A 9.0 Financial Earthquake

The “Stablecoin” That Could Crash Everything [The Daily Reckoning] December 19, 2022 [WEBSITE]( | [UNSUBSCRIBE]( A 9.0 Financial Earthquake - Why the U.S. had the Bahamas arrest FTX fraud Sam Bankman-Fried… - A potential disaster 10 times greater than FTX is brewing… - Don’t tether your fortunes to Tether… [Urgent Winter Warning From Jim Rickards]( [Click here for more...]( I just recorded an urgent warning in the freezing cold of Baltimore to reveal a devastating scam that the radical Democrats are pulling on the citizens of Maryland here and countless other states. Because according to my research, Joe Biden has already set in motion a devastating series of events thanks to his party’s radical “Green New Scam” policies… Soaring resource costs, crashing markets, chaos on Wall Street… Nothing can be ruled out leading up to December 21st. But if you know what to do, you could “opt-out” of this winter nightmare… And happily heat your home and fuel your life while potentially 15X’ing your money in the next 90 days IF you know what moves to make… [Click Here For All The Details]( Portsmouth, New Hampshire December 19, 2022 [Jim Rickards] JIM RICKARDS Dear Reader , A lot of the story about the collapse of FTX has been filled in over the past month, culminating with the arrest and pending deportation to the United States of the FTX mastermind Samuel Bankman-Fried. Actually, “mastermind” may be giving Sam too much credit. He appears to be a garden-variety, even boring fraud who simply stole customer money and used it to buy real estate and pay off politicians. There’s nothing particularly sophisticated about that. There’s a strong suspicion that last week’s indictment (by the U.S.) and arrest (in the Bahamas) were carefully timed by the corrupt U.S. Justice Department to shut Sam up. He was scheduled to testify under oath to a U.S. House investigatory committee on Tuesday, Dec. 13. He was arrested on Dec. 12. The testimony would have been highly embarrassing to Democrats on the committee. Just sayin’. Arresting Sam was a way to lock him up and make sure he never gives any testimony. At trial, he’ll probably take the Fifth Amendment or just plead guilty and skip most of the trial. Voila, cover-up accomplished. In any case, a lot will be revealed by other alleged wrongdoers and whatever the bankruptcy trustee discovers in his forensic investigations. This will take months at the earliest and a lot of buzz around the case may have faded by then. Delay is the best friend of the politician with baggage to hide. The Dangers of Crypto My focus on FTX is not sensationalist, although the case is surely sensational. My intent is to alert readers to the dangers of cryptocurrencies and the entire crypto infrastructure including exchanges, crypto banks, custody firms, lenders, borrowers and other service providers who make up the crypto ecosystem. I maintain that cryptocurrencies are not investments, and aren’t a suitable means of exchange, despite their adoption of the word “currencies.” They’re at best casino chips that can be used in the crypto casino. You can win or lose just as in a real casino but your chips are worthless out on the street. If you want to gamble in that casino, that’s perfectly fine. It’s your choice. Just realize what you’re getting into, like you do at any casino. [Response Requested 1/1000th of an ounce of gold available for you]( As a The Daily Reckoning reader, Jim Rickards is offering you 1/1000th of an ounce of gold when you upgrade your account. It will come in the form of a “Gold Back” - a new type of gold currency that’s starting to spread across America ([click here to view](. If you have not responded to Jim’s offer yet, and want to know how to claim yours… Please click the link below for details. Thanks! Amber Anderson Customer Service [Click Here To Learn More]( My other concern has been whether the collapse of FTX would have cascading effects causing other firms to go bankrupt also. That could happen either because other firms had put their own customers’ money on deposit with FTX or they were lenders to FTX. In either case, they’ll never see much of that money again. So far, that domino effect has happened. Several crypto exchanges and lenders have either filed for bankruptcy or have announced that they’re in financial distress and are seeking buyers or bailouts. That’s unfortunate for those firms (and more may join the fallen domino club soon), but the damage seems to be contained so far. Billions have been lost, it’s true, but it all existed inside the walls of the crypto casino. We have seen no signs that the traditional markets of stocks, bonds, commodities and foreign exchange have been affected just yet. So far, so good, though we’ll see. Is that the end of it? Can we all breathe a sigh of relief (assuming we weren’t invested in FTX), relax and go about our business? Unfortunately, the answer is no. Another Crisis Brewing With a “Stablecoin” There’s a disaster 10 times greater than FTX potentially waiting to happen. This disaster will not be contained to the crypto casino; it’s too large and has too many tentacles to investors, lenders, borrowers and institutions around the world. Any failure could be the catalyst for a global financial crisis worse than the 2008 global financial crisis or even the Great Depression. This potential crisis centers around another cryptocurrency called Tether. Tether is what is known as a stablecoin. This means that you pay $1.00 (or the equivalent in foreign currency) and you receive 1 Tether in return. (The ticker symbol for Tether on crypto exchanges is USDT). The issuer of USDT then claims that it will invest the dollars received in such a way that the value of $1.00 = 1 USDT will be maintained. The issuer further asserts that those who wish to “cash out” their USDT can go to designated exchanges and receive a $1.00 redemption for each USDT. The current market capitalization of USDT is $70.3 billion. There are minor fluctuations in the $1.00 target value, but they’re minor and considered normal. They’re not cause for concern among traders. USDT operates somewhat like a money market fund but instead of fund units convertible into dollars, you receive USDT tokens convertible into dollars. But the resemblance to money market funds ends there. The differences are frightening. Money market funds are heavily regulated by the SEC and by licensed exchanges. USDT is completely unregulated. Money market funds have strict audits. USDT has never released audited financials and has never indicated that it has any. [Urgent Note From Jim Rickards: “You’re Running Out Of Time!”]( [Click here for more...]( Your exclusive “Pro level” upgrade to Strategic Intelligence is ready to be claimed. This is your chance to claim 3 exciting new benefits along with a whole new level of service. Hurry… you only have until the timer hits 0 to act… [Click Here ASAP]( The securities held by money market funds to back up their units are publicly disclosed. They're very safe. They generally consist of short-term U.S. Treasury securities, top-rated bank deposits and prime commercial paper backed by bank guarantees. These instruments are typically referred to as “cash or cash equivalents” in financial accounting. But Tether has offered almost no transparency about what’s behind its token. In a recent settlement of fraud charges from the New York State attorney general, it did disclose a ridiculous pie chart with a few slices of broadly defined instruments by category. Nothing but Questions I don’t want to get lost in the weeds here, but it’s important to realize just how shaky Tether’s numbers are. The pie chart showed Tether was backed by cash and cash equivalents (75.85%), secured loans (12.55%), corporate bonds (9.96%) and other investments including tokens (1.64%). This disclosure is a joke. Who issued the corporate bonds? What is the security behind the secured loans? Who is the borrower on the secured loans? No one outside Tether knows. The first thing to note is that the cash and Treasury notes make up only 5.2% of the fund. In a money market fund that percentage would be close to 100%. The remaining 94.8% of the assets may be sound or may be complete garbage. We have no idea. Even if the commercial paper (50% of the total fund) is issued by Apple and IBM (it’s not), commercial paper can become entirely illiquid as happened to GE commercial paper in 2008. That paper could be worthless in a financial crisis. A Potential Financial Earthquake of 9.0 on the Richter Scale Is Tether financially sound? It’s possible. Could it be the greatest Ponzi in the history of the world? We don’t know, but we do know that $70.3 billion (and far more through leverage) is riding on the first answer. If the answer is yes, then this is a financial earthquake of 9.0 on the Richter scale waiting to happen. Most market participants are turning a blind eye or just hoping for the best. Your best strategy for crisis survival is straightforward: Keep away from crypto in all forms. Maintain a cash reserve so that you can weather the storm and perhaps even pick up bargains in the wreckage of a crisis. And keep a gold and silver reserve close at hand in case the crypto crisis turns into a complete breakdown of the monetary system as we know it. It’s possible. Regards, Jim Rickards for The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) P.S. Bloomberg reports that “People will die because of” [this.]( Unfortunately, millions of middle-class Americans are already at risk… and don’t even know it. I fear they’re in for a [“black Christmas”]( this winter. They could be facing the darkest winter this country has seen in generations. That’s why I strongly recommend that you [click here right now]( and pay very close attention to what I reveal. You might disagree with me, which is perfectly fine. I hope you’re right. But you at least need to know what I see coming so you can make your own judgment. [Go here now for all the details.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Jim Rickards] [James G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is the author of The New York Times bestsellers Currency Wars and The Death of Money. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. Please read our [Privacy Statement.]( If you are having trouble receiving your The Daily Reckoning subscription, you can ensure its arrival in your mailbox by [whitelisting The Daily Reckoning.](