Speaker 1: Hello, and welcome to another episode of The Mark Moss
Speaker 1: Show where we're talking about bitcoin, We're talking about cryptocurrencies.
Speaker 1: We're talking about the decentralized revolution that is happening right now.
Speaker 1: We're living through this and we're documented each and every
Speaker 1: step of the way. Big, big, big things are happening
Speaker 1: right now as I'm taking taking the time to make
Speaker 1: this recording, as we're as I'm talking to you for
Speaker 1: the Mark Moa Show, and that is uh, the entire
Speaker 1: cryptocurrency market cap is literally melting down. It's like a
Speaker 1: sea of red. But it's not just the cryptocurrency market,
Speaker 1: it's the entire market. We're talking about the NASDAC. We're
Speaker 1: talking about this, the tex stocks, we're talking about um,
Speaker 1: you know the tech darleans that are down. I think
Speaker 1: exchanges down or that index is down by more than
Speaker 1: some of the big darlens they're like Zoom and Shopify
Speaker 1: and Peloton are down like eighty percent or more. Um.
Speaker 1: But even other things like gold is down. I mean,
Speaker 1: we're seeing um things getting hammered all the way across
Speaker 1: the board, and even some of the big Darlin's like
Speaker 1: um Tesla. Even Tesla is getting absolutely crushed right now
Speaker 1: UM and even safe haven assets. Now today it looks
Speaker 1: like gold is doing a little bit better than it
Speaker 1: has been, but typically people think about gold as being
Speaker 1: that safe haven hedge. But yeah, even even uh even
Speaker 1: Tesla looks like it's getting absolute crushed right now, which
Speaker 1: I wonder if that's going to affect Elon must bid
Speaker 1: for buying Twitter M it's down about um since it's
Speaker 1: November high. Uh so that's interesting. The whole world is
Speaker 1: melting down, and of course the cryptocurrency markets are being
Speaker 1: completely hammered. If you look at um coin market cap,
Speaker 1: which is kind of a listing of all the cryptocurrencies
Speaker 1: that are out there, you can see, um, what do
Speaker 1: we have nineteen thousand four D cryptocurrencies listed here? And
Speaker 1: if you scroll through, I mean, it's just a sea
Speaker 1: of red. The only green that I see at the
Speaker 1: time that I'm talking to you right now is uh
Speaker 1: us D coin U s D C. I see binance
Speaker 1: coin b U s D and I see shoot man,
Speaker 1: uh true us D. So basically we have the stable
Speaker 1: coins are the only things that are still in the
Speaker 1: green here, and that is uh, that's the big story.
Speaker 1: The big story is the stable coins themselves and So
Speaker 1: the big, big story is the stable coins, and in
Speaker 1: particular U s T so us T is a terror
Speaker 1: lunas stable coin, and there's big things happening with that,
Speaker 1: and it appears to be I don't want to say
Speaker 1: it's the cause of all the market panic. It's certainly
Speaker 1: not the cause, but it's definitely exaggerated. So I want
Speaker 1: to break that down. I want to break down what
Speaker 1: the heck the stable coins are. We're gonna talk about
Speaker 1: the different types of different categories, how they're used, why
Speaker 1: they're used, um, what the government wants to do about
Speaker 1: regulating these things, um. And then we're gonna talk about
Speaker 1: um the only two that I think are the ones
Speaker 1: that you even want to be in. I want to
Speaker 1: then talk about it from a historical perspective, because the
Speaker 1: reality is is that stable coins are nothing new. It's
Speaker 1: a matter of fact. I like talk about history of
Speaker 1: the time. History doesn't just repeat at rhymes, uh, and
Speaker 1: it's it's rhyming and it's repeating right now. So this
Speaker 1: is nothing new. We've seen this before. UM. So I'm
Speaker 1: gonna give you that a historical perspective, and then I'm
Speaker 1: gonna give you the warnings and uh, some ways that
Speaker 1: you can pretend potentially protect yourself. So lots of cover
Speaker 1: today on the Markmall Show. Thanks for tuning in. If
Speaker 1: you're not tuning in on a regular basis, then you
Speaker 1: certainly should. You're probably missing out and so make sure
Speaker 1: to set a re minder to be with me each
Speaker 1: and every time at this same time, at the same channel.
Speaker 1: So at the time of my recording, as I said,
Speaker 1: it's an absolute blood bath. We see Bitcoin is down
Speaker 1: on the seven day ethereums down, um finance coin x
Speaker 1: r P, Cardano Salona fift. I mean, it's just an
Speaker 1: absolute murder out there. And like I said, the the
Speaker 1: markets are melting down. But the big thing that's dragging
Speaker 1: down all the markets, including a lot of the big
Speaker 1: hedge funds, including a lot of the blue chip stocks
Speaker 1: like the Tesla's, and including the entire cryptocurrency market cap,
Speaker 1: like I said, is this terror Luna situation that's going on.
Speaker 1: And so let's talk about that real quickly. So the
Speaker 1: first thing is we're talking about stable coins. So stable
Speaker 1: coins are the big um darling of cryptocurrencies. Of course,
Speaker 1: it's like this defy. DEFY stands for decentralized finance, which
Speaker 1: a lot of people believe is one of the biggest
Speaker 1: use cases to come out of cryptocurrencies, because supposedly everything
Speaker 1: needs to be decentralized, right, isn't that the big isn't
Speaker 1: that the big technological revolution that you talk about all
Speaker 1: the time mark Um everything should be decentralized, will not.
Speaker 1: That's not exactly right. No, I do talk about the
Speaker 1: decentralized revolution, which is what we're witnessing, which is what
Speaker 1: we're living through right now. Which, yes, the technological revolution
Speaker 1: is decentralization. However, unpopular opinion is not everything needs to
Speaker 1: be decentralized. Let me say it again for the people
Speaker 1: in the back. Not everything needs to be decentralized. So
Speaker 1: defy decentralized finance. Okay, really is it really decentralized? So
Speaker 1: let's think about this. If I was going to make
Speaker 1: a loan to somebody, I should know who that person
Speaker 1: is and what the percentage chance or the risk that
Speaker 1: they may or may not pay me back. I don't
Speaker 1: think anybody listening to this would ever want to loan
Speaker 1: money that you've worked for, your hard earned money that
Speaker 1: you've saved up, loan that to someone who you don't know,
Speaker 1: who they are, and you don't know what they're going
Speaker 1: to use it for, and nor do you know what
Speaker 1: the percentage chance the probability of them paying you back is.
Speaker 1: That would be insane. I hope nobody here whatever think
Speaker 1: about doing that. UM, And if you would think about
Speaker 1: doing that, I think you should rethink that. And so
Speaker 1: that thou think about that. In terms of decentralized finance,
Speaker 1: what does that mean? Finance should be centralized. There should
Speaker 1: be a central entity that's looking at the credit worthiness
Speaker 1: of the borrower and determining if it's a good or
Speaker 1: bad deal. They should determine that one person is less
Speaker 1: risky and gets a better rate, someone is more risky
Speaker 1: pays a higher rate. Somebody has to do that essential entity.
Speaker 1: We don't need that to be decentralized. What other things
Speaker 1: don't need to be decentralized, Well, lots of things. UM
Speaker 1: for example, tracking UM logistics on on the supposedly on
Speaker 1: the blockchain. Well, you could substitute the word blockchain for
Speaker 1: database and so let's track them in a database. And
Speaker 1: we do that now already amazing, isn't it? All? Right?
Speaker 1: Now back to the lesson at hand. So this defied movement,
Speaker 1: this decentralized finance movement has really been opened up. Why
Speaker 1: I'd buy what's called yield farming. And so people are chasing,
Speaker 1: chasing higher than average yield. So, for example, you put
Speaker 1: your money in the bank. When you put your money
Speaker 1: in the bank, the bank uses that money to create
Speaker 1: more money by loaning it back out. Now, the bank
Speaker 1: pays you interest on that money, because of course they're
Speaker 1: using that money to make more money. Now, it used
Speaker 1: to be that you could actually live off the amount
Speaker 1: of interest that you get from the bank. When I
Speaker 1: was a kid, you could make a tent on your
Speaker 1: money sitting in the bank. You have a million bucks,
Speaker 1: that would be a hundred thousand dollars a year hud
Speaker 1: dollars a year of passive income coming just from putting
Speaker 1: your money in the bank and then leaning it back out. Today,
Speaker 1: the problem is the bank gives you zero point zero
Speaker 1: five percent. I mean, basically, they give you nothing for
Speaker 1: having your money in the bank. So a lot of
Speaker 1: people are chasing this yield. How can they get away
Speaker 1: to get this yield away, to get these better than
Speaker 1: the average returns, And so people start going out further
Speaker 1: and further in the risk curve. In order to do that,
Speaker 1: they they start chasing all types of risky investments, obviously
Speaker 1: options trading and cryptocurrency investing, anything they can do to
Speaker 1: try to get better returns than what the market would bear.
Speaker 1: And so um they've done that. Now this yield farming
Speaker 1: seems like a great idea. And so we have defied
Speaker 1: decentralized finance. We have c FI, which is centralized finance.
Speaker 1: So the cea FI are players like Block five, um,
Speaker 1: players like celsius, um, players like Nexo, Crypto, dot Com, etcetera.
Speaker 1: So those are c FI centralized finance applications. And the
Speaker 1: thing with c FI is they supposedly cut out the
Speaker 1: middleman and they give more of those distributions back to you. Um.
Speaker 1: Now those have their own risk and reward scenarios, as
Speaker 1: defied does as well. Now we're finding out first and
Speaker 1: foremost the dangers that these DeFi can pose, as millions,
Speaker 1: hundreds of millions of dollars, billions of dollars are evaporating
Speaker 1: from people's accounts right before of very eyes. I'm gonna
Speaker 1: explain all that to you and more and how to
Speaker 1: protect yourself from that in a second. By the way,
Speaker 1: you're listening to the markma Show. We're talking about bitcoin,
Speaker 1: We're talking about cryptocurrencies. We're talking about the decentralized revolution
Speaker 1: that we are witnessing right now. And we're we're witnessing
Speaker 1: a meltdown of the financial system and it's taking down
Speaker 1: this decentralized revolution with it. However, it's not all what
Speaker 1: it seems, so I want to explain that to you
Speaker 1: and show you how you can navigate this. UM. I'll
Speaker 1: be back with that and more in a minute, So
Speaker 1: don't go away. I'll be right back. All right, Welcome back.
Speaker 1: You are listening to the Mark Moa Show. We're talking
Speaker 1: about bitcoin, We're talking about cryptocurrencies. We're talking about the
Speaker 1: decentralized revolution that we are living through right now as
Speaker 1: we speak now. Before the break, I was setting up this, uh,
Speaker 1: this thing about cryptocurrencies and this decentralized revolution we're talking about,
Speaker 1: UM defy decentralized finance. I was explaining the difference between
Speaker 1: DEFY and c FI, which is centralized finance. So centralized finances,
Speaker 1: the Celsius, the block five, the next the crypto dot com,
Speaker 1: central entity, central come puns that are that are handling
Speaker 1: this versus supposedly DEFY that's somewhat decentralized. Now I was
Speaker 1: making the case that not everything needs to be decentralized,
Speaker 1: all right, But now that you understand that, So now
Speaker 1: we have these decentralized protocols. The one that's blowing up
Speaker 1: right now and dragging the entire market down with us
Speaker 1: is called Terra Luna or its symbol as u ST.
Speaker 1: Now it's grown very very fast. It's grown very very
Speaker 1: big because they throw out a nineteen point five percent
Speaker 1: about a tent interest rate. So I can make zero
Speaker 1: percent in my bank, I can make eight to twelve
Speaker 1: percent through one of these centralized finance fis, or I
Speaker 1: could make tent by using one of these DeFi protocols
Speaker 1: like Tara Luna, staking it on the anchor protocol. Now,
Speaker 1: let's just ask a question. You've probably heard the saying
Speaker 1: there's no such thing as free lance. You've probably heard
Speaker 1: the saying that if something is too good to be true,
Speaker 1: then it probably is is. So ask yourself if the
Speaker 1: banks which are pretty much risk free, I mean, your
Speaker 1: money is f d I c ensured if they pay
Speaker 1: you zero point zero five, someone else could pay you
Speaker 1: ten percent, and then um Tera Luna on anchor pays you.
Speaker 1: Why do you think they can pay Because you're taking
Speaker 1: an enormous amount of risk, and so the first thing
Speaker 1: is you always have to think about your risk adjusted return.
Speaker 1: So there's a enormous amount of risk for doing this,
Speaker 1: and we're finding out exactly how much risk we have.
Speaker 1: So we're talking about this defy and we're talking specifically
Speaker 1: about these stable coins. So a stable coin now means
Speaker 1: that the token itself. So in this case, this U
Speaker 1: S T token is equal to one dollar and UM
Speaker 1: not the dollar superstable. We can see the prices of milk, steak, food, gas,
Speaker 1: cars going all over the place, but it's always pegged
Speaker 1: to a dollar. So as the dollar, that's always worth
Speaker 1: one dollar. Whatever dollar comby you, that's what it's worth,
Speaker 1: all right. Now, we have a couple of different versions
Speaker 1: of these stable coins that I think are important to
Speaker 1: dig into before we go too far into this story.
Speaker 1: Um so stable coins have become very very popular. The
Speaker 1: first one was tether. Tether became this first one and
Speaker 1: basically if I put a doll, if I give them
Speaker 1: a dollar US dollar, they'll give me back a token
Speaker 1: that UM is equal to one dollar. It's redeemable for
Speaker 1: one dollar. Anytime I want, I could go redeem that
Speaker 1: token get my dollar back. Now, they were supposed to
Speaker 1: be holding those dollars in an account, so they had
Speaker 1: my reserves in an account. Anytime we want, we can
Speaker 1: go exchange those That's how it's supposed to work. Now,
Speaker 1: we've had lots of stable coins start popping up. And
Speaker 1: the reason why they really gained a lot of popularity
Speaker 1: is if I'm in Bitcoin or some other cryptocurrency position
Speaker 1: and I want to I'm trading them in and out.
Speaker 1: I'm in and out. I'm in now. Um, it's hard
Speaker 1: to go in and out of US dollars. And so
Speaker 1: we've created this token, and they created this token that
Speaker 1: allows me to sell my position in this cryptocurrency and
Speaker 1: go into the stable coin temporarily, and then I can
Speaker 1: go back into position when I want, and so it
Speaker 1: allows me to stay within this crypto ecosystem. Well, Tether
Speaker 1: grew really really fast. It gained a lot of reserves,
Speaker 1: gained a lot of notoriety, and so of course they're
Speaker 1: stable coins popped up. Um, we have a lot of
Speaker 1: different stable coins of Tether. We have die which is
Speaker 1: another moment. We'll break that in the second US d coin,
Speaker 1: true US d um d g x UH, and on
Speaker 1: and on and on. But I don't want to go
Speaker 1: into all the particulars of each and every coin. What
Speaker 1: I want to do is I want to break down
Speaker 1: um really the two different types that we have, or
Speaker 1: really maybe the three different types that we have. Okay,
Speaker 1: So the first one, which is what they're supposed to
Speaker 1: be and what I think most people believe they are,
Speaker 1: and they're find out the hard way they're not, is
Speaker 1: that they're backed. They're backed with dollars. So I give
Speaker 1: them a dollar, they give me a token, They hold
Speaker 1: my dollar until I'm ready to exchange it. Now, if
Speaker 1: they keep all those dollars in their account, that would
Speaker 1: mean they're fully reserved, all the dollars they've accepted they're
Speaker 1: sitting in their account. That's okay, because at any time
Speaker 1: people can go redeem and get their dollars, no big deal.
Speaker 1: The problem is when they start going into what's called
Speaker 1: a fractional reserve, meaning when you give them your dollar
Speaker 1: they only hold on to fifty cents of it, or
Speaker 1: they only hold on to ten cents of it, and
Speaker 1: the other fifty cents or other ninety cents they go
Speaker 1: do something else with like put it into another asset,
Speaker 1: or try to gamble or trade with it to try
Speaker 1: to earn more money on that float on your money,
Speaker 1: all right, So this is where the problem comes in again.
Speaker 1: Full reserve, they have all the money. Everyone go get it,
Speaker 1: no big deal. Fractional reserve is a problem. If everybody
Speaker 1: wanted to go cash in their money, it would create
Speaker 1: a run. They won't have enough money to pay it
Speaker 1: all back. In addition, depend on what they're doing with
Speaker 1: the rest of that money, they're putting it more at risk,
Speaker 1: and if they lose it, they may not have your
Speaker 1: money to give back to you. And that's part of
Speaker 1: the problem. So real quickly. The only coins that I'm
Speaker 1: aware of, and if I'm wrong, please feel free to
Speaker 1: hit me up on social media let me know. The
Speaker 1: only two coins that I'm aware of that are fully
Speaker 1: regulated and fully backed by U S dollars are you
Speaker 1: s d C, which is the Circle coin, and g
Speaker 1: U s D, which is the Gemini coin. So US
Speaker 1: d C and g U s D, they're both federally
Speaker 1: regulated and backed by US dollars one to one. As
Speaker 1: far as I'm aware, every other stable coin out there
Speaker 1: is not fully reserved. Now why is that important? Well,
Speaker 1: let me tell you. Uh So, One, it's important because
Speaker 1: as we can see us, t Tera Luna coin is
Speaker 1: getting attacked right now, and as it turns out, they
Speaker 1: don't have the money to pay back. So instead of
Speaker 1: having those dollars, what they did is they put those
Speaker 1: dollars into another token they have called Terra Luna. So
Speaker 1: if I want to redeem my dollar stable coin for
Speaker 1: a dollar, what they do is they don't give me
Speaker 1: my dollar back because they don't have it. What they
Speaker 1: do is they give me a dollar's worth of this
Speaker 1: new token. The problem is, what if that new token
Speaker 1: isn't worth a dollar. Now, that's the problem that we've
Speaker 1: run into, and that's the problem that we're seeing melt
Speaker 1: down the entire ecosystem. To give you an idea of
Speaker 1: exactly what is going on, well, before we go into that,
Speaker 1: I wanna I'm gonna break down the mechanics of how that,
Speaker 1: how that works, but I want to explain to you,
Speaker 1: like I said, the difference of fully reserved or fractional reserve,
Speaker 1: because I think that's a key piece and I dig
Speaker 1: into history at the time, because history continues to repeat
Speaker 1: and there's a parallel throughout history that explains us to
Speaker 1: us this is this is nothing new. The period in
Speaker 1: time that I'm talking about is in the United States
Speaker 1: and really happened all around the world, and it was
Speaker 1: called free banking. Free banking was a time before we
Speaker 1: had central banking. So today we have central banking, which
Speaker 1: means that we have people at the top, central planners
Speaker 1: that are planning the entire banking system. Free banking would
Speaker 1: be the opposite. Free banking would mean there was competition.
Speaker 1: That means people could start different banks, and they could
Speaker 1: have different business models, and they could compete against each other.
Speaker 1: Now you probably you know which camp I'm in when
Speaker 1: it comes to that. I'm a free market person. I
Speaker 1: believe in free market um competition. I believe competition makes
Speaker 1: better products, better service, better prices. Central planning, to my opinion,
Speaker 1: always fails. Well it's not just my opinion. Throughout history,
Speaker 1: central planning always fails because it lacks the competition, it
Speaker 1: lacks the profit incentive, it lacks the information that comes
Speaker 1: in a free market UM system. So free banking uh
Speaker 1: per Wikipedia, it says that in the strictest versions of
Speaker 1: free banking UM, there is no role at all for
Speaker 1: a central bank or the supply of central bank money.
Speaker 1: Central bank money is supposed to be permanently frozen. There
Speaker 1: is therefore no government agency acting as a monopoly as
Speaker 1: a lender of last resort. Sounds sounds quite different than
Speaker 1: what we have before. And I'm gonna tell you why
Speaker 1: I think this is preferable. I'm gonna tell you what
Speaker 1: the history of this shows us. And then, like I said,
Speaker 1: I want to show you how it's exactly the parallel
Speaker 1: to what's happening today. Don't go away, all right, welcome back.
Speaker 1: You're listening to the markma Show. We're talking about bitcoin,
Speaker 1: We're talking about cryptocurrencies. We're talking about the decentralized revolution
Speaker 1: of course all the time, and today specifically we are
Speaker 1: talking about defy decentralized finance. We're talking about stable coins.
Speaker 1: We're talking specifically about terra lunar stable coins, which are
Speaker 1: blowing up the entire ecosystem. Now, before the Breakoup was
Speaker 1: explaining how there's really two different types um stable coins.
Speaker 1: We thought they were reserved, they had full reserves, meaning
Speaker 1: they were holding our dollars and we could redeem them
Speaker 1: for dollars whenever we want However, we found out that
Speaker 1: most stable coins are not reserved, meaning they're not holding
Speaker 1: our dollars, and instead they are fractally reserved and stare
Speaker 1: holding a little bit maybe fifty percent of your dollars
Speaker 1: or ten percent of your dollars, and the oif ninety
Speaker 1: percent are being loaned out and are at risk in
Speaker 1: some other assets. Now I was explaining how this is
Speaker 1: actually nothing new, and this is actually how the banking
Speaker 1: system works. So the banking system that we have in
Speaker 1: the world today, central banking is built on actional reserve.
Speaker 1: You put ten dollars in the bank, and nine of
Speaker 1: them get lent back out. The problem is those dollars
Speaker 1: get lent back out and going to somebody else's bank,
Speaker 1: and then they keep ten percent and loan out, and
Speaker 1: it happens over and over and over again, until we
Speaker 1: have so much leverage in the system that if even
Speaker 1: just a few percent of people, less than temperati of
Speaker 1: the people went to the banks to get their money out,
Speaker 1: the banking system would collapse. This is actually what happened
Speaker 1: in Canada as they started to freeze everybody's accounts from
Speaker 1: the from the Trucker protest that um very quickly they
Speaker 1: decided to reverse their position because the banks were going broke.
Speaker 1: But I wanted to liken this back to a period
Speaker 1: of time known as free banking. So free banking was
Speaker 1: before central banking. And it says, per Wikipedia, the strictest
Speaker 1: versions of free banking, there's either no role at all
Speaker 1: for the central bank or the supply of central bank
Speaker 1: money is supposed to be permanently frozen. Um. There's no UM,
Speaker 1: no government agency acted as a monopoly as a lender
Speaker 1: of last resort. And so in the central banking system,
Speaker 1: the central Bank, the Federal Reserve of the United States,
Speaker 1: is the lender of last resort, and so if a
Speaker 1: bank RT too bankrupt, the fire reserve can step in
Speaker 1: and backstop them, basically print more money out of thin
Speaker 1: air to give them money to keep them from going bankrupt. Now,
Speaker 1: the historical reference of this is really going back into
Speaker 1: the eighteenth and the nineteenth centuries. UM. It was defended
Speaker 1: by most notably Adam Smith, who Adam Smith is it
Speaker 1: was an amazing author. If you haven't read his books,
Speaker 1: you definitely should. Um. And really, if we go back
Speaker 1: into the United States, and we saw it through Australia, Switzerland, Scotland,
Speaker 1: et cetera. But in the United States specifically from the
Speaker 1: period of eighteen thirty seven to eighteen sixty four that's
Speaker 1: referred to the era of free banking. Now, a lot
Speaker 1: of people, specifically people that are proponents of the central
Speaker 1: banking model and people that have been raised to think
Speaker 1: the central banking model is good. So people that have
Speaker 1: gotten economics degrees and so forth have been taught that
Speaker 1: the that the free banking era was bad, that all
Speaker 1: these different banks that were that were starting up on
Speaker 1: their own and creating their own currencies was a big
Speaker 1: problem because they were continually going out of business and
Speaker 1: blowing up and people were losing their money. Now that
Speaker 1: is true, However, maybe the reasons for why that happened
Speaker 1: isn't necessarily true. But basically, um, you would have a
Speaker 1: bank open up and they would create their own form
Speaker 1: of currency. And I could choose, as a person in
Speaker 1: a free country, which of these free banking models I
Speaker 1: want to go with. So bank A says, hey bank,
Speaker 1: He says, hey, Mark, We're going to hold all your
Speaker 1: money for you, and it's gonna be always there for you,
Speaker 1: and anytime you want you can come get it. Um
Speaker 1: and we're just gonna hold it and we're not going
Speaker 1: to pay you any interest on that. Okay, that's my choice.
Speaker 1: They can hold it. I ron nothing. Um, let's say
Speaker 1: Bank B Bank number two says, hey, Mark, we'll hold
Speaker 1: your money. However, um, we're only gonna hold seventy five
Speaker 1: cent of it. We're gonna go do some loans, but
Speaker 1: they're gonna be very very safe loans, gonna be very
Speaker 1: very careful, and we're gonna pay you, say, five percent
Speaker 1: on your money. And then bank number three or banks see,
Speaker 1: they say, Mark, we're only gonna hold of your money. However,
Speaker 1: we're gonna we're gonna loan the seventy out, but we're
Speaker 1: really good at this. Um, we're gonna be really careful,
Speaker 1: but we're gonna pay you fifteen percent on your money.
Speaker 1: So now those are three different competing models. Ones fully reserved,
Speaker 1: one's barely fraction reserved, and ones massively fraction reserved. They
Speaker 1: all one gives me no return five percent or say fiftent.
Speaker 1: Now I get to choose which of those I want
Speaker 1: based off of the return that I'm getting and the
Speaker 1: risk that I'm accepting. All Right, so I think that's
Speaker 1: a good model. I personally do UM. I can choose
Speaker 1: my risk. They can operate. Now in a free market,
Speaker 1: the bad banks will fell, They're gonna make bad decisions,
Speaker 1: they're going to fail, and people will lose their money.
Speaker 1: It's going to happen, and men's all the time. People
Speaker 1: invest in the things all the time. They lose their money.
Speaker 1: But it allows this competition to happen, and it creates
Speaker 1: a market. One man's loss is another man's gain, unfortunately
Speaker 1: UM And that's exactly what these stable coins are doing.
Speaker 1: So they create their own token, just like the free
Speaker 1: banks create their own dollars. They create their own token,
Speaker 1: and they have different levels of reserve. Some are more reserved,
Speaker 1: some are less reserved, and they have different risk models.
Speaker 1: What are they doing with that money? And it's up
Speaker 1: to me in a free market to decide if I
Speaker 1: want to use one of these and if so, which
Speaker 1: one I want to use, and how much risk I'm
Speaker 1: able to take. Now, some of the problems of complications
Speaker 1: come from do I really know what their business model is?
Speaker 1: Is it opaque, is it transparent? Is it non transparent?
Speaker 1: And that's part of the thing. You always need to
Speaker 1: be able to quantify your risk. Now, Um, that's how
Speaker 1: the free banking system work. Now, a lot of historians,
Speaker 1: most economic professors, would have you believe that the free
Speaker 1: barn banking system failed because these banks constantly blew up
Speaker 1: and people lost their money. Again, which is true, and
Speaker 1: that's why we need the central bank to come and
Speaker 1: back stop all these so people don't lose their money.
Speaker 1: It's not entirely true, all right. So let me let
Speaker 1: me just break this down before we go into the
Speaker 1: rest of it here. So, um, if we look at this,
Speaker 1: what really happened is that the general banking banking laws
Speaker 1: that the government enforced upon these banks, they made these
Speaker 1: banks operate within this structure, and the banking laws restricted
Speaker 1: their activities in a bunch of important ways, all right.
Speaker 1: Most importantly, the US free banks could only have one office,
Speaker 1: and they had to provide security for their notes by
Speaker 1: gold reserves, but also by purchasing and surrendering to state
Speaker 1: banking authorities certain securities the state law deemed acceptable for
Speaker 1: the purpose. So let me think about this a second.
Speaker 1: So one that they allow me to operate, um in
Speaker 1: a competitive environment, I have to abide by their rules,
Speaker 1: and their rules hold back my competitive ability. So UM,
Speaker 1: One I have to provide reserves in gold, but also
Speaker 1: I have to put the money into whatever the banking committee,
Speaker 1: the banking authorities tell me I can put it into.
Speaker 1: Here is a big, big problem. So instead of holding
Speaker 1: all my dollars in a full reserve system, now the
Speaker 1: actual bank authorities are forcing that bank to not hold
Speaker 1: full reserves but instead put some of those reserves into
Speaker 1: the assets they want them to go into, such as
Speaker 1: the securities generally included bonds of state governments, and it
Speaker 1: was the depreciation of these bonds that was the chief
Speaker 1: cause of free bank failures in various episodes when many
Speaker 1: banks in a state failed. So I gotta love the government.
Speaker 1: They didn't allow the free banks to operate freely. They
Speaker 1: didn't allow them to actually compete. Instead, they mandated one
Speaker 1: you can only have one bran edge to the money
Speaker 1: you have. You can't actually hold it. Instead, you have
Speaker 1: to be you're forced to buy risky government debt. And
Speaker 1: it was the risky government debt that went bad on them.
Speaker 1: So then the collateral they were holding went bad and
Speaker 1: they weren't able to pay their depositors back. When the
Speaker 1: depositors saw this happening, what do you think happened. The
Speaker 1: depositors went to get their money out of the banks.
Speaker 1: The run on the banks caused the banks to collapse.
Speaker 1: Whenever you have your money in a bank or in
Speaker 1: any type of asset, if you're holding Tesla stock and
Speaker 1: you see it down right now, you might be freaking out.
Speaker 1: You might go, shoot, I better sell that now. I'm
Speaker 1: happy to take sixty cents on the dollar back right now,
Speaker 1: because I could lose even more. And that's exactly what
Speaker 1: happens in this fractional reserve banking system. They see, oh shoot,
Speaker 1: they loaned some of the money to this government bonds.
Speaker 1: These bonds blew up. I'm not getting my money back.
Speaker 1: I better go get my money back first before everybody
Speaker 1: else shows up. UM. I'm gonna explain more about this
Speaker 1: free banking concept, how that worked, UM, and then I
Speaker 1: want to apply it back to what's happening with US, UM,
Speaker 1: the US dollar stable coins, specifically Terry Luna. And then
Speaker 1: we'll talk about some of the things that you should
Speaker 1: be doing to protect yourself. UM. That and a lot more.
Speaker 1: When I come back. You're listening to the Mark Moa
Speaker 1: show talking about bitcoin, cryptocurrencies, the Decentralized Revolution, and specifically
Speaker 1: today Defy, decentralized finance, stable coins, and what's happening with
Speaker 1: Terror Luna and so much more in a second when
Speaker 1: I come back, don't go away, all right, Welcome back.
Speaker 1: You're listening to the Markma Show. We're talking about bitcoin, cryptocurrencies,
Speaker 1: the decentralized Revolution Nation every week. Today we're talking specifically
Speaker 1: about decentralized finance, Defy, We're talking about UM, this Terror
Speaker 1: Luna blow up that's happening, and I was talking about
Speaker 1: before the break, I was talking about the historical context
Speaker 1: of this and so UM. Stable coins, whether they're fully
Speaker 1: reserved or fractionally reserved, is nothing new. As a matter
Speaker 1: of fact, this is an exact parallel, in my opinion,
Speaker 1: to the free banking model the United States went through
Speaker 1: from eighteen thirty seven to eighteen sixty four. I went
Speaker 1: into a little bit of a tangent telling you that
Speaker 1: everything you've learned is wrong about free banking and that
Speaker 1: it didn't blow up because they were necessarily bad businesses.
Speaker 1: They blew up mostly because the government mandated how they
Speaker 1: operate and really forced them into a model that caused
Speaker 1: them to collapse, mainly by forcing them to buy government
Speaker 1: bonds of state governments that when they failed, the collateral
Speaker 1: they held failed as well. Another thing that really caused
Speaker 1: a free banking to fail to fail is that the
Speaker 1: lack of branch banking in turn caused state issued bank
Speaker 1: notes to be discounted at varying rates once they had
Speaker 1: traveled any considerable distance from their sources, which was an inconvenience.
Speaker 1: So what does that mean? So um, In addition, UM,
Speaker 1: they were so restricted they could they could only have
Speaker 1: one office, all right, And so what happens is then
Speaker 1: instead of um two things, instead of having this economy
Speaker 1: of scale where like a bank could grow and they
Speaker 1: could have multiple offices and they could bet they could
Speaker 1: be if I'm an econmy scale, the bigger problem is
Speaker 1: that if I bought Mark's currency from Mark's free bank
Speaker 1: in the city, and then I traveled to another city,
Speaker 1: there was no Mark's bank there, and there was no
Speaker 1: marks currency to use, and nobody wanted to accept Mark's
Speaker 1: currency because it was a hundred miles away and it
Speaker 1: was hard to travel back then. And so what would
Speaker 1: happen is someone would say, um, well, I'll take that
Speaker 1: Mark's currency, but because I'm going to have to drive
Speaker 1: a hundred miles or they couldn't drive back then, sorry,
Speaker 1: they had to go by horseback. Since I'm gonna have
Speaker 1: to travel a hundred miles to redeem it, I want
Speaker 1: a ten haircut now. Uh. Let me give you a
Speaker 1: modern day example of this. The US dollar is the
Speaker 1: reserve currency of the world. Um. The U S dollars
Speaker 1: recognized everywhere around the world. For the most part. I
Speaker 1: spend a lot of time down in Mexico. In Mexico,
Speaker 1: they accept dollars pretty much everywhere. Um. There's a little
Speaker 1: place that I like to go to on the Baja Peninsula.
Speaker 1: It's about a about a fourteen hour drive from my house.
Speaker 1: It's about because it's deep in Mexico. It's probably three
Speaker 1: to four hours from any major town, major town where
Speaker 1: like there might be an a t M for example,
Speaker 1: there's no et M s there. There's no consistent power
Speaker 1: that they don't really have any electricity. They don't have
Speaker 1: any internet, there's no cell phones. Um. The reason why
Speaker 1: I go to this place in the middle nowhere is
Speaker 1: because the waves are really really good. And I'm not
Speaker 1: gonna tell you the name of because I don't want
Speaker 1: to let people showing up there but I spent a
Speaker 1: lot of time there. Now, when you go there, they
Speaker 1: want paceos. Pacos is the currency of the dollar. Everybody
Speaker 1: uses paces there. Now in some of these places they
Speaker 1: will accept the dollar. The problem is that they're going
Speaker 1: to have to drive. They have cars. Now they're gonna
Speaker 1: have to drive about two hours to the nearest town
Speaker 1: where they could find a bank to turn those dollars
Speaker 1: back into paceos. So, yes, they'll take the pager. Yes
Speaker 1: they'll take the dollars, but at a massive discount. And
Speaker 1: that's exactly what happened. It's free banking. Because they couldn't
Speaker 1: have multiple branches. Um, it caused them to have to
Speaker 1: discount their currencies. All right, Now, that was a big tangent.
Speaker 1: Give you a little historical lesson to show you that
Speaker 1: this is exactly where we're at today. So these banks
Speaker 1: were limited in what they were able to do because
Speaker 1: of the government regulations. And then, um, they did not
Speaker 1: hold all of those dollars in reserve, and so that
Speaker 1: caused these bank runs and the things to happen. And
Speaker 1: so back to the stable coins. The stable coins are
Speaker 1: doing the same way, the same thing. They're not holding
Speaker 1: of those reserves and Basically, anytime you don't have something
Speaker 1: fully reserved, you're gonna open yourself up to runs. At
Speaker 1: some point, some attack is going to happen where they're
Speaker 1: gonna come and say, hey, this person did something risky.
Speaker 1: There's a chance we may not get our money back,
Speaker 1: and people will start running for the exits, Like like
Speaker 1: at a movie theater if somebody yelled fire, there's two exits,
Speaker 1: and everybody's gonna start running for those exits, and everybody
Speaker 1: will start trying to pull their money out. UM. Fractally
Speaker 1: reserved assets are always dangerous in this regard, specifically in
Speaker 1: this case. So, like I was saying earlier, U s
Speaker 1: d C and g U s D as far as
Speaker 1: I know, are the only two UM coins that are
Speaker 1: UM backed. Now as a side note, I mean just
Speaker 1: taking a look at the damage and destruction that's happened
Speaker 1: here UM. So that the way this this specific Terry
Speaker 1: Luna coin works is that I give them a dollar
Speaker 1: and they don't hold that dollar. Instead they turn that
Speaker 1: dollar into value on the Terror Luna token. Now that
Speaker 1: Terry Luna token, just a couple of weeks ago, was
Speaker 1: worth about nine two dollars seven dollars. I mean almost
Speaker 1: a hundred dollars. Just a couple weeks ago, that token
Speaker 1: was worth about a hundred bucks. So if I wanted
Speaker 1: my dollar back, they would give me a dollar's worth
Speaker 1: of that token. The problem is is that has been
Speaker 1: absolutely plummeting. As a matter of fact, there's a couple
Speaker 1: weeks it was worth about a hundred dollars and today,
Speaker 1: at the time of this recording, it's worth one one
Speaker 1: dollar and seven cents. As a matter of fact, we've
Speaker 1: seen the market cap drop I mean almost nine. I mean,
Speaker 1: it's just a complete blood bath on this. And so
Speaker 1: instead of holding my dollars, they put it into this
Speaker 1: risky asset. The problem is that risky asset became worth
Speaker 1: next to nothing um and now that's bringing down the
Speaker 1: rest of the market. The terror Luna stable coin had
Speaker 1: a valuation of about um where are we here, about
Speaker 1: eighteen billion Today it's down to about nine billion. I mean,
Speaker 1: capital is just getting completely liquidated. Now. What's happened since then?
Speaker 1: Now a lot of people believe this might have been
Speaker 1: an attack, and as a matter of fact, I've been
Speaker 1: having lots of conversations talking about this. Of course, is
Speaker 1: all speculative at this point. But this is what Wall
Speaker 1: Street hedge funds do. They spot a weakness or an
Speaker 1: imbalance in the market and they go place wagers and
Speaker 1: bets against it. They've been doing this for a long time.
Speaker 1: They've been doing it since the eighties. Remember hearing stories
Speaker 1: of corporate raters. You have famous people like Carl Icon
Speaker 1: who have made their name off of, you know, doing
Speaker 1: corporate rating. Things like that. Movies have been made, like
Speaker 1: the movie Wall Street was made about doing that. And
Speaker 1: they find these companies that might be overleveraged. UM, they
Speaker 1: borrow money, they attack them, they short them, and they
Speaker 1: crush it. I don't I don't like it. I'm not
Speaker 1: a fan of it. Unfortunately, it hurts a lot of people.
Speaker 1: But this is uh, this is capitalism. I guess now
Speaker 1: some risks that you need to be aware of. I
Speaker 1: think that all stable coins that are not reserved are
Speaker 1: at risk. Once it happens to this one, they're going
Speaker 1: to come after the rest, So all the other stable
Speaker 1: coins UM, specifically tether, I would be very cautious of
Speaker 1: holding money. If you want to hold money and stable coins,
Speaker 1: I would take it out of those and put it
Speaker 1: into one of the two I mentioned USDC, N g
Speaker 1: U S d UM. The other thing I'd be careful
Speaker 1: of is that this is going to cause a lot
Speaker 1: of contagion. We saw Haro Luna trying to raise about
Speaker 1: a billion and a half dollars to try to help
Speaker 1: prop it back up. One of the companies that was
Speaker 1: putting a lot of money in was Celsius. Now a
Speaker 1: lot of you might know Celsius that was referencing earlier
Speaker 1: as a centralized finance company. Why would they be willing
Speaker 1: to put up so much money to help a competitor. Well,
Speaker 1: probably because they invested a lot of their client's money
Speaker 1: into that protocol itself, and so they have this interest
Speaker 1: to try to prop it back up. So I'm afraid
Speaker 1: that as is continue to get worse, it might start
Speaker 1: taking down companies like Celsius, companies like block Fire, et cetera.
Speaker 1: So I'd be very very careful with where you have
Speaker 1: your money right now today. Now it's also been dragging
Speaker 1: down Bitcoin, partially because everything's coming down, but also because
Speaker 1: they had they had a big chunk of their money,
Speaker 1: their dollars in bitcoin as well. They were forced to
Speaker 1: liquidate that entire balance, about a billion dollars a Bitcoin
Speaker 1: was dumped onto the market, which has also brought that down. Now,
Speaker 1: if this continues to spread, if they go after Tether next,
Speaker 1: if Celsius gets pulled into this, if this can happen,
Speaker 1: it could really bring down on the entire market cap
Speaker 1: of almost everything. This is a risk that you have
Speaker 1: to be aware of now. It seems like right now
Speaker 1: from conversation I've been having today, this is having a
Speaker 1: big positive results on bitcoin. We're hearing that people institutional
Speaker 1: buyers are lining up trying to get orders into buy bitcoin.
Speaker 1: But there could be more short term pain before we
Speaker 1: see a turnaround. That's just the truth. I don't want
Speaker 1: to admit it. I don't want to believe it. I
Speaker 1: hope it's not the case, but I think that could
Speaker 1: very well be because the way the markets are right now,
Speaker 1: all these big hedge funds, they're looking for some way
Speaker 1: to find yield, and one of the easiest ways to
Speaker 1: find yield is to go attack these companies and make
Speaker 1: giant windfalls. It's rumored that maybe the company who did
Speaker 1: the attack on Tera Luna could have made as much
Speaker 1: as eight hundred million dollars. Anyway, that's a big lesson
Speaker 1: only hold coins that are fully reserved, watch out for
Speaker 1: everything else. You're listening to the Mark mo Show talking
Speaker 1: about bitcoin, cryptocurrencies, UH, the decentralized Revolution, and today the
Speaker 1: stable coins. Thanks so much for listening.