Not even physical cash, just a transfer to an overseas account. The money simply isn't there and the scales are enormous."
What do you mean by "money"? How can money "simply" not be available, when it's a matter of updating a row in a database? The issue is whether assets exist. Googling suggests the US contains assets worth $124 trillion; is that incredible to you?
And if we wanted to print $124 trillion of cash to represent all the assets, that would be silly, but just as doable as a wall on the Mexican border.
Yes, because the US government can literally fiat dollars into existence.
OTOH, the big point of guaranteeing deposits is that a credible party doing that prevents bank runs, which are caused by fear of bank collapse that will destroy access to deposit balances.
> The FDIC only has enough to cover a tiny proportion of bank liabilities.
The FDIC’s funds are just the zero-effort first-love of payment; FDIC insurance is guarantees by the government, not just the gives held by the FDIC.
> It seems very disingenuous for people in this thread to say "well if everyone cashed out tethers" and then handwave away the alternative of "well if everyone cashed out USD".
Tether isn't backed by an entity which can simply will USD into existence; FDIC or NCUSIF insured bank or credit union balances are.
If literally nobody (hypothetically) is willing to own actual land, factories, and so on, then it's the tangible assets that are worthless, not the money. It would be the ultimate in deflation.
Not even physical cash, just a transfer to an overseas account. The money simply isn't there and the scales are enormous. US banks only can pay back 3-10% of cash deposits. The FDIC only has enough to cover a tiny proportion of bank liabilities.
It seems very disingenuous for people in this thread to say "well if everyone cashed out tethers" and then handwave away the alternative of "well if everyone cashed out USD". These scenarios playing out would have Tether actually being able to pay a reasonable percentage of creditors.