Comment by doctoboggan
2 days ago
> without ever actually seeing any real returns.
I am sure he "saw" real returns on a very real looking app or website. As we transition to a cashless society we are all getting use to the numbers on our computers and phones representing real money.
My paystub is digital, it goes into my bank account directly and the numbers on my computer go up. I spend money by taping a computer chip onto another computer chip and then the numbers in my bank account drop. I can also digitally transfer those numbers to a brokerage account and click a few buttons and then the numbers go up and down depending on how people are feeling about the stock market. In the past few years, seemingly always up, which I think is priming young or naive investors to believe investments never fail.
> I am sure he "saw" real returns on a very real looking app or website.
Exactly: "Hanes told Mitchell a confusing story. Not long ago, Hanes explained, he started investing in cryptocurrencies with the help of some people he met online. First, he and his partners deposited money on a reputable U.S. platform for buying and selling crypto. The profits were enormous, he said: He took out his phone to show Mitchell his account balance, which seemed to indicate that the investment was worth $40 million."
And frankly, that's an entirely reasonable result for having invested in Bitcoin at any number of times, which was also by all reasonable measures a bad idea. I think even people who support the existence and value of crypto would agree that Bitcoin winners are most like stock-lottery winners than particularly savvy investors.
Crypto is great for scams even beyond it's infrastructural advantages because a lot of people made a ton of money from investing money they couldn't afford to lose in things that were pretty indistinguishable from the actual scams.
The difference between a real crypto exchange and a scam crypto exchange is that you can actually withdraw your cryptocurrency from the exchange.
This nuance lost on the common cryptocurrency speculator given that they have no idea what cryptocurrency actually is or how it's supposed to work.
There is a difference between seeing numbers go up on an app, and getting money into an actual bank that you know to be real.
The fact that you're even arguing this point shows how easy it is for people to fall for this crap.
Anyone can make a real looking app that makes it look like you're making money when they've already stolen all your money and spent it on hookers and coke on yachts.
Not anyone can start a real bank in the US, and if they can, you generally have protections in place to not need to worry the bank is that egregiously fraudulent.
I think younger investors know and understand that the market can fall, but this is still different than having lived through the market falling and how dramatic that can be.
> I think is priming young or naive investors to believe investments never fail.
Investments fail, there are plenty in the news. Broad market indices, however, don’t fail. There have been numerous bailouts over the previous decades. Why would one assume any future government wouldn’t continue bailouts if all the previous ones did?
The act of a bailout couples the credit of the rescuing organization with that of the rescued. That's literally what a bailout is: the rescuer agrees to take on some of the losses and credit risk, usually in return for agreements for future payments and power over how the business is restructured and managed. In the process, the credit and assets of the rescuing organization are damaged, and the bailed out organization is saved. Purely financial transactions never affect the actual reality on the ground, only how risks, responsibilities, and rewards are apportioned.
When the organization is as big as the U.S. government and has as good credit as the U.S. did in 2008, you can save an awful lot of financial institutions. But if it gets to the point where everybody expects to be bailed out and people start acting accordingly, you can't. Eventually the government ends up falling, as people start realizing that the economy isn't actually working and everybody is just cooking the books with financial transactions.
Government policy makers know this, and their livelihood is dependent upon the continued existence of the government, and so at some point they declare "Nope, bailout is not going to happen this time. You're on your own." At that point, the last group of people who took stupid financial risks are left holding the bag. It's very much like a pyramid scheme: the going is good as long as you can find a greater fool to assume the risk from you, but at some point there are no greater fools, and you find out the greater fool was you.
>At that point, the last group of people who took stupid financial risks are left holding the bag.
Isn’t that all the policy makers, old voters, taxpayer funded DB pension funds, etc that depend on broad market equity index fund returns?
Obviously, the system breaks down when it breaks down (when the currency has no purchasing power left to lose), but until then, the entire political apparatus is incentivized to bail out asset prices.
And if that isn’t possible, then the status of your investments/brokerage/bank accounts is going to be the least of your worries, as you will have more immediate concerns about procuring food/energy/shelter/security.
We've never had an executive whose financial policy positions include eliminating FDIC and that much of the federal deficit is fraudulent so can safely be disregarded and left unpaid. Believing in continuity at this time is a poor bet.
Governments and nations collapse. Anyone who was bullish in 235 CE Rome would have died long before their investments would be back in the black.
235 CE Rome? The Western Roman Empire lasts another two centuries- Romulus Augustus is deposed in 476 CE. That's longer than the US Constitution has existed (ratified in 1788).
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> Broad market indices, however, don’t fail.
Famous last words
Especially when you look at how it is distributed. At least market cap weighted... Makes me really question just how high can the line go.
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