Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Banking in uncertain times

bitsaboutmoney.com

Post reply on HN
Print view View original

71–80 of 378 posts

Re: Banking in uncertain times

#71

Post by bix6 »

spir wrote: post #47

Stablecoins are conspicuous in their absence in patio11's post. Personally, I believe that patio11's loathing of crypto has made him incurious about its potential. But that's not the point here. The point is that stablecoins are about to become a Very Good Deal for ordinary people: In the near future, stablecoins like USDC will become immune to bank runs because the US Dollar reserves backing them will be held in veh…

Vastly superior except there is zero insurance, reserves are held within the traditional banking system and it can depeg at any time…

Re: Banking in uncertain times

#72

Post by floathub »

Camus134 wrote: post #63
floathub wrote: post #55

The claim that, "when interest rates rise, all asset prices must fall" seems, uhm, somewhat off. If this were true, it would be trivial to stop and reverse inflation (i.e. deflate) with any increase in interest rates (?). While it's certainly useful to think about prices as signals that, "embed an interest rate derivative", it seems a stretch to claim every single one of those derivatives is perfectly negatively corr…

"If this were true, it would be trivial to stop and reverse inflation (i.e. deflate) with any increase in interest rates" Well, that is the strategy of the Fed. Raise interest rates when we experience too much inflation.

The Fed strategy is to reduce the rate of growth (1st derivative) or prices, not reduce the actual price level (which would be deflationary). And that's non-trivial for many reasons, including the fact that not every price signal responds the same to short term interest rate movements.

Re: Banking in uncertain times

#73

Post by JumpinJack_Cash »

There need to be a separation between funds transaction and investing. Just like the separation between Church and State or Investment Banking and Commercial Banking.

Currently there isn't because you are forced to invest if you want to be able to transact. As a matter of fact the figure you see in your checking account is expressed in dollars but that is false because those are IOUs from the bank exressed in dollars. You are defacto investing in the loan portfolio of your commercial bank.

It's a very different thing.

Maybe CBDC will allow all of us to 'bank with the Fed' so we will know for sure that those dollars are real and not being put to work in any way , shape or form.

Re: Banking in uncertain times

#74

Post by czbond »

Pet_Ant wrote: post #45

I mean maybe we should require large companies to split their accounts across several banks, I mean what is the real overhead here?

That really is a CFO's job. To assess risk, and distribute it. Larger amounts in larger banks are swept across multiple branches transparently to reduce the account holders risks for individual branch failures.

However, the FDIC limit is REALLY low in today's terms. $250k limit was set in 2010. The money stock has been printed 143% more since 2010. To me that is about $607k in today's dollars.

Re: Banking in uncertain times

#75

Post by lordfrito »

spir wrote: post #58
mtoner23 wrote: post #53

Earlier quoted context omitted.

USDC may have instant 24/7 access to global markets. But why did the price of USDC drop to 90 cents this weekend. It isn't immune bank runs.

You're right, last weekend, USDC dropped to a low of ~$0.88. However note - SVB was closed on a Friday (as is the FDIC's custom). This meant that USDC could not process redemptions over the weekend as banks were closed, and this created fear in the market. - USDC had 8% of their reserves trapped in SVB. The fair market value of USDC would have been $0.92 if all SVB deposits were lost, which was never likely. - crucia…

> stablecoins are about to become a Very Good Deal for ordinary people

> the UX of stablecoins is becoming vastly superior to bank deposits because you'll be immune to bank runs, control your own money, and have instant access to global markets, including for low-risk yield on your stablecoins, such as in treasuries or over-collateralized lending

I disagree, but OK

> over the weekend, USDC did lose its $1 peg and trade as low as ~$0.88

Hmmm doesn't seem like a Very Good Deal for an ordinary person.

> However note

Oh, now I see what you're doing. It's a Very Good Deal, except reasons

> However, all USDC holders were able to maintain access their USDC to do whatever they wanted with it

So it might have dropped 12%, but they still had access. That's a win to you?

Your definition of stable is vastly different than mine.

My FDIC backed bank account is guaranteed not to lose value.

I don't understand the cognitive dissonance on display here.

Re: Banking in uncertain times

#76

Post by overthrow »

spir wrote: post #52
pjc50 wrote: post #50

Earlier quoted context omitted.

This is essentially fanfiction, as stablecoins so far have been very opaque about what they do with their reserves. Especially Tether. (largely because the mechanics of holding $60bn in treasuries would attract some questions about KYC which stablecoins are unable to answer)

You're right that internationally-run Tether (USDT) is the largest stablecoin and has opaque reserves. However, American-run USDC is growing faster and has excellent transparency: https://www.circle.com/en/transparency

It's also worth noting that the US government itself sometimes uses USDC when there is no better option. If there were any doubts of USDC's legitimacy, the government would be trying to shut it down (see: USDT), not using it for transfers.

https://www.nasdaq.com/articles/us-government-enlists-usdc-f...

https://www.circle.com/blog/circle-partners-with-bolivarian-...

Re: Banking in uncertain times

#77

Post by vishnugupta »

lifty wrote: post #33

I have been seeing conflicting opinions from people in the financial know-how. On one hand, patio11 says that you can ignore this and that the banking system is very resilient. On the other hand, him and others mentions that you need to use 3rd party providers in order to distribute your deposits in order to have full insurance coverage. Is there any way for a non sophisticated person to avoid these headaches? Otherw…

If you are over $250K limit and need that money under 2-3 years then T-bills is the way to go. I haven't used it as I'm not a US resident but I hear that it's straightforward.

Beyond 3 years it makes sense to spread it among Index fund, gold ETF etc., depending on your need, risk appetite etc., But then we are venturing into "investment" and not "safe keeping".

https://www.treasurydirect.gov/marketable-securities/treasur...

Re: Banking in uncertain times

#78

Post by snarf21 »

brvsft wrote: post #62
snarf21 wrote: post #57

Earlier quoted context omitted.

Except that 99.9% of people will buy "stable" coins on Coinbase. Not your keys, not your crypto. If Coinbase gets leveraged or goes the way of SFB, you have literally the same non-immunity as a bank run except you also don't get FDIC backstops.

SFB? You mean SVB? SBF?

Sorry, I meant SBF but transposed.

Re: Banking in uncertain times

#79

Post by greesil »

floathub wrote: post #55

The claim that, "when interest rates rise, all asset prices must fall" seems, uhm, somewhat off. If this were true, it would be trivial to stop and reverse inflation (i.e. deflate) with any increase in interest rates (?). While it's certainly useful to think about prices as signals that, "embed an interest rate derivative", it seems a stretch to claim every single one of those derivatives is perfectly negatively corr…

Bond prices fall. Not all assets.

Re: Banking in uncertain times

#80

Post by johnla »

Semaphor wrote: post #36
tetrep wrote: post #6

Earlier quoted context omitted.

A deserving; that which makes one deserving of reward or punishment; merit or demerit; good conferred, or evil inflicted, which merits an equivalent return: as, to reward or punish men according to their deserts. "Just deserts" is a common phrase that uses it in the same way.

Oh wow. I (non-native) never realized it only had one s, I always assumed it was "just desserts", as in, you are getting the dessert you deserve, after the food (the evil you did) :D

If I was on Who Wants to be a Millionaire, I would've picked "just desserts" as my final answer without hesitation. TIL
Post reply on HN