(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
I think your thesis on tether is missing one key point... The government is looking for the next marginal buyer of UST's. Sovereigns are selling, MMFs are still buying.. as you pointed out, tether is one of the larger holders and therefore buyers of debt. As the crypto bull run continues, this is likely to increase. This is in the interest of bad girl yellen. I think they see it for what it is and will support tether in doing so in order to roll over their short term treasuries
Per Hayes’ Kaiseki blog (https://cryptohayes.substack.com/p/kaiseki-b15230bdd09e), the obvious (to everyone by now) coup d’etat mafia that captured the U.S. government will require any entity that wants access to Fed reserves to play ball with enslaving the people in a Hotel California-esque CBDC— you can check in anytime you like, but you can never leave (check out). Thus no problem with finding buyers of Treasuries as the Fed will backstop everyone and no one will be allowed to cash anything out of the circle jerk corral. Attempting to force Japan’s playbook on Westerners.
Unlike most other nations which will have central bank issued CBDCs (e.g. China), the anti-taking provision of the (frankly mostly dead by now) U.S. Constitution prevents a Fed direct CBDC (programmable central bank digital currency). Instead ostensibly analogous to how the mafia circumvented the First Amendment by outsourcing censorship to FAANG (i.e. Big Tech), the plan underway is ostensibly/posited to first bankrupt the regional and smaller banks[1] so that TBTF (too-big-to-fail) banks such as JP Morgan (which coincidentally is adding 500 branches while other banks are closing them) will consolidate all the assets and then hypothetically implement the 666-dystopian CBDC on behalf of the government. FedNow appears to instead just be a way to facilitate instant bank runs to further this goal.
Thus it may be that Tether is tolerated if it is going to be folded into the privatized CBDC plan, in which case the outcome is as dystopian and dire as Arthur’s presumption that Tether is on the outside of the cabal (which I doubt but I have no such connections as I am only a lowly s/w engineer).
Another potentially important conjecture is that if the plan is ultimately to un-invert the yield curve and shift (probably while WWIII is underway post-2025) to monotonically rising long-rates, presumably the cabal banks implementing the CBDC will be depositing their marked-to-market loss Treasuries to a new BFTP but which is paying less IORB (interest) on reserves than the long-dated Treasuries, thus Fed remitting most interest income back to the Treasury so the national debt doesn’t spiral out-of-control too prematurely while we plebs are locked into egregious stagflation and forced rationing, carbon credit restrictions, etc..
Hell arrives soon…
[1] Ostensibly why the Fed/Treasury were late to raise interest rates and claimed they would be transitory, causing banks to load up on low-interest Treasuries which collapsed in value with the fastest, catch-up interest rate raising campaign perhaps ever.
The Fed must reduce its balance sheet to zero. This would cause a severe contraction in the circulation of USD credit money.
==============
Arthur was made head of the Fed and he implemented everything he wrote about in this essay! There are fewer dollars in circulation! And could we expect deflation of the dollar? But here's the problem. The mechanism for transmitting money from the level of owners to the level of workers has broken down. Workers have less money, demand for goods and services has fallen. To compensate for the fall in business profitability, manufacturers raised prices. Which ultimately led to hyperinflation of the dollar and a spiral contraction of the US economy. Imagine what grateful US citizens will do with Arthur after this. :)
Man, this article was soooooo interesting! The Tether perils are real and it's about time crypto had a true stablecoin like Ethen that's decoupled from the Fed tentacles. Well said!
We've got a bunch of true stable coins but they all have the same perils as each other. exchange risk, risk of hacks, being gamed by whales etc.. My read on this one is it is very dependent on Ethereum increasing in value against USD at which point, why would you sit in a stable coin? you might as well just buy Eth.
Arthur this might be the most important comment you will read this year? Surprised if you’re not already aware of this?
Arthur Hayes blogged:
“What would cause the USD to flip from an inflationary to a deflationary currency? US Politicians need to stop spending a fuck ton of money to get re-elected. The Fed must reduce its balance sheet to zero. This would cause a severe contraction in the circulation of USD credit money.
I don’t believe either flippening is likely to occur…”
That seems to be a faulty assumption. USD will be massively deflationary relative to all other (especially risk-on, e.g. ETH) assets[1] as the EuroDollar system goes into cardiac arrest with a dollar shortage, and the dollar skyrockets as it razes the bankrupt globalism and its soon-to-be-former role as the global reserve currency (in the aftermath of the scorched-earth global default of the EuroDollar system which currently makes it so).
Also the centralization and exchange risk in the Ethena design are IMO non-viable for a decentralized future.
Your design ostensibly has incentives incompatibilities that will be exploited. This is what the superior floating “peg” reflex bond design attempts to ameliorate:
[1] Except maybe gold and possibly Bitcoin although Satoshi’s legacy protocol Bitcoin as the 1988 Economist Magazine cover story Phoenix likely rises only after the USD dies as the global reserve and the ANYONECANSPEND destruction of the impostor Bitcoin which everyone incorrectly thinks is Bitcoin.
[2] John Nash’s paper where he described what Bitcoin would become and how it will discipline the nations. We are headed into massive global deflation and socialism will be eviscerated. Expect (not quite teotwawki) warlordism and government collapse all over.
“You don’t need to peg to anything in order to be stable. The most important thing to understand is that DeFi can and should be detached from the fate of the US Dollar. RAI is a first step in that direction {…} could potentially become a native unit of account for the Ethereum ecosystem, known as the Ethereum Standard.”
Stablecoin RAI launches, a pure, decentralized alternative for DeFi
Soleimani added that the redemption price, also known as the initial target price, does not really matter because, “RAI only cares about relative stability.”
Instead of being redeemable for (i.e. pedded to) a specific asset, this stablecoin design can modulate an interest rate (in a positive or negative multiplicative direction) to minimize the volatility. Even volatility w.r.t. a basket of assets could be targeted. Also the inelastic expansion of credit and money supply could be targeted.
“Under normal circumstances Rai would be an inflation hedge {…}”
What if Tether is just an inexpensive, proxy to destroy the USD by buying up enough UST to ultimately dump them on the market? They are essentially making free money by digitally printing a foreign currency. You'd think only a State's Fed (or equivalent) would have that right, or at the very least, a local, heavily regulated entity (e.g. Circle). What am I missing?
That’s the longest ‘stick yer money in my yield earning stable coin’ I’ve ever read ! Add to that ‘do it for the crypto bros, fk the banks’ war cry……oh and btw you’ll wanna grab our governance tokens along the way. Well I’ll be one waiting and watching from the sidelines sitting in USDT and assessing if this is a ‘real’ alternative or another Do Kwon ‘steady lads’ moment.
Doesn't the fed print money out of thin air? Why would the Fed need the Treasury/bad gurl yellen to funnel money to the Fed for their loss from paying interest on Tether's reserve?
I think your thesis on tether is missing one key point... The government is looking for the next marginal buyer of UST's. Sovereigns are selling, MMFs are still buying.. as you pointed out, tether is one of the larger holders and therefore buyers of debt. As the crypto bull run continues, this is likely to increase. This is in the interest of bad girl yellen. I think they see it for what it is and will support tether in doing so in order to roll over their short term treasuries
Per Hayes’ Kaiseki blog (https://cryptohayes.substack.com/p/kaiseki-b15230bdd09e), the obvious (to everyone by now) coup d’etat mafia that captured the U.S. government will require any entity that wants access to Fed reserves to play ball with enslaving the people in a Hotel California-esque CBDC— you can check in anytime you like, but you can never leave (check out). Thus no problem with finding buyers of Treasuries as the Fed will backstop everyone and no one will be allowed to cash anything out of the circle jerk corral. Attempting to force Japan’s playbook on Westerners.
Unlike most other nations which will have central bank issued CBDCs (e.g. China), the anti-taking provision of the (frankly mostly dead by now) U.S. Constitution prevents a Fed direct CBDC (programmable central bank digital currency). Instead ostensibly analogous to how the mafia circumvented the First Amendment by outsourcing censorship to FAANG (i.e. Big Tech), the plan underway is ostensibly/posited to first bankrupt the regional and smaller banks[1] so that TBTF (too-big-to-fail) banks such as JP Morgan (which coincidentally is adding 500 branches while other banks are closing them) will consolidate all the assets and then hypothetically implement the 666-dystopian CBDC on behalf of the government. FedNow appears to instead just be a way to facilitate instant bank runs to further this goal.
Thus it may be that Tether is tolerated if it is going to be folded into the privatized CBDC plan, in which case the outcome is as dystopian and dire as Arthur’s presumption that Tether is on the outside of the cabal (which I doubt but I have no such connections as I am only a lowly s/w engineer).
Another potentially important conjecture is that if the plan is ultimately to un-invert the yield curve and shift (probably while WWIII is underway post-2025) to monotonically rising long-rates, presumably the cabal banks implementing the CBDC will be depositing their marked-to-market loss Treasuries to a new BFTP but which is paying less IORB (interest) on reserves than the long-dated Treasuries, thus Fed remitting most interest income back to the Treasury so the national debt doesn’t spiral out-of-control too prematurely while we plebs are locked into egregious stagflation and forced rationing, carbon credit restrictions, etc..
Hell arrives soon…
[1] Ostensibly why the Fed/Treasury were late to raise interest rates and claimed they would be transitory, causing banks to load up on low-interest Treasuries which collapsed in value with the fastest, catch-up interest rate raising campaign perhaps ever.
Super
For those in need of an invitation code, feel free to use this one: qewu7
Great article as always Arthur!
The Fed must reduce its balance sheet to zero. This would cause a severe contraction in the circulation of USD credit money.
==============
Arthur was made head of the Fed and he implemented everything he wrote about in this essay! There are fewer dollars in circulation! And could we expect deflation of the dollar? But here's the problem. The mechanism for transmitting money from the level of owners to the level of workers has broken down. Workers have less money, demand for goods and services has fallen. To compensate for the fall in business profitability, manufacturers raised prices. Which ultimately led to hyperinflation of the dollar and a spiral contraction of the US economy. Imagine what grateful US citizens will do with Arthur after this. :)
Man, this article was soooooo interesting! The Tether perils are real and it's about time crypto had a true stablecoin like Ethen that's decoupled from the Fed tentacles. Well said!
We've got a bunch of true stable coins but they all have the same perils as each other. exchange risk, risk of hacks, being gamed by whales etc.. My read on this one is it is very dependent on Ethereum increasing in value against USD at which point, why would you sit in a stable coin? you might as well just buy Eth.
Was the individual who discovered the Holy Grail of monetary science suicided?
https://cryptohayes.substack.com/p/dust-on-crust-part-deux/comment/51347877
THE FUTURE NWO TWO-TIER MONETARY SYSTEM
Arthur this might be the most important comment you will read this year? Surprised if you’re not already aware of this?
Arthur Hayes blogged:
“What would cause the USD to flip from an inflationary to a deflationary currency? US Politicians need to stop spending a fuck ton of money to get re-elected. The Fed must reduce its balance sheet to zero. This would cause a severe contraction in the circulation of USD credit money.
I don’t believe either flippening is likely to occur…”
That seems to be a faulty assumption. USD will be massively deflationary relative to all other (especially risk-on, e.g. ETH) assets[1] as the EuroDollar system goes into cardiac arrest with a dollar shortage, and the dollar skyrockets as it razes the bankrupt globalism and its soon-to-be-former role as the global reserve currency (in the aftermath of the scorched-earth global default of the EuroDollar system which currently makes it so).
Also the centralization and exchange risk in the Ethena design are IMO non-viable for a decentralized future.
Your design ostensibly has incentives incompatibilities that will be exploited. This is what the superior floating “peg” reflex bond design attempts to ameliorate:
https://bank.dev/why
https://bank.dev/principles.html
By averting the zero bound, non-self-extinguishing compound debt growth requirement and Triffin’s dilemma, which ostensibly all central banks will be forced to switch to with legacy Bitcoin as the ‘REF’ in the Rico design per John Nash’s proscription (of something like a future Bitcoin standard discipline) in §Currencies in Competition (https://web.math.princeton.edu/jfnj/texts_and_graphics/Main.Content/IDEAL_MONEY.../Older/PENN_STATE/babu.money.b.pdf#page=5).[2]
https://bank.dev/rico
https://bank.dev/vox
https://archive.today/https://medium.com/reflexer-labs/stability-without-pegs-8c6a1cbc7fbd
[1] Except maybe gold and possibly Bitcoin although Satoshi’s legacy protocol Bitcoin as the 1988 Economist Magazine cover story Phoenix likely rises only after the USD dies as the global reserve and the ANYONECANSPEND destruction of the impostor Bitcoin which everyone incorrectly thinks is Bitcoin.
[2] John Nash’s paper where he described what Bitcoin would become and how it will discipline the nations. We are headed into massive global deflation and socialism will be eviscerated. Expect (not quite teotwawki) warlordism and government collapse all over.
My prior pertinent comments on this blog:
https://cryptohayes.substack.com/p/dust-on-crust-part-deux/comment/51337865
https://cryptohayes.substack.com/p/dust-on-crust-part-deux/comment/51336516
P.S. I’m a capable 58 year old s/w engineer fully recovered from my decade ordeal with Tuberculosis.
https://anonymint.substack.com/
https://anonymint1.substack.com/
https://bitcointalk.org/index.php?topic=355212.0
=================
November 4, 2022
Did Nikolai Mushegia discover the holy grail of monetary science?
Crypto researcher suicided for finding a decentralized solution to the central bank Triffin Dilemma?
https://youtu.be/dqA7wKEhRcw
(Crypto Billionaires End Up "DEAD" After Exposing The Global Elite...WHY? | Chico Crypto)
My YT comment, “Publicity is best defense for a known dissident.”
Tornado.cash plot (https://www.coindesk.com/policy/2022/08/21/arrest-of-tornado-cash-developer-draws-dutch-crypto-community-protest/) thickens. Remember Brock Pierce who helped shill the laying of the $4B EOS turd ICO? Do some powers-that-be want to prevent the launch of any decentralized viable stable coin?
The new Ethereum-backed RAI token’s price is not pegged to anything but it should retain a stable exchange rate—hopefully.
(https://decrypt.co/58101/reflexer-launches-alternative-to-ethereum-stablecoin-dai-called-rai)
“You don’t need to peg to anything in order to be stable. The most important thing to understand is that DeFi can and should be detached from the fate of the US Dollar. RAI is a first step in that direction {…} could potentially become a native unit of account for the Ethereum ecosystem, known as the Ethereum Standard.”
Stablecoin RAI launches, a pure, decentralized alternative for DeFi
(https://cointelegraph.com/news/stablecoin-rai-launches-a-pure-decentralized-alternative-for-defi)
“Our aspirations for RAI, however, are more profound — if RAI fulfills its purpose within DeFi and starts to earn global adoption, it could prove to be a viable solution to the Triffin Dilemma (https://www.imf.org/external/np/exr/center/mm/eng/mm_sc_03.htm) {c.f. also Wikipedia (https://en.wikipedia.org/wiki/Triffin_dilemma)}, and bring credible neutrality to the administration of a stable global reserve asset.”
{…}
Soleimani added that the redemption price, also known as the initial target price, does not really matter because, “RAI only cares about relative stability.”
Instead of being redeemable for (i.e. pedded to) a specific asset, this stablecoin design can modulate an interest rate (in a positive or negative multiplicative direction) to minimize the volatility. Even volatility w.r.t. a basket of assets could be targeted. Also the inelastic expansion of credit and money supply could be targeted.
“Under normal circumstances Rai would be an inflation hedge {…}”
(https://www.reddit.com/r/MakerDAO/comments/vr1mmh/comment/iesmmle/)
Contrast Rico/Rai designs with decentralized but still dollar pegged LUSD (https://morioh.com/p/cf283f91beb9), c.f. also Guide to Liquity Protocol — collateralize ETH and mint LUSD (https://medium.com/stakingbits/guide-to-liquity-protocol-collateralize-eth-and-mint-lusd-da6c72e6303c).
First Mircea (https://businessinsider.mx/bitcoin-billionaire-mircea-popescu-drowns-leaving-behind-fortune-2021-7/) @ Trilema.com and now… MakerDAO co-founder Nikolai Mushegian “drowns” at 29 in Puerto Rico
(https://cointelegraph.com/news/makerdao-co-founder-nikolai-mushegian-dies-at-29-in-puerto-rico)
MakerDAO Co-Founder Found Dead Days After Eerie Tweets | Bitcoinist.com
(https://bitcoinist.com/makerdao-co-founder-found-dead/)
No Evidence of Foul Play in Death of MakerDAO Co-Founder Nikolai Mushegian, Police Say
(https://decrypt.co/113602/makerdao-co-founder-death-nikolai-mushegian)
MakerDAO co-founder found dead after tweets of sex trafficking by CIA
(https://www.cryptopolitan.com/makerdao-co-founder-found-dead/)
Great article Arthur, as always!
How can I obtain an early access code for Ethena?
Hey George, feel free to use this one: qewu7
What if Tether is just an inexpensive, proxy to destroy the USD by buying up enough UST to ultimately dump them on the market? They are essentially making free money by digitally printing a foreign currency. You'd think only a State's Fed (or equivalent) would have that right, or at the very least, a local, heavily regulated entity (e.g. Circle). What am I missing?
That’s the longest ‘stick yer money in my yield earning stable coin’ I’ve ever read ! Add to that ‘do it for the crypto bros, fk the banks’ war cry……oh and btw you’ll wanna grab our governance tokens along the way. Well I’ll be one waiting and watching from the sidelines sitting in USDT and assessing if this is a ‘real’ alternative or another Do Kwon ‘steady lads’ moment.
Doesn't the fed print money out of thin air? Why would the Fed need the Treasury/bad gurl yellen to funnel money to the Fed for their loss from paying interest on Tether's reserve?
Well w.r.t. to remittances because it’s the law as written in the The 1913 Federal Reserve Act.
https://en.wikipedia.org/wiki/Structure_of_the_Federal_Reserve_System
https://www.federalreserve.gov/aboutthefed/section7.htm
But Arthur Hayes is incorrect, the Treasury never remits to the Fed, but instead the Fed accrues a negative asset:
https://www.stlouisfed.org/on-the-economy/2023/nov/fed-remittances-treasury-explaining-deferred-asset
I like FUBU. The main question I have is: Is it permissionless? Can your USDe be frozen like USDT and USDC?
LSD Smart Contract!
https://youtu.be/IPSzTBP5PAU
Ain’t No Mountain Higher… :-}
Thank you Arthur. Can’t do voice, yet. We work with “Dynastic Trusts.
https://futurism.com/neoscope/cryogenic-estate-planning
Live Long & Prosper #LLP