The Crypto Crash: all Ponzi schemes topple eventually

[PSPS]

The Crypto Crash: all Ponzi schemes topple eventually
Robert Reich

We’re back to the wild west finances of the 1920s as the crypto industry pours huge money into political campaigns

Sun 19 Jun 2022 02.25 EDT

One week ago, as cryptocurrency prices plummeted, Celsius Network – an experimental cryptocurrency bank with more than one million customers that has emerged as a leader in the murky world of decentralized finance, or DeFi – announced it was freezing withdrawals “due to extreme market conditions”. Earlier this past week, Bitcoin dropped 15% over 24 hours to its lowest value since December 2020. Last month, TerraUSD, a stablecoin – a system that was supposed to perform a lot like a conventional bank account but was backed only by a cryptocurrency called Luna – collapsed, losing 97% of its value in just 24 hours, apparently destroying some investors’ life savings.

Eighty-nine years ago, Franklin D Roosevelt signed into law the Banking Act of 1933 – also known as the Glass-Steagall Act. It separated commercial banking from investment banking – Main Street from Wall Street – to protect people who entrusted their savings to commercial banks from having their money gambled away. Glass-Steagall’s larger purpose was to put an end to the giant Ponzi scheme that had overtaken the American economy in the 1920s and led to the Great Crash of 1929.

Americans had been getting rich by speculating on shares of stock and various sorts of exotica (roughly analogous to crypto). These risky assets’ values rose solely because a growing number of investors put money into them. But at some point, Ponzi schemes topple of their own weight. When the toppling occurred in 1929, it plunged the nation and the world into a Great Depression. The Glass-Steagall Act was a means of restoring stability.

But by the 1980s, America forgot the financial trauma of 1929. As the stock market soared, speculators noticed they could make lots more money if they could gamble with other people’s money – as speculators did in the 1920s. They pushed Congress to deregulate Wall Street, arguing that the United States financial sector would otherwise lose its competitive standing relative to other financial centers around the world.

More at: https://www.theguardian.com/technology/commentisfree/2022/jun/19/the-crypto-crash-all-ponzi-schemes-topple-eventually

[Martin68]

1. There is no inherent reason crypto currency should be dominated by Ponzi schemes. That's just greedy

people scamming suckers like they always have.

[3Hotdogs]

2. Agree.

Last edited Mon Jun 20, 2022, 07:31 AM - Edit history (1)

But the point of the article is that banks should not be using peoples’ personal account money to invest in speculative products.

This was also shown when the economy blew up in 2008.

[Martin68]

3. Yes. Exactly. Cryptocurrency, risky mortgage bundles, questionable mortgage schemes, Silicon Valley

investment schemes, the Brooklyn Bridge, Florida real estate - caveat emptor.

[TheFarseer]

4. Please tell me there's no chance of a bailout here.

Crypto should just die a quick painful death. They've put alot of money into political campaigns though, so I wouldn't say it's impossible.

[3Hotdogs]

5. IF its big enough to endanger the economy, it will be bailed out.

That's why Henry Paulson called the emergency meeting of Wall Street Banks to bail out the Greenwich Ct. hedge fund ( I don't recall the name) when they went belly up.

But it's only your tax money. So don't worry. Glass-Seigel might have prevented that but it was dismantled.

[Yo_Mama_Been_Loggin]

7. What's next? Pyramid scheme bailouts?

I think anyone with a functioning brain would know crypto-currency was all smoke and mirrors.

[Bucky]

8. This is why pure capitalism is such a joke.

Real capitalism doesn't mean giving people money if they lost money, so long as they had enough money to make losing money to make other rich people worry

But the nature of capitalism, which leads to the worship of money, does create enough corruption to ouborous itself

[moonshinegnomie]

6. this isnt the first time bitcoin has crashed

its had several drops of the same magnitude

now the fringe cryptos (dogecoin,shiba inu, and hundreds of others) are pure garbage.