[oraphalous]

>But in the bank scenario, the dollars that it loaned out aren’t worth any less.

Just a small point of clarification - I think - that helps to make your point a little clearer.

If the bank collapses - it's likely precisely because those loaned dollars ARE worth less. Commonly in bank collapses - those that borrowed from the bank can't repay for whatever reason. Creditors to the bank then get spooked and demand 'redemption' of their deposits.. etc

The difference is that whether or not a borrower from the bank still has that wealth is mostly independent of the actions of the bank (making other risky loans that lead to collapse etc). The value of the borrowed dollars depends entirely on the borrower. Whereas with tether - you might have locked it down in a hardware wallet encased in cast iron steel under your bed - doing nothing risky with it at all - but it could still go to zero in value. Tether's value depends on the actions of the issuer entirely.

Similarly - the owners of tether can't, through their risky use of tether endanger the prospects of the issuer; while borrowers can, through their risky use of loans, endanger the prospects of the banks.

[qeternity]

> Just a small point of clarification - I think - that helps to make your point a little clearer.

> If the bank collapses - it's likely precisely because those loaned dollars ARE worth less.

I get what you mean, but it's not quite the same. The loan, as in the receivable, is worthless and thus might prompt/contribute to a bank run/collapse. But the only reason defaults are an issue (like in this scenario) is precisely because the loaned dollars do have value, and the bank (and its depositors/creditors) want them back.

It's all just assets and liabilities.