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They don't have to do mess around with face value. Individuals and companies with billions of dollars in cash can't really stick it in a mattress and ignore it

They don't have to do mess around with face value. Individuals and companies with billions of dollars in cash can't really stick it in a mattress and ignore it. They have to find storage, pay rent, heating/cooling/humidity control, security, etc. That costs money. Negative interest rates reflect that cost. Security guards alone would cost round_up(24*7/40) = 5 security guards assuming you only need a single guard (and they never get sick or take vacation), which at a loaded labor cost of at least $150k (low end) is $750k, which is 4% interest on $18.75m. So, under $20m and you're happy to pay the central bank the money to guard your cash.

madcaptenor 11y ago
But one guard can guard a lot more than $20m. A normal-size briefcase holds about $1m in $100 bills, (http://www.cockeyed.com/inside/million/million.html http://www.cockeyed.com/inside/million/million.html, https://www.quora.com/How-many-$100-bills-can-you-fit-in-one-of-those-metal-courier-suitcases https://www.quora.com/How-many-$100-bills-can-you-fit-in-one...), or presumably about five times that if you store in 500-euro notes. So in the end people with amounts of cash in the single- or double-digit millions would probably get together and hire one guard instead of many (you don't get rich by spending six figures a year unnecessarily) ... and we start heading back towards reinventing banks.
deleted 11y ago
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nkurz 11y ago
Individuals and companies with billions of dollars in cash can't really stick it in a mattress and ignore it. True. Far better to bury it somewhere remote. See this "news article" from the future about how it plays out: The desert dollar industry January 1, 2021 These days, the desert is swimming in cash... literally. Over the last six months, a booming business in illegal cash storage has sprung up in Nevada, New Mexico, and Arizona where analysts estimate that $30 billion worth of $100 notes have been hidden. By day, smugglers drive deep into the desert, SUVs loaded down with suitcases full of Ben Franklins. Once they've found an ideal spot, they wait till the sun goes down and frantically dig a hole, only to drive away the next morning with nothing but the cache's GPS coordinates and a drone or two to guard it. When asked about the sorts of people staying at her motel these days, Smith shrugs. "I don't ask who they are and they pay cash." ... http://jpkoning.blogspot.com/2015/12/the-desert-dollar-industry.html http://jpkoning.blogspot.com/2015/12/the-desert-dollar-indus...

madcaptenor 11y ago

But one guard can guard a lot more than $20m. A normal-size briefcase holds about $1m in $100 bills, (http://www.cockeyed.com/inside/million/million.html http://www.cockeyed.com/inside/million/million.html, https://www.quora.com/How-many-$100-bills-can-you-fit-in-one-of-those-metal-courier-suitcases https://www.quora.com/How-many-$100-bills-can-you-fit-in-one...), or presumably about five times that if you store in 500-euro notes. So in the end people with amounts of cash in the single- or double-digit millions would probably get together and hire one guard instead of many (you don't get rich by spending six figures a year unnecessarily) ... and we start heading back towards reinventing banks.

deleted 11y ago

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nkurz 11y ago

Individuals and companies with billions of dollars in cash can't really stick it in a mattress and ignore it. True. Far better to bury it somewhere remote. See this "news article" from the future about how it plays out: The desert dollar industry January 1, 2021 These days, the desert is swimming in cash... literally. Over the last six months, a booming business in illegal cash storage has sprung up in Nevada, New Mexico, and Arizona where analysts estimate that $30 billion worth of $100 notes have been hidden. By day, smugglers drive deep into the desert, SUVs loaded down with suitcases full of Ben Franklins. Once they've found an ideal spot, they wait till the sun goes down and frantically dig a hole, only to drive away the next morning with nothing but the cache's GPS coordinates and a drone or two to guard it. When asked about the sorts of people staying at her motel these days, Smith shrugs. "I don't ask who they are and they pay cash." ... http://jpkoning.blogspot.com/2015/12/the-desert-dollar-industry.html http://jpkoning.blogspot.com/2015/12/the-desert-dollar-indus...