paid to investors is money coming from more recent investors. If this was explained it would be obvious that investing in the scheme would be a very bad idea, so a Ponzi scheme also involves an element of fraud.

Capitalism is different because returns come from business developing products or services and selling them. The most obvious manifestation is when firms innovate and develop new products, such as whatever you are using to read this.

[Bird on a Fire]

Anyway, I have no idea what any of this has to do with FTX, or even Crypto.

Start a new thread if you need a beginners guide to economics.

That's a cop out.

You're happier with state-backed currencies than distributed computer currencies because of the system behind it. What part of the price of the pound, for instance, gives you more confidence than the price of a big crypto coin? The homoeopathic quantities of actual lumps of lovely, tangible metals getting moved around because we can make saucepans out of them?

[dyqik]

Anyway, I have no idea what any of this has to do with FTX, or even Crypto.

Start a new thread if you need a beginners guide to economics.

That's a cop out.

You're happier with state-backed currencies than distributed computer currencies because of the system behind it. What part of the price of the pound, for instance, gives you more confidence than the price of a big crypto coin? The homoeopathic quantities of actual lumps of lovely, tangible metals getting moved around because we can make saucepans out of them?

From page 1 and 3 of this thread (substitute BoE for Federal Reserve for GBP):

This. The big banks literally create money out of thin air and take a cut. It’s an appealing business model.

Money thus gains credibility from the credibility of the issuer to satisfy you, to redeem their IOU. The Federal Reserve has considerable credibility to satisfy you. A lot stands behind it. Some central banks have less credibility, it is traditional to mention Argentina at this point, for example.

How credible is Bitcoin to satisfy you? Not a credible as a long-standing big bank with large assets.

And fundamentally, the credibility of the Federal Reserve rests on political foundations created by the United States legal requirement to accept dollars as discharging debts, the United States legal authority to levy taxes and impose fines, and the United States legal authority to impose criminal sanctions on individuals who do not pay taxes and fines. Plus the United States' willingness and ability to pay its debts to the Federal Reserve.

The economic foundation in this is the United States ability to collect taxes from the US economy, which depends on the health of the economy.

But what you say is not in disagreement with Ivan's statement.

There is literally nothing there. However this does not mean that the nothing cannot be utilised. There's literally nothing there when you say "cheers mate I owe you a pint" but it can be utilised as a mechanism.

The point is that these transactions, although useful for the transactees, are worthless for investors in crypto.

If you buy a bitcoin now for $15,693 you will not benefit in the slightest if somebody uses bitcoin as a blackmail pay off.

That applies to buying anything except shares in companies.

If I were to by a tonne of copper then I don't benefit directly from anyone else buying copper. On aggregate I will though benefit indirectly if enough people buy copper and those purchases affect the price.

It does though seem strange to describe copper as being something about which "there is literally nothing there [...] a lot of costly activity is being undertaken for which is essentially worthless."

Ivan appeared to be arguing that crypto is different because it has no intrinsic use. But I don't agree, crypto has intrinsic uses.

With copper there is something there. It's a limited resource. By buying a ton of copper, you've removed a ton of copper from the market, and because people need copper as an input to their businesses, the market value goes up slightly.

Crypto coins are nearly all based around a limited resource, but it's a resource that is not useful for anything other than trading crypto. No one needs a Bitcoin in order to produce items for sale at a profit.

Legal tender currencies get around this by being sufficient for discharging debts. Fine art, crypto etc. are only "useful" in the sense that you can brag about owning them.

It's best to think of crypto coins as shares in a company with no turnover and no assets.

[dyqik]

As I said, if you need a Economics 101 thread, start one.

[Woodchopper]

Anyway, I have no idea what any of this has to do with FTX, or even Crypto.

Start a new thread if you need a beginners guide to economics.

That's a cop out.

You're happier with state-backed currencies than distributed computer currencies because of the system behind it. What part of the price of the pound, for instance, gives you more confidence than the price of a big crypto coin? The homoeopathic quantities of actual lumps of lovely, tangible metals getting moved around because we can make saucepans out of them?

As dyqik has mentioned, the pound has a whole government behind it, including courts, police and customs etc. Same applies to the euro, US dollar etc.

[EACLucifer]

Anyway, I have no idea what any of this has to do with FTX, or even Crypto.

Start a new thread if you need a beginners guide to economics.

That's a cop out.

You're happier with state-backed currencies than distributed computer currencies because of the system behind it. What part of the price of the pound, for instance, gives you more confidence than the price of a big crypto coin? The homoeopathic quantities of actual lumps of lovely, tangible metals getting moved around because we can make saucepans out of them?

The fact that it is linked to the tax raising powers of the UK government, and must be accepted to settle debts, again due to the power of the UK government. That ties it to the economy of the UK itself.

[Bird on a Fire]

And the decisions affecting those institutions are made by a very small number of people who mostly went to school together. Are the Oxbridge set (present company excepted) really acting in my best interests when they decide the price of the pound, any more than some crypto guy is? Beyond the fact that both want the price stable/ going up (usually).

(Conspiracy theories about particular ethnic groups are stupid as well as offensive, but decision-making in the market is obviously non-randomly distributed with respect to geography, socio-economic background, gender etc etc. Much of it unwittingly - more of a distributed conspiracy.)

[dyqik]

And the decisions affecting those institutions are made by a very small number of people who mostly went to school together. Are the Oxbridge set (present company excepted) really acting in my best interests when they decide the price of the pound, any more than some crypto guy is? Beyond the fact that both want the price stable/ going up (usually).

They don't decide the price of the pound. The market decides that. The size of the UK economy and political reality is the fundamental constraint on that

The crypto guy has no such constraints.

[Bird on a Fire]

I would say the UK government over the last 12 years has been worse for people like me than a crypto exchange operator (the ones that aren't straight-up scams, but rather operate genuine sales of crypto assets).

FWIW my assets and liabilities are split over GBP, EUR and ISK. I can only vote in one of those currencies (would've been two, but brexit, delivered by dark money from and political game-playing by...yes you guessed it.) so while I may be running capitalism, some are more running it than others.

[Bird on a Fire]

And the decisions affecting those institutions are made by a very small number of people who mostly went to school together. Are the Oxbridge set (present company excepted) really acting in my best interests when they decide the price of the pound, any more than some crypto guy is? Beyond the fact that both want the price stable/ going up (usually).

They don't decide the price of the pound. The market decides that. The size of the UK economy and political reality is the fundamental constraint on that

The crypto guy has no such constraints.

Well, their decisions as to what to do with the UK determines the price of the pound, via the market, along with other factors.

Whereas yeah a crypto guy has no influence over the price at all - it's just the market.

[dyqik]

I would say the UK government over the last 12 years has been worse for people like me than a crypto exchange operator (the ones that aren't straight-up scams, but rather operate genuine sales of crypto assets).

This is objectively false. You can't buy food or pay rent with crypto. If you could, that food and rent would cost more than it would in fiat currency.

[dyqik]

I would say the UK government over the last 12 years has been worse for people like me than a crypto exchange operator (the ones that aren't straight-up scams, but rather operate genuine sales of crypto assets).

This is objectively false. You can't buy food or pay rent with crypto. If you could, that food and rent would cost more than it would in fiat currency.

Also, most crypto transactions have substantial carbon emissions associated with it - far more than a regular currency.

ETA: Cryptocurrency transactions and mining cause about 0.7% of the US's carbon emissions, about the same as all diesel vehicles in use. Regular banking transactions worth millions of times more cause a tiny fraction of that, because they are just small computing operations.

Note that that's independent of the economic activities that give any currency value, it's an additional emission on top of the regular emissions.

[IvanV]

This is not how bank loans work. You surely know that they loan many multiples of their holdings and simply create the extra money they lend.

Better to say that while banks can create money they don’t create wealth. What is usually happening when banks make loans is that illiquid assets (eg, house, car or washing machine) are converted into liquid assets (eg pounds, euros, dollars).

No, it’s more than that. They create money based on multiples of the asset base. See the link I just posted above. This is a bit of a tangent but it’s relevant because a) people ought to but don’t understand this stuff and b) the way that banks operate is a key driver behind crypto. The banks are not benign facilitators. A digital currency could potentially fulfil this role though - although it would be disruptive.

Full reserve banking has long been discussed as an alternative to fractional reserve banking. Fractional reserve banking clearly creates systemic risk, and banking regulators regulate the fraction, and also the nature of assets that are allowed to be counted as reserve - for example risk adjusting the values rather than just adding up their nominal value regardless of risk.

The reserve ratio is a temptation for nation states. Fractional reserve banking creates financial potential to get economies going. But also creates risk. Full reserve greatly reduces the risk, but makes financial capital much less available. Back in the 50s and 60s getting a mortgage was a real privilege, because there was more demand for mortgages than financial capacity of the institutions to lend. We go back to those kind of conditions, if full reserve is the requirement.

I read the article linked in another post on the dangers of fractional reserve banking, but it neither made clear how crypto can deliver full reserve banking, nor what advantage crypto would have over traditional banks to do full reserve banking. It seemed to be more a case of, crypto could do this - without explaining in sufficient detail how - so that is what it can do.

And then there's still the elephant in the room. Who would want to borrow and lend denominated in some unstable, unbacked, high transaction cost, token, rather than a proper currency, which has the advantages of relatively good stability, wide acceptability, state backing, and low transaction cost? Governments of countries with weak currencies have difficulty putting bonds onto the international market denominated in their own currencies, and have to put high interest rates on them. But when they borrow in dollars or euros, they suffer when their own currencies weaken. It's difficult to agree fair and cheap borrow/lend agreements denominated in dodgy currencies.

You asked somewhere, what can a bank do that a distributed ledger can't do, especially given the immodest profits attributed to the thieves who run banks. Well, fractional reserve, we learned, which has its problems but also its advantages. Full reserve isn't a total answer. Maybe distributed ledger can do full reserve banking, I'm not quite sure how, but suppose it can. And maybe it can do it denominated in proper currency, rather than dodgy tokens with no backing other than temporary mutual confidence. But if distributed ledger means blockchain, well that seems to be very expensive to run. So thieving bankers may well be cheaper than blockchains for the customer, a lot cheaper. And at least the thieving bankers are closely regulated. That can be addressed by closely regulating the distributed ledgers too.

[plodder]

I’m glad you read the article Ivan, because you’ll know the federal reserve is one of the institutions looking at digital currencies to manage the risks associated with fractional reserve banking in extremis. This might be a surprise to some of the empty barrels upthread though.

I agree there are certainly practical problems that need answering at the moment, but this doesn’t mean the underlying principle is stupid, a scam, impossible etc.

What I would say in argument is that just because a new technology is expensive or clunky does not mean that it will always be so. I’m sure someone said the same about minting coins or printing banknotes.

[lpm]

Do you think FTX was a scam, yes or no?

[dyqik]

I’m glad you read the article Ivan, because you’ll know the federal reserve is one of the institutions looking at digital currencies to manage the risks associated with fractional reserve banking in extremis. This might be a surprise to some of the empty barrels upthread though.

I agree there are certainly practical problems that need answering at the moment, but this doesn’t mean the underlying principle is stupid, a scam, impossible etc.

What I would say in argument is that just because a new technology is expensive or clunky does not mean that it will always be so. I’m sure someone said the same about minting coins or printing banknotes.

The underlying principles of crypto are to make bank transactions that currently are easy, harder. There is no technical breakthrough that can change that, because we're taking about mathematical operations here, not mechanical things. The same physical technology is used for regular banking and crypto banking.

Similarly, lots of people are looking at Blockchain as a thing in non crypto-currency applications, but none of them can't be done more easily and cheapy with a well backed up traditional transactional database.

Then there's the potential existential risk to Blockchain and crypto, which is large scale quantum computing - which is the one thing that would make crypto transactions costs much smaller, and would also make the crypto aspect largely irrelevant.

[Woodchopper]

I’m glad you read the article Ivan, because you’ll know the federal reserve is one of the institutions looking at digital currencies to manage the risks associated with fractional reserve banking in extremis. This might be a surprise to some of the empty barrels upthread though.

People can read the discussion document here.
https://www.federalreserve.gov/publicat ... 220120.pdf

It focuses upon a central bank providing a digital currency for services like mobile payment apps or digital wallets (which are popular but a bit risky). Seems sensible overall.

[plodder]

I’m glad you read the article Ivan, because you’ll know the federal reserve is one of the institutions looking at digital currencies to manage the risks associated with fractional reserve banking in extremis. This might be a surprise to some of the empty barrels upthread though.

People can read the discussion document here.
https://www.federalreserve.gov/publicat ... 220120.pdf

It focuses upon a central bank providing a digital currency for services like mobile payment apps or digital wallets (which are popular but a bit risky). Seems sensible overall.

More recent is this speech by the vice chair of the Fed Reserve at a speech at the bank of England this summer:

Given the foundational role of fiat currency, there may be an advantage for future financial stability to having a digital native form of safe central bank money—a central bank digital currency. A digital native form of safe central bank money could enhance stability by providing the neutral trusted settlement layer in the future crypto financial system.10 A settlement layer with a digital native central bank money could, for instance, facilitate interoperability among well-regulated stablecoins designed for a variety of use cases and enable private-sector provision of decentralized, customized, and automated financial products. This development would be a natural evolution of the complementarity between the public and private sectors in payments, ensuring strong public trust in the one-for-one redeemability of commercial bank money and stablecoins for safe central bank money.11

But of course, lol, scam, obvious bad idea is obvious bad idea etc.

https://www.federalreserve.gov/newseven ... 20708a.htm

[Woodchopper]

I’m glad you read the article Ivan, because you’ll know the federal reserve is one of the institutions looking at digital currencies to manage the risks associated with fractional reserve banking in extremis. This might be a surprise to some of the empty barrels upthread though.

People can read the discussion document here.
https://www.federalreserve.gov/publicat ... 220120.pdf

It focuses upon a central bank providing a digital currency for services like mobile payment apps or digital wallets (which are popular but a bit risky). Seems sensible overall.

More recent is this speech by the vice chair of the Fed Reserve at a speech at the bank of England this summer:

Given the foundational role of fiat currency, there may be an advantage for future financial stability to having a digital native form of safe central bank money—a central bank digital currency. A digital native form of safe central bank money could enhance stability by providing the neutral trusted settlement layer in the future crypto financial system.10 A settlement layer with a digital native central bank money could, for instance, facilitate interoperability among well-regulated stablecoins designed for a variety of use cases and enable private-sector provision of decentralized, customized, and automated financial products. This development would be a natural evolution of the complementarity between the public and private sectors in payments, ensuring strong public trust in the one-for-one redeemability of commercial bank money and stablecoins for safe central bank money.11

But of course, lol, scam, obvious bad idea is obvious bad idea etc.

https://www.federalreserve.gov/newseven ... 20708a.htm

Yes, seems sensible. In theory at least a central bank digital currency would eradicate cryptocurrency (which have the drawbacks described in the speech). I expect that one problem would be the extent to which crypto inspired conspiracy nonsense would lead people to put their money into unsafe assets even if a safe alternative is available.

[plodder]

I’m not sure it is entirely conspiracy nonsense (eg 2007’s bail outs) and it also strikes me that the people most at risk from crypto (central bankers) are using such conciliatory language.

[dyqik]

I’m glad you read the article Ivan, because you’ll know the federal reserve is one of the institutions looking at digital currencies to manage the risks associated with fractional reserve banking in extremis. This might be a surprise to some of the empty barrels upthread though.

People can read the discussion document here.
https://www.federalreserve.gov/publicat ... 220120.pdf

It focuses upon a central bank providing a digital currency for services like mobile payment apps or digital wallets (which are popular but a bit risky). Seems sensible overall.

More recent is this speech by the vice chair of the Fed Reserve at a speech at the bank of England this summer:

Given the foundational role of fiat currency, there may be an advantage for future financial stability to having a digital native form of safe central bank money—a central bank digital currency. A digital native form of safe central bank money could enhance stability by providing the neutral trusted settlement layer in the future crypto financial system.10 A settlement layer with a digital native central bank money could, for instance, facilitate interoperability among well-regulated stablecoins designed for a variety of use cases and enable private-sector provision of decentralized, customized, and automated financial products. This development would be a natural evolution of the complementarity between the public and private sectors in payments, ensuring strong public trust in the one-for-one redeemability of commercial bank money and stablecoins for safe central bank money.11

But of course, lol, scam, obvious bad idea is obvious bad idea etc.

https://www.federalreserve.gov/newseven ... 20708a.htm

That's not a Cryptocurrency in the Bitcoin sense, or the other kinds traded in FTX though.

It's closer to a banknote with security features that's suitable for online use.

[plodder]

by all means clarify what it is you're vehemently opposed to rather than slightly in favour of.