I don't think you understood what Sam was saying, being short BTC futures is NOT the same as having a net short exposure to bitcoin prices. And what does Tether have to do with BitMart, an exchange I had never even heard of before this "hack"?
They weren't net short by design since they have to stay delta neutral. They were long spot and short futures. However when the liquidations started happening, the futures to spot premium went outta whack.
So instead of locking in some spread they target, they ended up benefitting with a much larger profit.
And BitMart has no option to trade in USD. They trade exclusively in USDT. Tether might not have a hand in the hack, but they definitely have a hand in providing liquidity to exchanges which they print out of thin air with no actual 1-to-1 USD backing.
The Tether part was to highlight how this space is rife with scams, both on the shadow banking side and on the exchange side of things.
But how is being delta neutral a scam? If they weren't taking the other side of the long futures trade, someone else would at an even worse price. And if they weren't buying it back lower, someone else would at a worse price.
The idea that Tether just prints out of thin air is a conspiracy theory, I've seen large traders confirm they can do create/redeems and there was some information released about their holdings of commercial paper, settlement with NYAG, etc. And they have frozen stolen funds in the past, in the case of the Poly network hack. USDT routinely trades at a premium to USD, the market does not seem worried.
Of course Binance and Tether and a lot of other unregulated crypto companies are shady, but it's more interesting to focus on the particular shady company in the original post.
They have been evading an audit for almost 7 years now. They are required to provide an attestation every 3 months and yet they delayed the last one. Their current attestation raises more questions than answers: https://twitter.com/dee_bosa/status/1466826912781590529
Their attestations have never been independently verified.
Their commercial paper holdings are all murky and they have never provided an actual breakdown. Who knows if they are holding large quantities of commercial paper tied to Chinese real estate?
I mean, for a legit org, they tend to get sued quite a lot (and never win).
An audit for a stablecoin shouldn't really be hard to do.
And no, it's not really a conspiracy theory when there is so much evidence against Tether and Bitfinex. The burden of proof is on them. They can have all the "conspiracy theories" go away with an audit. 7 years. Still waiting. Accusations against Theranos were labeled as conspiracy theories up until 2015. They were until they weren't.
Regards Alameda and being delta neutral, I edited my comment. I never claimed it was a scam. It's just that firms can profit off crashes which may embolden others to take similar positions. The whole space is highly manipulated by big players, its as simple as that.
1) Those tests results would be highly correlated, so you wouldn't necessarily be much more than 99% accurate still.
2) If the prior probability of someone committing a crime on a given night is low, you are in the classical example of false positives doing harm via Bayes rule.
Those "structural changes" are called austerity and they have not worked well where they have been tried. There is a very strong argument that the Euro currency is deflationary and is causing many of the various issues like unemployment, government debt crises, etc. See Stiglitz's book The Euro for an in depth argument.
Or just look at the unemployment statistics. https://www.statista.com/statistics/268830/unemployment-rate... The countries outside of northern Europe that are on the Euro or pegged to it have much higher jobless rates than those with their own currency. Czechia, Romania, Poland, Hungary are not pegged while Bulgaria, Lithuania, Estonia are. Similarly outside the EU, Bosnia is pegged and doing poorly, Iceland is not and doing fine even though they were very hard hit by financial crisis.
It's exactly analogous to the way the fixed gold exchange rate was deflationary during the Great Depression and as soon as countries dropped the gold standard they started recovering.
These terms have wildly different meanings depending on the context. In my use, structural change refers to revenue-neutral economic rule making. Austerity means deficit reduction.
Making it easier to hire and fire employees is a structural change. Making it cheaper to form a new business, or increasing funding to courts, is also structural change. Removing requirements that e.g. hairdressers be licensed [1] is another. Some of these measures may actually increase deficits, at least in the short term.
If Finland had controlled their own currency, they could have made adjustments based on their unique circumstances. Instead they were left to suffer through a miserable near decade long rolling recession.
It's not so much that adjustments are made. It's more that when exports fall, the currency falls with it automatically, which helps for exports. In short, a floating currency helps regulate the import/export balance. Not having a floating currency means you need wage renegotiation and a lot of manual processes to achieve the same.
Note that in the time period there's also Nokia mobile dying, which impacts the numbers a bit.
Currency control is good to have, but I think it's also a kind of patch, not a fix.
As a Southerner, I think we do need structural changes; unfortunately, as you write, these are usually a code for austerity and job precariousness, whereas the changes we need are at the top level, not bottom. In government, major companies and even many small ones. We have hard-working and qualified people, who are wasted by the corrupt and incompetent.
Here is a simple way to demonstrate the point of the article. If I deposit $100 in a bank, the bank can lend out around $90 to someone else (fractional reserve banking). That person now deposits the money at another bank, and the "money supply" is $190 instead of $100.
On the other hand when a central bank "prints money", they use it to buy assets with an equivalent value, so there is no net transfer of wealth done by the central bank. That assumes they don't affect asset prices, which not a great assumption.
The way central banks affect the money supply is through interest rates to change the supply and demand of private loans that banks make, which indirectly affects the money supply.
> If I deposit $100 in a bank, the bank can lend out around $90 to someone else (fractional reserve banking)
This is the textbook explanation which the article strongly rejects. In practice the bank will lend out as much as possible - it is not effectively constrained by reserve requirements since it can and will simply borrow the difference. What constrains it is market forces (the demand for loans, and their profitability), and financial regulations, and finally the interest rates set by the central bank.
If a retail bank believes it can turn a profit by lending money borrowed from the central bank, in compliance with the law, it will do so until it exhausts the opportunity. Consumer deposits are irrelevant.
Exactly. There is no reserve limit: any pretense of that was washed away once sweep accounts became standard.
Banks lend as much as they possibly can, and then a bit more, and then expect the taxpayers to pick up the pieces when it all falls apart.
The irony is that there need not be a reserve ratio: if we just adopted duration-matched banking, where a bank had to demonstrate it had ownership of a given dollar it was lending for the duration it loaned that dollar (e.g. via a CD) it would be fine.
This is the fundamental problem with banking, and I don't understand why no one talks about it. Banks are lying about having money they don't have (i.e. they are promising the same dollar to more than one person at the same time). If we forced them to just stop lying it would all work out, and there wouldn't be any need for a reserve ratio.
As others have said, that is a textbook model of banks that describes how banks haven’t worked for at least a century (if ever?). That’s called the ‘money multiplier’ model, and it’s a myth. Even ‘fractional banking’ isn’t really a valid explanation. How banks work is called ‘endogenous money’, but one economist is trying to change that to the more friendly and self explanatory “bank-originated money and debt.”
The most amazing thing about how banks actually work (see the article) is that they don’t need any deposits to lend. Thus, how much a bank can lend is utterly independent of the amount of deposits they have. (Of course, deposits are useful for liquidity for interbank transfers, but the bank can just borrow reserves from other banks or the CB if it needs). But lending creates deposits with an equal amount of debt.
The other thing to remember is that deposits are a liability to the bank. A bank couldn’t lend out deposits because it wouldn’t balance out in double entry bookkeeping - even if it created the debt as an asset, it needs to create the matching deposit, so now you have two liabilities (deposit lent from, deposit for the person lent to) and one asset (the debt), which doesn’t sum to zero. Whereas creating the asset (mortgage / debt) and a matching liability (deposit) does.
Apparently my answer is worse than the guy who thinks "The fed is literally giving asset holders free money" and the guy who makes a pitch for Bitcoin. Whatever. Utilize your downvote cartel however you see fit I guess.
Regardless of whether the loans are linked to individual deposits or borrowed from other banks, I was just trying to communicate how commercial banks could increase the money supply without input from the central bank. Nowhere did I claim the reserve requirement and monetary base were the limiting factor of the money supply (in fact the last sentence says supply of loans is influenced by interest rates). This is just what figure 1 depicts in the paper. The direct quote from the conclusion of the paper is "Most of the money in circulation is created, not by the printing presses of the Bank of England, but by the commercial banks themselves."
Furthermore I claimed that central banks affect the money supply via rates, which is supported via the conclusion as well: "The Bank of England is nevertheless still able to influence the amount of money in the economy. It does so in normal times by setting monetary policy — through the interest rate that it pays on reserves held by commercial banks with the Bank of England. "
Depends how you define loss, a lot of people would disagree with you. They have had significant positive free cash flow for a long time, over a decade at least.[1] But since they reinvest the profits this becomes low net income.
His new investors made $10 million less than they would have if he had not stolen from them. Embezzlement is still a crime even if you are the CEO and the company is profitable. And there was a bunch of lying in securities disclosures of course, which is a crime by itself.
So they were too aggressive. They should have used fake bookings much less and increase them much more slowly, and don't show with "hey, wanna switch?" right after.
Should have? You realize you're arguing for something that's morally reprehensible and legally questionable (fake bookings) in the context of something else whose morality is dubious at best (how should OpenTable know about sagging sales in the first place if they're not already affiliated with OpenTable?)
I'm sure it is structured in a way that mitigates that issue. E.g. donate to an intermediary trust for the tax benefit, then that trust makes the gift to the university. In fact the article seems to name this entity as the Pearson Family Foundation.
