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No one is disrupting banks – at least not the big ones

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Re: No one is disrupting banks – at least not the big ones

#431

Post by delusional »

StackRanker3000 wrote: post #427
delusional wrote: post #361

Earlier quoted context omitted.

Why would "the government" do that? I hate it when people talk about "the government" doing something. The real mechanics you'd see in your example is that the business elite would begin astroturfing support from the American public, with some nonsense about helping the poor better control their finances. Nobody would believe it, and progressives would be against it. In reality it will be driven by the commercial des…

I don’t really understand your point. The United States Congress, and the executive branch, they never do anything, to the point where you find it absurd to suggest that they would? Everything is done by the ”business elite”?

That would indeed be a bad point, and basically a conspiracy theory. I do not believe that.

My point is that "The Government" is not a singular hivemind, and can't be meaningfully analyzed as such. There are people, those people operate as part of The Government, but any analysis cannot be separated from the person or their affiliations.

Saying "The Government did X" only leads to the misunderstanding that "X" wouldn't have happened without The Government. In reality, "The Government" was the hammer that person "A" used to do "X". Had he not had that hammer, he could have used another.

Re: No one is disrupting banks – at least not the big ones

#432

Post by jgilias »

danielmarkbruce wrote: post #429
jgilias wrote: post #423

Earlier quoted context omitted.

Ok, what am I misunderstanding here? If I need financing of 100 pesos for buying a house, and I go to a commercial bank which has a 10% fractional reserve requirement, they'll give me 100 pesos, 90 of which will be newly created broad money. As I buy the house, and pay the 100 pesos to the seller, the 90 newly created pesos just entered the economy. If I go to your corner store and buy an Iphone on credit, you're not…

Continue down the chain on your house example. Imagine in each case instead of transferring money in bank accounts, people do the work on credit. Add up all the credit at the end of the chain. Then go back and add up all the bank account balances in the "pay with money transfer". It'll be the same (except for the fraction). Now, go look at a bunch of public company balance sheets - you'll see payables and receivables…

I see. You use "money" in a kind of a metaphysical 'total value' sense. That's fine, but very confusing when talking about "money creation", because that term typically means the particular mechanism by which units of a particular currency come into existence. In particular, M2 money growth, and where that line comes from.

You're right when you say that it's all debt all the way down, but you're very much wrong if you really believe that new fiat units appear in the system just because you took a loan at a non-bank entity.

EDIT: To illustrate my point a bit.

Let's assume that there are no fractional reserve banks, and only cash exists as a form of money. Only government issues cash, in total 10k USD have been issued, and the next issuance will be in 2 years.

Let's say you need 10 USD, and I have a 10 USD banknote. The banknote is debt money in the sense that it's a direct liability on the central bank balance sheet. For me it's a 10 USD worth asset.

Now we sign an agreement that you're going to pay back 11 USD in a year. I give you my banknote. Now I have exchanged one asset (a 10 USD bank note) for another asset (your promise to pay back 11 USD in a year). Depending on your character, history, and point in time between now and in a year my new asset is worth between 0 - 11 USD.

Let's assume you have stellar character, and are a well respected member of the community who always pays their bills. It's likely my new asset is now worth 10.5 USD, and someone would be willing to buy your debt from me.

By issuing a loan to you, we haven't created additional 50 cents in the system. The system only has 10k in it, and the next issuance is in 2 years. Anyone who would be willing to buy your debt from me would need to already have 10.5 USD.

Now the government decides that fractional reserve banking is pretty nifty, and is made legal. The fractional reserve requirement is set at 10%.

A neobank that has 3 USD cash (central bank liability) in their vaults approaches me and buys your debt from me by opening a 10.5 USD deposit in my name. Now the bank has a liability of 10.5 USD (my deposit), a 3 USD asset (cash), and an asset worth approximately 10.5 USD (your debt).

Congratulations, we have now all together created 7.5 USD of additional money in the system. The theoretical M2 money maximum in our system is now 100k USD. How much is actually in circulation depends on how much debt people are taking on. At the moment we're the only ones having done this, so amount of M2 money in the system is 10 007.5 USD.

Re: No one is disrupting banks – at least not the big ones

#433

Post by delusional »

dghlsakjg wrote: post #378
delusional wrote: post #361

Earlier quoted context omitted.

Why would "the government" do that? I hate it when people talk about "the government" doing something. The real mechanics you'd see in your example is that the business elite would begin astroturfing support from the American public, with some nonsense about helping the poor better control their finances. Nobody would believe it, and progressives would be against it. In reality it will be driven by the commercial des…

The government already does this. SNAP, colloquially foodstamps, can only be used on certain forms of food. Frozen goods are fine, but cannot be prepared hot, even if there is not a charge or it is the exact same food product. So my local corner grocery is allowed to sell anyone frozen food, whether they pay with SNAP or cash. But they also have a microwave that anyone can use to heat up purchased food, except for SN…

This was actually a fascinating research topic for me, because I can only agree that it seems arguably hostile or at least silly and backwards.

I found that the provision in question. The part of the bill defining "food" as "any food except hot food" was actually from the rewriting in 1977, where it was added to (and this comes from a single second hand source) supposedly ensure fair competition with fast-food joints that can't accept foodstamps. To me, nothing indicates that the intention of the government officials was to restrict the choices of recipients, but rather to ensure fair competition. One member, along with a few (maybe two) supporters even bring up the idea of restricting choice based on "nutritional value", but the others tear it down calling it wrongheaded and administratively impossible (my words).

This is interesting because what we don't see is a majority of the house that is OK with restricting choice for the subjects own good, or for some notion of health. Instead we actually see members very hostile to the idea of restricting choice based on "health". The path for such members to accept a restriction anyway is by putting it against something they value more, the fair competition of the free market.

The people who are restricted by the "hot food" limitation is not the recipients of snap, it is the store owners, who are supposed to be banned from competing with KFC.

Re: No one is disrupting banks – at least not the big ones

#434

Post by kbolino »

vrighter wrote: post #422
kbolino wrote: post #383

Earlier quoted context omitted.

These incentives already exist. The tax code has been manipulated to encourage or discourage behavior since at least WW2. A digital currency makes a lot of these incentives easier to create and easier to enforce, but they wouldn't be new .

an incentive is meant to encourage, not to force. They are not equivalent. A digital currency turns suggestions into orders.

Whether to nudge or to force is a policy choice, and is orthogonal to the question of digital currency.

Re: No one is disrupting banks – at least not the big ones

#435

Post by kbolino »

danielmarkbruce wrote: post #403
kbolino wrote: post #397

Earlier quoted context omitted.

The Federal Reserve is a bank. And we already have a relevant historical example to examine, postal savings accounts. I'm not aware of any special power that the executive branch had to bypass the judicial branch where those accounts were concerned, versus privately held accounts. Plus, the Post Office was directly answerable to the President then, while the Federal Reserve has never directly answered to the Presiden…

Not for consumers and non-bank businesses it isn't. You don't have an account at the fed. You have an account at plain old commercial bank. Someone at the plain old commercial bank can freeze your money, right now. You'll have to sue, go to court, win, just to get access to your money. If the fed becomes the place you have an account, they can do what the commercial bank currently can do. The difference is incentives…

Commercial banks answer to the government, to the central bank, to their shareholders, and to their non-governmental regulators (payment networks, insurers, etc). This has created plenty of examples of "debanking" of businesses and individuals who bring with them excessive risk due to their history of attracting controversy and/or legal trouble.

Whereas, the government can of course confiscate assets already, including through commercial banks, but generally cannot refuse service. If a CBDC becomes the norm, an account held at the central bank becomes a right, and thus refusal of service becomes a punitive measure subject to statutory and constitutional limits and scrutiny. This is arguably better than the commercial bank situation, where "business risk" is (generally) a valid reason to refuse to provide service.

Re: No one is disrupting banks – at least not the big ones

#436

Post by dghlsakjg »

bear141 wrote: post #384
dghlsakjg wrote: post #378

Earlier quoted context omitted.

The government already does this. SNAP, colloquially foodstamps, can only be used on certain forms of food. Frozen goods are fine, but cannot be prepared hot, even if there is not a charge or it is the exact same food product. So my local corner grocery is allowed to sell anyone frozen food, whether they pay with SNAP or cash. But they also have a microwave that anyone can use to heat up purchased food, except for SN…

Requiring people who get government money for food to not use it on prepared food is a good thing I would think. Technicalities like the one you presented do seem ridiculous on their own however.

If you're so poor that you can't afford food, what are the chances that you have access, time, and ability to turn ingredients into meals every time you need to eat.

I'm totally fine with a person on SNAP using it to get a hot or prepared meal if that's what they need. We have already decided to allocate the resource to them for the purpose of buying food, why does it matter if they spend it on a premade sandwich instead of a frozen burrito.

Re: No one is disrupting banks – at least not the big ones

#437

Post by dghlsakjg »

delusional wrote: post #433
dghlsakjg wrote: post #378

Earlier quoted context omitted.

The government already does this. SNAP, colloquially foodstamps, can only be used on certain forms of food. Frozen goods are fine, but cannot be prepared hot, even if there is not a charge or it is the exact same food product. So my local corner grocery is allowed to sell anyone frozen food, whether they pay with SNAP or cash. But they also have a microwave that anyone can use to heat up purchased food, except for SN…

This was actually a fascinating research topic for me, because I can only agree that it seems arguably hostile or at least silly and backwards. I found that the provision in question. The part of the bill defining "food" as "any food except hot food" was actually from the rewriting in 1977, where it was added to (and this comes from a single second hand source) supposedly ensure fair competition with fast-food joints…

In 1977 I can believe it as an anti competitive thing.

Today though, there's plenty of legislators who are happy, and vocal, to keep something like this there out of a paternalistic spite towards the poor.

Re: No one is disrupting banks – at least not the big ones

#439

Post by rapfaria »

hcarvalhoalves wrote: post #369
rapfaria wrote: post #21

Earlier quoted context omitted.

Not sure abou that: Credit portfolio in 2023: Itaú - $1176 billion Banco do Brasil - $1109 billion Bradesco - $877 billion Nubank - $91 billion Nubank also had the highest default rate between them (some 6%). It was great when it was created (fully digital, no credit score check for a credit card), but it is now dealing with the same problems as the big banks

To be fair, you have to compare credit portfolios by product and customer size. That is how the Central Bank reports and tracks these numbers. Nubank offers consumer credit (credit card, personal loans), but you're comparing portfolios that include mortgages, large companies, industry, agriculture, etc. Similarly, the default rate of the entire portfolio varies according to the product mix, so you can't compare that…

Exactly, which is why Nubank is miles away from "disrupting" the traditional banks, and not only at what Nubank does.

Re: No one is disrupting banks – at least not the big ones

#440

Post by danielmarkbruce »

kbolino wrote: post #435
danielmarkbruce wrote: post #403

Earlier quoted context omitted.

Not for consumers and non-bank businesses it isn't. You don't have an account at the fed. You have an account at plain old commercial bank. Someone at the plain old commercial bank can freeze your money, right now. You'll have to sue, go to court, win, just to get access to your money. If the fed becomes the place you have an account, they can do what the commercial bank currently can do. The difference is incentives…

Commercial banks answer to the government, to the central bank, to their shareholders, and to their non-governmental regulators (payment networks, insurers, etc). This has created plenty of examples of "debanking" of businesses and individuals who bring with them excessive risk due to their history of attracting controversy and/or legal trouble. Whereas, the government can of course confiscate assets already, includi…

The incentives/goals are the issue. By and large, commercial banks want to do business with you. They are subject to constraints, but they want to do it. They can/do also push back, they aren't just doing whatever the government says.
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