The Modern Version of A Run On The Banks Starts As Tether and TerraUSD Lose Their $1 peg

By Stan Szymanski

Just one month ago on April 9, 2022 I penned an article titled ‘Tether Is Not A Stable StableCoin and Will Collapse Crypto’. In that article, I detail the previously and widely unreported instabilities and lack of financial integrity that the organization of Tether possesses. Today we wake up to find that not only has ‘StableCoin’ TerraUSD has soundly had its value trounced in the last 24 hours but now the StableCoin kingpin Tether had fallen as low as $.94 early Thursday.

I also previously exposited in the above referenced article that in 2008 when the Reserve Primary Money Market Fund ‘broke the buck’ and reported a value of $.97 that it caused a serious run on other money market funds that slowed only when the federal government stepped in and backstopped the money market funds.

TerraUSD, the worlds’ third largest StableCoin, is not backed by reserves. It was supposed to keep its $1 peg through its relationship with its ‘sister’ coin, Luna. Well, Terra lost as much as 70% of its value yesterday after Luna had fallen to $.87 after being as high as $116 in April 2022. It appears those two have had a bit of a fallout as there is nothing real, only crypto, to back their relationship.

This morning however, Tether, the worlds largest StableCoin-supposedly backed by assets like commercial paper and government bonds-broke below its coveted $1 peg to the U.S.

According to Forbes…’Tether’s CTO Paolo Ardoino on Thursday said the group is honoring USDT redemptions at $1 and has managed more than 300 million in the last 24 hours “without a sweat drop.”…

According to the CoinMarketCap app this morning, Tether has a market cap north of 82 billion dollars. As I outlined in my April 2022 Tether article at least one source has come forward to claim that Tether has loaned money to Chinese companies and very likely, Chinese companies in the vastly troubled Chinese Real Estate sector through Tether’s alleged purchase of their commercial paper.

If and as the requests for further redemption of Tether progresses, the entity will run out of liquid cash reserves and will have to go to the market to redeem its holdings of Government short term instruments and Commercial Paper. I put forth to you that if Chinese Commercial paper is put out for bid, there will be very few willing, if any, to buy it from Tether. In my humble opinion, I believe that the Chinese market for Commercial Paper, especially as it relates to Real Estate is essentially frozen.

Just as Real Estate giant Evergrande is in default and yet has not given one penny in restitution/receivership to western bondholders, neither will Tether get much, if anything, for its foreign CP holdings, thus thwarting Tethers’ ability to satisfy prolonged requests for redemptions. I believe that this will cause a much larger panic as it unearths the fact that much larger aspects of the worldwide financial system are actually bankrupt and insolvent. The bank runs in 1933 started at the local savings and loan. In 2022 it starts with the ‘StableCoins’.

Getting back to the 2008 ‘breaking the buck’ and today: In 2008 the U.S. Government stepped in to support the money markets as the commercial paper market of 2008 froze. Will they do the same for the cryptocurrency market of 2022? Even when the government stepped in, the world went through the worst financial crisis since The Great Depression. I believe that what we are seeing with the collapse of financial assets that people believed they could count on is only going to accelerate from here. I believe that the actual size of the problem is magnitudes beyond Lehman et. al. because of the deception in pricing, actual ownership and lies about the rating and quality of financial assets that has been carried out on such an enormous scale. This deception is self-evident in cryptocurrency and in stocks regarding the totally criminal rehypothecation of assets.

If the United States Government left behind as many as 9,000 people and $85 Billion dollars worth of military equipment in Afghanistan, how could anyone reason that they would step in save the assets of a cryptocurrency system that holds itself out to be a replacement for the US dollar?

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All rights reserved.

Stan Szymanski (or Encouraging Angels) is not a medical doctor. This is not medical advice. In all matters pertaining to the health and care of a human being consult a medical doctor. This is not legal, financial or personal advice. Consult appropriate professionals in those fields for that type of advice.

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By Published On: May 17, 2022Categories: AP Staff, FinanceComments Off on The Modern Version of A Run On The Banks Starts As Tether and TerraUSD Lose Their $1 peg

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About the Author: NC Scout

NC Scout is the nom de guerre of a former Infantry Scout and Sergeant in one of the Army’s best Reconnaissance Units. He has combat tours in both Iraq and Afghanistan. He teaches a series of courses focusing on small unit skills rarely if ever taught anywhere else in the prepping and survival field, including his RTO Course which focuses on small unit communications. In his free time he is an avid hunter, bushcrafter, writer, long range shooter, prepper, amateur radio operator and Libertarian activist. He can be contacted at [email protected] or via his blog at brushbeater.wordpress.com .

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