RE: Dafuq? Why are people paying $1.25 to $1.35 on Poloniex for Steem Dollars?
Steem Dollars can be looked at as analogous to Bonds in the, legacy, financial system - and I think that the same financial rules apply.
With the current economic climate the interest rates on Bonds is negligable or negative in some cases - they are seen as safe investments because you get the principle payment back at the end of the term.
The price of Bonds varies depending on the interest rate - a Bond with a principle value of $100 but offering a coupon rate of 5% will be worth more than $100 on the open market when the central bank has set the interest rate of < 5% - this is because it is very unlikely that you will find another safe investment that will return $5 for every $100 dolars in this scenario.
My understanding is that the 'coupon rate' on Steem Dollars is 10%, so this makes them a lot more lucrative than what is currently available in the traditional financial system.
I hear what you are saying about the 10% interest rate on Steem Dollars but then why would anyone even pay $1.10 for them if they would be basically washing out the $0.10 of interest / coin for an entire year?