Bank failures come in waves • Hacker News Board

Re: Bank failures come in waves

#161

Post by clarge1120 » Tue, Mar 21, 2023, 1:24 PM UTC

vishnugupta wrote: post #95

Continuing the theme of the article the current banking crisis has exposed two conflicting functions of money i.e., store of value and a vehicle of investment both of which are facilitated by banks. Keeping money safe, whether physically or digitally, comes at a cost. Banks absorb this cost because they make money through credit creation, maturity transformation, and interchange fees. They even pass on some of that p…

The biggest challenge facing CBDCs (Central Bank control of Digital Currencies) is that any laws or regulations concerning them can be changed at anytime, without the consent of the governed.

See Credit Suisse.

Re: Bank failures come in waves

#162

Post by spacebanana7 » Tue, Mar 21, 2023, 1:24 PM UTC

JDEW wrote: post #116

spacebanana7 wrote: post #109

Earlier quoted context omitted.

A hybrid solution could be a grade of bank accounts whose deposits are backed 1:1 by short dated government debt. You get most of the safe custody benefits of CBDC whilst minimising the costs of restructuring the banking system. Customers could still use all the same banking apps and branches. Such a program could even be eased in over time by steadily increasing the proportion of bank balance sheets allocated to sho…

Narrow banks. The FED didn’t like the idea…[0] [0] - https://johnhcochrane.blogspot.com/2018/09/fed-nixes-narrow-...

That's deeply frustrating. The FED's potential opposition about balance sheet control and reverse repo have clear weaknesses pointed out by the author you cite.

Re: Bank failures come in waves

#163

Post by [deleted] » Tue, Mar 21, 2023, 1:26 PM UTC

meh8881 wrote: post #146

zizee wrote: post #41

From what I understand, when someone takes out a loan, a bank doesn't lend out depositors' money. Instead money is "created" by the bank (on behalf of the fed), and the bank needs to pay the fed interest. The bank also needs to pay the loan back by an agreed uppn time (which destroys the money). Why can we not have a similar system for deposits? A bank takes a deposit, the fed "destroys" the money, but pays interest…

> From what I understand, when someone takes out a loan, a bank doesn't lend out depositors' money. Instead money is "created" by the bank Nah it’s simpler. You put a dollar in the bank. The bank loans 80 cents to Bob. Bob puts 50 cents of that 80 cents in the bank. The bank loans out some of that. Even without going beyond Bob, the same dollar is now in the bank twice. That’s what people mean by money being created.

[deleted]

Re: Bank failures come in waves

#164

Post by retube » Tue, Mar 21, 2023, 1:30 PM UTC

thwayunion wrote: post #145

retube wrote: post #138

Earlier quoted context omitted.

central banks could offer 100% guaranteed deposit facilities without a CBDC.

I'm so confused by what role a CBDC is even supposed to play... why would the government establish a new currency pegged 1:1 to its existing currency? Why not just... allow normal Americans to keep deposits at federal reserve banks?

Well they could, but actual implementation would be via an intermediary commercial bank that held it's deposits with the Fed. Central banks don't want to have to deal with retail customers. But the result is the same.

Re: Bank failures come in waves

#165

Post by amelius » Tue, Mar 21, 2023, 1:32 PM UTC

vishnugupta wrote: post #95

Continuing the theme of the article the current banking crisis has exposed two conflicting functions of money i.e., store of value and a vehicle of investment both of which are facilitated by banks. Keeping money safe, whether physically or digitally, comes at a cost. Banks absorb this cost because they make money through credit creation, maturity transformation, and interchange fees. They even pass on some of that p…

Good analysis.

Similarly, the App Store mixes "Store" with "Content filter". We should be able to choose both independently.

Re: Bank failures come in waves

#166

Post by v4dok » Tue, Mar 21, 2023, 1:40 PM UTC

ifyoubuildit wrote: post #160

ricardobayes wrote: post #158

Earlier quoted context omitted.

On the other hand, imagine what level of services we could have if it wasn't for the tax dodgers and cash in hand payments. I reckon we could fund universal basic income just from whitening the economy, in any given country.

I imagine we'd have a similar level of services, and the same level of urgency to raise taxes.

Depends on the country. For countries with a lot of "black money" and corruption there is an obvious benefit. Taxes yield less because they don't capture the whole economy, as a result taxes are increased and get paid by the "idiots/ethical" which creates a vicious cycle. Now if tomorrow you had everyone paying taxes then 2 things would happen which would result in a new equilibrium. 1. The tax revenues would massively increase 2. People would push for lower taxes because suddenly they care more as their real marginal tax rate is the nominal one.

Would this result in more efficient spending of taxes in a corrupt economy? Not immediately. A lot of shitty people would get reach fast in the meantime, but the system would balance because people would no longer participate in the corruption directly as they used to.

Yes, you remove some freedom, but I am convinced that for societies that have a trust disconnection between the government and the people would be a net benefit (assuming democracy).

Additionally, comercial banks have been pretty shitty on providing liquidity to the real economy throughout the QE (at least in some parts of the west). They had their chance to not be a bottleneck, they missed it. Good riddance.

Re: Bank failures come in waves

#167

Post by atlasunshrugged » Tue, Mar 21, 2023, 1:42 PM UTC

cflynnus wrote: post #120

vishnugupta wrote: post #95

Continuing the theme of the article the current banking crisis has exposed two conflicting functions of money i.e., store of value and a vehicle of investment both of which are facilitated by banks. Keeping money safe, whether physically or digitally, comes at a cost. Banks absorb this cost because they make money through credit creation, maturity transformation, and interchange fees. They even pass on some of that p…

Thinking CBDCs are “safe” is extremely naive. They’re a dystopian nightmare. They’re every dictators wet dream. This is why Bitcoin matters. Bitcoin = freedom.

Couldn't you sub cash for Bitcoin here and have it make just as much sense? Also, isn't bitcoin highly traceable, especially for a sophisticated state actor?

Re: Bank failures come in waves

#168

Post by maxilevi » Tue, Mar 21, 2023, 1:42 PM UTC

gnicholas wrote: post #74

maxilevi wrote: post #36

Earlier quoted context omitted.

Managers might have been fired and equity wiped out but they still have all the rent and bonuses that were extracted during the high risk high reward activities. That’s why it’s a morale hazard and the fed taking over it doesn’t solve it.

You've just coined a new term, "morale hazard". Perhaps this is when there is a moral hazard problem that affects morale?

Haha that is hilarious, I can't edit my comment but thanks for pointing it out

Re: Bank failures come in waves

#169

Post by danaris » Tue, Mar 21, 2023, 1:46 PM UTC

rjtavares wrote: post #127

i67vw3 wrote: post #119

Earlier quoted context omitted.

Could the Glass-Steagall Act prevented the 2008 banking crisis?

We don't know. Glass Steagall Act doesn't really deal with the fundamental problem with 2008, which was at its core an error in measuring potential risk of new finantial products. It could have prevented some of the worst impacts of that error, but we're not sure. Here's quote from former Federal Reserve Vice Chairman Alan Blinder: "What bad practices would have been prevented if Glass-Steagall was still on the books…

The difference between war and financial regulations is that there is no reason that the conditions that caused a previous financial crisis can't reoccur if you don't regulate against them. It's less like war that way, and more like health: you don't say "well, I got salmonella poisoning last year, so that's the last war; there's no reason to be careful about cooking chicken all the way through now!"

If letting retail banks take depositors' money and gamble with it was a bad idea then, it's almost certainly still a bad idea now.

Re: Bank failures come in waves

#170

Post by v4dok » Tue, Mar 21, 2023, 1:49 PM UTC

cflynnus wrote: post #120

vishnugupta wrote: post #95

Continuing the theme of the article the current banking crisis has exposed two conflicting functions of money i.e., store of value and a vehicle of investment both of which are facilitated by banks. Keeping money safe, whether physically or digitally, comes at a cost. Banks absorb this cost because they make money through credit creation, maturity transformation, and interchange fees. They even pass on some of that p…

Thinking CBDCs are “safe” is extremely naive. They’re a dystopian nightmare. They’re every dictators wet dream. This is why Bitcoin matters. Bitcoin = freedom.

An economy run on Bitcoin is an absolute dystopia. You reluinquish monetary control to a deflationary coin, being in the whim of Bitcoin whales. People who advocate for it, either are whales or they are stupid.

Ask south europe how well it worked for them having no power over their monetary policy.