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It's not that simple. Keep in mind that "wealth" as such can't be stored, it has to be invested/put into something; the market's assessment is that the liquidit

It's not that simple. Keep in mind that "wealth" as such can't be stored, it has to be invested/put into something; the market's assessment is that the liquidity, safety, and convenience of treasury debt is a desirable combination to house a few billion of wealth. As an alternative to buying treasuries, you could use a bank, but keep in mind that FDIC only covers accounts up to $250k and beyond that, you're exposed to the bank's credit risk, admittedly small, but a very large concern for an individual/company with millions in cash. Banks don't work the same way for big accounts as small ones, you actually have to weigh things like "will my money be available" and "will the bank default". If the situation gets bad enough, people will start warehousing cash in bunkers, but that's expensive and I highly doubt it could be done for less than 0.05%/year or whatever slightly negative rate the yield is on these things. Banks provide a valuable service by offering depository safekeeping of funds. If we stay in this zero-interest environment much longer, expect to see more fees on checking accounts as net interest margin (what the banks earn between their borrowing costs and their lending prices) continues to fall.

codyb 11y ago
Interesting note on storing cash in "bunkers", according to Wikipedia [0] (referenced to a book "The Accountant's Story"), Escobar and crew used to have to write off 10% of their money stored in warehouses because rats would actually come and nibble away at the bills. Unfathomable to me having so much money that you need literal warehouses for it, but even more amazing is that there was no alternative besides a 10% year over year loss on your stored capital. When you're talking about a cartel that was bringing in roughly $22Bn a year (also Wikipedia) that amounts to roughly $2.2Bn a year sunk to rats. So, in retrospect, if you can do it legally, the Fed's bills seem like a great deal compared to stockpiling cash. And I'm sure you're paying far less to secure those, although I'm not exactly sure how these treasuries work and if you could just purchase one worth $22Bn and put it in a safe somewhere. Seems like it'd be just about impossible to steal something like that and pass it off as your own. [0] - https://en.wikipedia.org/wiki/Pablo_Escobar#cite_note-accountant-8 https://en.wikipedia.org/wiki/Pablo_Escobar#cite_note-accoun...
- AnimalMuppet 11y ago
  For $2.2Bn a year, it seems like Escobar could have bought a lot of cat food, and a fair number of vets to keep the cats healthy...
- dragonwriter 11y ago
  > When you're talking about a cartel that was bringing in roughly $22Bn a year (also Wikipedia) that amounts to roughly $2.2Bn a year sunk to rats. 10% annual loss on the warehouse-stored amount does not mean 10% loss of annual income. Some of that annual income is getting turned into non-cash assets, after all.
  - codyb 11y ago
    Yea of course, it was just back of the napkin calculations to come up with an upper bound for the amount lost every year. Still staggering even if it was a quarter of that.
- toomuchtodo 11y ago
  > Unfathomable to me having so much money that you need literal warehouses for it Its talked about in Europe with the ECB using negative interest rates to (unsuccessfully) stoke their economies. http://www.economist.com/news/finance-and-economics/21644203-negative-interest-rates-do-not-seem-spur-inflation-or-growthbut-they-do-hurt http://www.economist.com/news/finance-and-economics/21644203... http://www.bloomberg.com/news/articles/2015-04-23/negative-interest-rates-may-spark-existential-crisis-for-cash http://www.bloomberg.com/news/articles/2015-04-23/negative-i...

codyb 11y ago

Interesting note on storing cash in "bunkers", according to Wikipedia [0] (referenced to a book "The Accountant's Story"), Escobar and crew used to have to write off 10% of their money stored in warehouses because rats would actually come and nibble away at the bills. Unfathomable to me having so much money that you need literal warehouses for it, but even more amazing is that there was no alternative besides a 10% year over year loss on your stored capital. When you're talking about a cartel that was bringing in roughly $22Bn a year (also Wikipedia) that amounts to roughly $2.2Bn a year sunk to rats. So, in retrospect, if you can do it legally, the Fed's bills seem like a great deal compared to stockpiling cash. And I'm sure you're paying far less to secure those, although I'm not exactly sure how these treasuries work and if you could just purchase one worth $22Bn and put it in a safe somewhere. Seems like it'd be just about impossible to steal something like that and pass it off as your own. [0] - https://en.wikipedia.org/wiki/Pablo_Escobar#cite_note-accountant-8 https://en.wikipedia.org/wiki/Pablo_Escobar#cite_note-accoun...

AnimalMuppet 11y ago
For $2.2Bn a year, it seems like Escobar could have bought a lot of cat food, and a fair number of vets to keep the cats healthy...
dragonwriter 11y ago
> When you're talking about a cartel that was bringing in roughly $22Bn a year (also Wikipedia) that amounts to roughly $2.2Bn a year sunk to rats. 10% annual loss on the warehouse-stored amount does not mean 10% loss of annual income. Some of that annual income is getting turned into non-cash assets, after all.
- codyb 11y ago
  Yea of course, it was just back of the napkin calculations to come up with an upper bound for the amount lost every year. Still staggering even if it was a quarter of that.
toomuchtodo 11y ago
> Unfathomable to me having so much money that you need literal warehouses for it Its talked about in Europe with the ECB using negative interest rates to (unsuccessfully) stoke their economies. http://www.economist.com/news/finance-and-economics/21644203-negative-interest-rates-do-not-seem-spur-inflation-or-growthbut-they-do-hurt http://www.economist.com/news/finance-and-economics/21644203... http://www.bloomberg.com/news/articles/2015-04-23/negative-interest-rates-may-spark-existential-crisis-for-cash http://www.bloomberg.com/news/articles/2015-04-23/negative-i...