The emptiness of Bitcoin and other cryptocurrencies is avoided, supposedly, as a consequence, but as Nobel Prize-winning economist Jean Tirole said recently, he is very, very worried by stablecoins. And he’s right to be so, because although people talk about them as if they are money, they are not.
They carry no guarantee from any government. And worse still, they’re not subject to any real supervision.
The danger is simple. When they collapse, and they may well do so, taxpayers are very likely to be forced to pick up the bill.
Tirole issued his warning in an interview with the Financial Times when he said that there is insufficient supervision of stablecoins. It’s a point I’ve made on this channel before now, and I’m glad to see somebody like him joining in
The Nobel Laureate joins in with Ritchie.
And we’re surprised Spud is wrong, right?
They pretend to be fully backed assets, just as the bonds that were marketed at that time claimed to be. But the risk is that the US Treasury bonds, that stablecoin funds are supposedly invested in, provide too low a yield in real terms to provide the backing for those who promote these funds, and they will therefore abandon this form of asset backing and instead go for riskier assets with higher returns.
They do indeed invest in other than T-bills. Because Tether (the only one to worry about) is hugely, grossly, profitable. They’ve some $80 billion of coin out there, some $80 billion of T-bills on which they’re making 4% (-ish) wholly buckshee and risk free. Their other investments are financed by their retained profits….
Sigh:
Stablecoins, however, do something even worse than bank failures did. They actually link themselves to the US dollar. But at the same time, they are not dollars. They are not money, but they undermine, by the way in which they’re issued, the ability of the government and central banks to control money.
Effectively, they’re creating a parallel private currency, and they shift control over money creation to private speculators and crypto-oligarchs as a consequence. That means democratic states could lose the ability to run their own economic policies.
Stablecoins do this as much as Scottish bank notes do – given that they’re, you know, backed one to one?
The fact is, money is and must remain a public good managed under democratic authority. And that is the role of democracy. The debate is not about financial stability. It is about political power.
Who controls money creation, governments or private speculators? Stablecoin has tilted power away from democracy, at the time being, towards oligarchs and political insiders. Now we have to be honest. There is a fight on our hands as to who is to run our economies and in whose interests.
Ahhh, the real reason. If other folks can just create money then MMT won’t work therefore it must be banned. Very Spud.
“They carry no guarantee from any government. ”
Hence the popularity.
Stuart Hill says:
September 6 2025 at 9:13 am
The same Zack Polanski who said he could talk to women boobs and make them bigger? Pinning your hopes on this clown really is scraping the barrel.
+1
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Richard Murphy says:
September 6 2025 at 10:04 am
If you are so Cartesian to think there is no link between mind and body, more fool you.
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“The debate is not about financial stability. It is about political power.”
This sums up the potato’s philosophy in one sentence. All the guff and pretend economics he writes is just window dressing for what really drives him – crazed lust for power over every aspect of your life
Hey, look, something new!
Let’s regulate it!
Only question is; are they readily, widely & confidently exchangeable for goods & services? If the answer’s yes, they’re money.
The contrary: I’ve just been lumbered with 4000 Canadian dollars. Undoubted backed by the Canadian government (don’t laugh at the rear). Are they readily, widely & confidently exchangeable for goods & services? Maybe in Canada & possibly northern states of the US up near the frontier. But nowhere else I know. So here, they’re not money.
Is it just me or does he use the words democratic/democracy an awful lot? Every time I see it I think of the Democratic People’s Republic of Korea, the Democratic Republic of the Congo, the German Democratic Republic. It’s like he thinks, as they did, that that word excuses lack of individual liberties. It seems every tosser who wants to curtail choices these days describes the behaviour as a threat to democracy. Even replacing think of the children.
Fvckwit complains that it’s the manufacturer’s fault when he pours coffee over his PC, it then stops working, because they did not make it waterproof.
“I need to go to Cambridge to pick up my now-repaired computer. What I must then do is remember to keep it apart from coffee thereafter, because that was apparently to blame. That, though, makes me wonder how it is that Apple can make expensive items of equipment that are not designed to coexist with those things that are likely to be on every desk ever known.
But for insurance the repair would have cost £2,519. I paid £229”
I can see why he hates advertising. He’s been suckered into buying a hideously expensive piece of kit presumably with a spec that he can’t possibly need, when about all he does with it is write blogs.
@BraveFart
Thirty years ago as a very junior I worked with a guy who obsessively disassembled his mouse every week to clean the ball and rollers (remember those?). Ten years later my attitude was mice/keyboards should be treated as consumables, any sign of dodginess just replace them, don’t bother trying to fix them. I wonder how long it will be, in any rational business context, before laptops will be treated the same way. The data is all backed up somewhere, the actual tool is easily replaceable. When I left my previous job ten years ago I asked if they wanted my work phone, they said no, just the SIM card, you can keep the hardware. My wife got a couple of useful years out of it.
My desktops have been like that for a decade. Buy refurbs at £100 each once every two or three years. Everything’s in google or browser anyway.
Meh.
“ Effectively, they’re creating a parallel private currency”
But I thought Murphy taught us that money only acquires any value because it can be used to pay tax? So how can a private currency exist?
I think this is how the Crown Dependency currencies operate, and with I think a similar range of backing.
From memory (so likely to be wrong and/or out of date), Jersey backs their “Jersey pounds” 100% with UK government gilts and just collects the interest, but the Isle of Man uses a broader range of investments including shares, giving them a higher return in the long term.
I once read about a price list displayed in the NE USA in (I think) the 1830s. Every item was priced in four currencies: New England dollars, New York dollars, Pennsylvania dollars, and pounds sterling. It reminds you that a country can function without having just a single currency.
In which currency did people pay US taxes? Dunno but maybe it wasn’t a problem for everyman: the fedgov got most of its income from tariffs.
dearieme
I’d guess that most of the currency back in 1830 was metal based. So gold would be gold, no matter what was stamped on the coins.
A winner of the Sveriges Riksbank Prize in Economics is not a Nobel Laureate. It has this in common with the Prizes for Peace and Literature that it is awarded to the flavor of the month socialist retard.
I would take a slghtly more expansive view, BiS – if you can trot down to the nearest bank and turn those 4K CAD into EUR, GBP, or USD, then they are still money. I (in Canada) keep a small pile of USD on hand for conveninence when travelling. I have never considered it to ‘not be money’ just because I intend to spend it in Hawaii, or have to transfer it from my USD to CAD accounts to spend it locally. It adds one more step to that ready, wide, and confident exchange that concerns you – and that step is equally wide and ready, and performed at posted rates.
@dcardno
It doesn’t really work like that. To deposit CAD in a bank here they have to be changed to Euros, so to get GBP or USD in exchange I’d be paying a second conversion charge. Now in my particular case the Spanish bank I use doesn’t accept deposits in foreign paper. It’s a caixa not a clearing bank, although it does offer a level of service you Brits can only dream of. The CAD 4k is actually a loan I transferred out of GDP via my CAD account with Wise. Converted at mid-market with a few bucks transmission charges. Unfortunately I’m getting it back in paper. The exchange rate is nothing like the Wise rate. I’ll be losing a hefty wedge. More sensible would have been the other party to have deposited the CAD in my CAD account at a Canadian bank, only paying the deposit fee. Or changed the CAD to USD paper to give me. We’re an international community here. I can use GBP in local shops. I hold cash in GBP, USD, Colombian COP, Brasilian reais & a couple of other currencies because they’re readily accepted for goods & services. All of them circulate outside of the country of issue. CAD’s “funny money”. None of it circulates outside of Canada & a few US border areas. Any paper has to be physically shipped back to Canada.So effectively it’s not money.
@Tim 7.56
Me too £200 Chromebook. Does it all. You don’t even have to do backups.
The trial of Taylor in Planet of the Apes: everyone knows that man cannot speak. So, if a man speaks, he must be in defiance of Nature itself. and must therefore be exterminated. Because Man cannot speak.
So also MMT does not work without Tax. And Tax provides the basis, the SOLE basis, of value for a currency. That is an immutable law. So, if any currency comes along that derives its value not from Tax, well everyone knows it cannot. So it must be destroyed to prevent it deriving its value not from tax, which everyone knows it cannot do.