Once

upon a time, there was a Shepherd, who did some rather peculiar things. In the little nursery paddock where he kept the ewes and their sheep, he was also keeping she-wolves who were making little wolf pups. Why someone would do this, I don't know, but I am here to tell you the story about what happened. Every year, the sheep would all rut and have babies, and so would the wolves. The Shepherd would feed the old Ewes who were no longer producing new lambs to the wolves. But this was not enough for the wolves. In the night, they would creep around and eat some of the lambs as well. Now, to explain why the Shepherd was raising these wolf pups, it was because many people believed they were better than Sheep. Why, I don't know, because the wolves were eating the sheep. Worse than this though, instead of killing the wolves, the people around the Shepherd were instead feeding the sheep up and then wondering why the wolves just kept rising in population and all that hay being fed to the sheep every year was costing more and more, and the profit of raising sheep this way was getting smaller and smaller. Eventually the village idiot showed up and started shouting about this. "Hey, people, the wolves are parasites on you all. You feed them, feed the sheep to feed them sheep, and then you wonder why the cost of of your woolly socks keeps rising. DUH. Wolves only eat sheep. They don't make wool, or meat!" ## It doesn't make any sense, right? The wolves have got a pretty sweet deal at the expense of everyone else. Maybe hay growers are doing quite well also, but humans don't eat hay or wolves, nor can they clothe themselves with them. Well, here we are with Steem. Out of the proportion of Steem that is newly issued and distributed, automatically 37.5% is paid out in newly generated SBD contracts that are pegged to the US dollar. Currently this constitutes 5.25% of the total market capitalisation of Steem and SBD (together, about 21 million, 1 million is SBD). Now, the dynamics: Every time the Steem price goes up, naturally the value of SBD goes down. To maintain the peg, the SBD contracts sell off Steem to drive down the value of the SBD. So naturally this acts as a brake against growth in the value of Steem. It literally cannot go up, there is 5% of the total pool, if the price goes up 5%, then the SBD must sell off Steem bound into it to bring the value of the SBD back towards parity with the dollar, and to achieve this end, every bit of that 5% gain must be sold off by SBD to hold the peg. So now you can see why the price has never been able to climb in the 8 months since the peak of the initial pump. Steem goes up, SBD sells Steem. It's not a mystery, and it's certainly got nothing to do with Whales, who if they were taking 100% care of their own interests and not trying to see Steem become widely adopted, would logically be liquidating their SP and going somewhere else with their money (not that there is many places money doesn't die the same way in the market...). **I just want to repeat that. Anyone still in Steem right now, who has whale sized amounts of assets, is serious about Steem.** Most of them have lost over 90% of their investment already. If I was a whale I probably would have ditched long ago. The loss is bigger in number value (though in proportion it is equal for everyone). ## Does a bank pay you interest to hold a liquid, instantly transferrable asset like in a daily transactions 'savings'? Maybe, if they want to go into liquidation... **No, the opposite.** Typical in Europe is an account fee of around €1 a month. If minimum wage is something like €1000 a month, then right off the bat you are looking at a cost for holding cash in the account of the order of about 0.1% per year. -0.1% should also then be the best interest you get on SBD. You cannot as a witness in Steem set a negative interest rate on SBD. But the bank will not give you interest if you can instantly sell the money. Even if you are locked into a term deposit, 2% is a very high yield these days, no term deposit gets you over 6%. ## Yet Steem Backed Dollars accumulate interest! Firstly, to solve the problem, Steem Backed Dollars should have no interest accruing to them. I have had people say that you can't hold the peg without an interest payment. I say the opposite, there should be an interest charge. ### Steem Backed Dollars *SHOULD NOT BE BETTER THAN REAL DOLLARS*! Secondly, all liquid rewards should be in Steem. There should be a way to create, and destroy SBD assets properly. Without interest, in fact the SBD becomes the payment instrument and Steem the savings/transaction account, and Steem Power is the term deposit. I don't believe there is any rational argument to support the interest payments on SBD, whatsoever, that have any relation to real world economics, in a situation where real USD cost you 0.1% in account fees (at least) and are depreciating in value against commodities at at least 2% per year (that's a halving of value every 10 years, by the way). There is much contention but I think that in the last 10 years in fact the inflation of the USD is more like 8% which means any term deposit paying under 8% is costing you while your money is locked away from you. I think that people should be able to keep SBD, but it should cost the holder, not the rest of us, especially not people with big holdings of Steem Power, which in the Alice through the looking glass upside down is effectively via SBD a illiquid long term asset (like a term deposit) that is losing value to pay for SBD. You would laugh at a bank that offers to hold your money and not let you transfer it for a longer term, *AND* charging you for the privilege! What is even more ironic is that is exactly what they are starting to do now. When the term deposit rate drops below inflation (which it pretty much is), everything is going upside down. You are being charged to deposit, and earning interest on debt. This is how it's working now with Steem, and thus like a microcosm of the global financial system, it is on an endless slid down into deeper and deeper debt. Nobody with even the most basic understanding of even mainstream Keynesian economics would be able to honestly say that the great Maynard would have considered the charging of money sitting illiquid in deposit as a good idea (even if his assertion that cash should always devalue implies this). It's straight up idiotic, yet the word-weaving people use makes it sound the opposite. No, it sounds like magic to me, voodoo, a frickin shell game. As a Witness operator, it is part of my election platform that I want to see the elimination of all automatic creation of SBD, to allow users to create or destroy (releasing the underlying Steem back into their balance) SBD, and I want to see the elimination of positive interest rates on SBD. If nobody can agree on either side of the table, then it should be set to zero. It still would be a better buy than a real US dollar but at least it won't be stealing (so much) from Peter to feed Paul (Peter holds SP, Paul holds SBD). I am now setting my SBD interest rate to zero, and in protest, which is quite mute really, I am setting my bias so that I am selling SBD for 50 cents and buying it for $2 on behalf of those using the 'conversion' function. Which, I should point out, I don't think anyone uses. That right there is another issue, aside from genuine creation or destruction of SBD by account holders voluntary choice, there is no point in having conversion when you can transfer it. Without transferrability, SBD can do nothing claimed of it. Transferability in the real economy comes at a cost, not at a profit. Liquidity is a cost. Interest is paid on loans because money now is more expensive than money later. Or, it should be, if it wasn't being printed to oblivion, which is how the whole system is upside down. ## For those who think my position is extreme: Even if you don't want to see the automatic production of SBD removed, you can surely at least agree that you should be able to unwind SBD contracts, and not just transfer them. If my hypothesis is correct (and I can't see any reason why it is not) then genuinely being able to delete SBD would help steem price rise, or more correctly, stop braking it as it goes up. ## Steem is coming to a crisis point The cost of operating a witness goes above the pay rate when Steem drops much below 5 cents. The price is falling through towards 8 cents now and absolutely nothing indicates that this is going to change. No witnesses, No Steem. I think if SBD could instead of being automatically created, be bound out of Steem or unbound back to Steem at will by account holders, and that SBD had a charge on it of around the rate of inflation of USD supply (somewhere between 2 and 5%), that within the month Steem's price would pump hard all the way back past $1, the rewards system would be able to pay a decent rate to authors for their work (it's now pretty much only possible for a hundred or so writers to make any reasonable amount of money on Steem). The whales would stop powering down so much and the endless drama in the forum relating to distribution and payout rewards would become far less vicious and less visible. Let's stop the Fed from stealing our Steem! Make SBD like real dollars, devaluing at the same rate. I am declining payout on this post because I am so far across the threshold of being tired of watching every effort I make to keep the value of my Steem account come to nothing and even slowly sliding backwards. I stand with the Whales who have stuck around up to this point despite all the loss of the value of their investment, and against the Dollar Worshipers who are getting a free ride on Steem Power holders with the illogical interest rate on a liquid asset. # Enough! Basta! Genug! Genoeg! Dostatuchno!

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We can't code here! This is Whale country!

Vote #1 `l0k1`

_{Go to steemit.com/~witnesses to cast your vote by typing l0k1 into the text entry at the bottom of the leaderboard.} _{(note, my username is spelled El Zero Kay One or Lima Zero Kilo One, all lower case)}

sigmajin