This is so dumb. Luna ate shit because someone murdered it. It's replaying 1992... by design. He doesn't get 2008 either. The bad backing in 2008 wasn't mortgages, it was artificial bets on whether mortgages would fail. Surprise! They did! Except since you earned more money on a mortgage that will almost fail, the banks wrote a lot of mortgages that failed. And let's talk about the money, shall we? It took a billion dollars in leverage to extract about 800 million in value from a blockchain with about $8b in it. The $8b is all gone, but it was about a $40b blockchain a month ago so really, the market did hella worse to Terra than Terra did to themselves. Compare and contrast: Countrywide was 1.9 trillion in mortgages. The government paid $182 billion to bail out AIG. Wendy's lost a half billion dollars in market cap yesterday because apparently their earnings per share were a penny under estimates. Terra was dumb, Do Kwon is an asshole, a fool and his money are soon parted, but cryptocurrency shenanigans have as much to do with 2008 as they do with ZZZZ Best or LTCM or the S&L crisis or Russian contagion or the bankruptcy of Brazil or Black Monday or any other example you care to list, idiots in general and David Gerard in particular point to 2008 because it's widely accepted that it was a case of Bad Financial People Being Bad, scold and move on, no need to learn anything after all that shit was entirely out of our hands amirite? It's lazy shit like this: Algorithmic stablecoins are ETFs. They're modeled on ETFs. But you're only allowed to make fun of people who question the wisdom of ETFs. But instead let's pick on Tether, because we always have to pick on Tether, without noting that every bank in the developed world gets a government guarantee at 5% backing and Tether is 75% bonds. 'cuz god forbid you explain fractional reserve banking to the proles, they might start to wonder about the whole shaky system. like I said So yeah. This is definitely like 2008, because "despairing messages" on Reddit are 100% equivalent to six million households being foreclosed on. For sure - Occupy Wall Street and the Tea Party will be riiiiiiight back again because Terra ate shit. And this sort of tedious moral scolding with no attempt to understand what's actually going on, let alone explain it, will allow people to continue to believe they have no power over the man behind the curtain so why even bother trying to figure out what he's doing.Stablecoins are a modern form of the wildcat banks of the 1800s, which issued dubious paper dollars backed with questionable reserves.
You might be asking why either UST or luna is worth anything in the first place, given they were created ex nihilo by Terra.
What do you mean by “artificial bets”? I’m a bit lost with that mortgage bets. Side note by tying back to the stocks conversation and Wendy’s for that matter - it looks like a lot of large CPG companies and energy companies aren’t really eating shit. Or not nearly as much as everyone else. Looking at Chevron, PepsiCo, Keurig Dr Pepper, Nestle, Danone, Unilever...etc. Maybe a few % difference YTD, which pales in comparison. Interesting given the margin situations and logistics challenges in that realm.
Long have I bitched that fundamentals are out of vogue. "Fundamentals" says "Ford makes a lot of cars and pays dividends to its shareholders while doing it, Ford is probably worth more money than Rivian." The problem is, since you can't make any money through fundamentals, nobody even remembers what they are anymore. Except Warren Buffet. That asshole made money on Amtrak. So let's talk CDOs The shorthand on 2008 was "(waves hands) mortgages." But this ignores a few steps. - the perception: Countrywide loaned money to people who couldn't afford it, backed by houses that weren't worth it. These loans were underwritten by Wall Street and they all lost money because as we all know, the blacks and the poors can't be trusted with money. - the reality: Countrywide loaned money to people who couldn't afford it BECAUSE investment brokers wanted loans made to people who couldn't afford them so they could wager on their failure. They took these loans, you see, and threw them into a blender. Then they ran that soup through a fractionating column in order to rank their riskiness into "danger" "don't" "kiss your money goodbye" "you already owe money on this" and "this is criminal and you are likely complicit". They then blended those toxic brews into cups full of swill and waved them under the noses of ratings agencies. The agencies said "smells great!" so that university pension funds and municipal bond managers could legally buy these biohazard beverages and tell their coworkers what they did with a straight face. Now - how deep is the evil? The "2008 take", which David Gerard is all about, is "people shouldn't buy mortgages they can't afford." Of course in 2008 that was "20% of your income" and if you look now, Chase will tell you 28% so... prolly deeper than that on the face of it. The "Pre-Big Short" take was "all the way down to the ratings agencies who should never have called a toxic blend of bad mortgages an AAA bond." But holy shit if we can't trust Morningstar the whole edifice crumbles. My take? banks are not thrifts, thrifts are not banks but I'm one of those assholes who owns cryptocurrency and didn't get wiped out so clearly, I'm a drug dealing pederast. Options are bets. Futures are bets. Swaps are bets. Most "financial instruments" are bets. 2008 was caused by bets. Terra was caused by the equivalent of an ETF breaking.