Hoisted: The Attraction of Communism in the 1930s

Wisdom from the office down the hall: claiming that you will tether your cryptocoin to the dollar does not, in fact, make it much less stupid as something for others to invest in. Cryptocurrencies are stupid investments. Investors in them are grifters or fools. A fool can make money if they eventually find a bigger fool to sell to. And the biggest fool of all is the person who sees that fools have made money in stupid investments and thinks that is a reason to imitate them: Barry Eichengreen: The Stable-Coin Myth: "Mania for cryptocurrencies... so-called “stable coins”... Tether, Basis, and Sagacoin... rigidly tied to the dollar...

...Stable coins purport to... [be] attractive as units of account and stores of value... not mere vehicles for financial speculation. But this doesn’t mean that they are viable. To understand why, it is useful to distinguish three types.... Fully collateralized... [the] problem with this model: expense.... A cryptocurrency with questionable backing that is awkward to use... may be attractive to money launderers and tax evaders, but not to others.... Partly collateralized... investors will scramble to get out before the cupboard is bare.... the equivalent of a bank run, leading to the collapse of the peg.... Uncollateralized has this problem in spades.... All of this will be familiar to anyone who has encountered even a single study of speculative attacks on pegged exchange rates, or to anyone who has had a coffee with an emerging-market central banker. But this doesn’t mean that it is familiar to the wet-behind-the-ears software engineers touting stable coins. And it doesn’t mean that the flaws in their currently fashionable schemes will be familiar to investors...


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