11 ms·

The logic in this article seems confused to me. The central business problem for retail banks is how to earn more from deposits than they pay in interest, and

by nsedlet 11y ago

The logic in this article seems confused to me. The central business problem for retail banks is how to earn more from deposits than they pay in interest, and to do so at a scale of billions of dollars. Apple also needs to figure out how to make money from its pile of cash. Accepting deposits and becoming a bank would only make that problem worse - so how is "having lots of cash" evidence that Apple wants to be a bank? An investment bank is a different animal and I would strongly disagree with the author that Apple is a "de facto investment bank". Investment banks advise clients on financial transactions and help clients hedge risk (something Apple doesn't do). There are much more straightforward and compelling explanations for why Apple cares about security (as others in this thread have pointed out). The only thing I would slightly agree with is that Apple maybe has an eye toward building its own payments network (a payments network is NOT a bank, by the way). But Apple isn't even CLOSE to competing with Visa and MasterCard in that regard - even if it did disintermediate the credit card companies it would have to have much much larger consumer adoption of Apple Pay plus a merchant network. Honestly the tone and muddled structure of this article come off as a poorly substantiated conspiracy theory.

TheLogothete 11y ago
Why is this article even on the front page (#1 even) of HN? Is this guy famous? His article is pure ramblings and defies common sense.
- DanBC 11y ago
  Charles Stross is an author, and has written some (really good) SF that covers some stuff in a way that HN appreciates. He's also a member here, and sometimes comments. http://www.amazon.co.uk/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_2_0?qid=1459176293&sr=8-2-ent http://www.amazon.co.uk/Charles-Stross/e/B001H6IW0Q/ref=sr_t... http://www.amazon.com/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_2_0?qid=1459176293&sr=8-2-ent http://www.amazon.com/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_...
  - dredmorbius 11y ago
    He submitted this item himself. Sneaky bastard.
- pythonistic 11y ago
  Stross is a well-known and popular science fiction author and former system administrator. Pundits and SF authors don't need to be accurate to project what may happen in the future (e.g., Clarke assumed we'd have manned communications space stations in geosynchronous orbit rather than automated robots).
  - slindz 11y ago
    To me, your comment read as though he was a San Francisco author. It took another comment to figure out you meant Science Fiction. I read entirely too much HN.
    - sjs7007 11y ago
      Haha, same happened to me!
      - patrickmclaren 11y ago
        Just upvote, in this case, no need for 'me too' or +1s.
- devy 11y ago
  He probably is famous in hard sci-fi genre. He's got a wikipedia page[1]! I didn't know until this post. [1] https://en.wikipedia.org/wiki/Charles_Stross https://en.wikipedia.org/wiki/Charles_Stross
- lisper 11y ago
  What difference does it make if the author is famous or not? Famous people get things just as wrong as non-famous people. (And I have no idea why you think the article defies common sense. It seems like a perfectly cogent argument to me.)
  - kbenson 11y ago
    I agree that fame should not be a sole qualifying attribute for getting on the front page here, but I think fame can be a qualifying factor, if used appropriately. That is, if a person is famous for being prescient in items relevant to the post, or if they are well known or respected in that sphere, that can help carry some legitimacy to their views to those that aren't entirely capable of assessing the merits of the argument, and would rather not spend time researching claims from someone that turns out to be a rambling idiot. There are also pieces by those famous that are less arguments, and more calls to action, in which the person't fame, or reputation, helps push the message, and as such it can be factored in as part of the message. It becomes useful for assessing how widespread the reach of the message will be. E.g. Brad Pitt speaking our against a social injustice vs Kim Kardashian commenting on fiscal policy. In one the fame helps spread the message (even if it doesn't, or at least shouldn't change the merits of the message itself), in the other the fame is irrelevant. For Stross, he's a fairly famous hard Science Fiction author, he's commented on the future and fiscal issues before, and has written books regarding interstellar money systems (haven't read yet) and possible problems with them. His fame in this area makes me want to see what he has to say, we'll see if I agree after I finish reading it...
    - marincounty 11y ago
      The late Christopher Reeve said it perfectecly. It never got any coverage, but it made me instantly like him more. Basically he got tired of reporters asking his opinion--on everything. It was right after Superman. He said in a tired voice, "Why are you asking for my opinion? Why us actors? Why not the Janitor down the hall. Guess what--that Janitor probally knows more? We read lines other people wrote?" The reporter walked away, like Superman didn't save the day?
  - 11y ago
- mercurial 11y ago
  It's on the front page because people often find what Charlie Stross' writes to be of interest (even if they don't necessarily agree). It's democracy at work, basically.
- anothermouse 11y ago
  A CPAN author, former tech journalist, hugo award winner. His works are so on the intersection of economics and scifi that apparenly even Paul Krugman has reads him. http://crookedtimber.org/2009/01/27/stross-on-development-economics/ http://crookedtimber.org/2009/01/27/stross-on-development-ec...
ThomPete 11y ago
Yeah most people forget that banks today don't really make money on peoples normal savings accounts. The interest is simply too low. They mostly make their money on huge corporate loans, investing and housing market.
- bradleyjg 11y ago
  That's a false dichotomy. From a bank's perspective savings accounts are money they borrow, while mortgages and corporate loans are money they lend out. A bank can make money on a savings account via fees and the like, and having a large base of savings can provide massive political cover, but in the idealized system bank accounts were always a way of raising money and so a cost center not a profit center. The interest rate being low is a good thing from their perspective it means the cost of acquiring working capital is lower than when they have to pay out more.
  - ThomPete 11y ago
    In theory you are right. In reality thats just not how they make their money. Amongst other reasons because the governments have deemed them too important for normal people and so they in effect subsidize them and fund them through amongst other things Fractional Reserve Banking. The big banks are considered too big to fail and so they more less have a get out of jail card to gear their risk. The money they can make from personal savings accounts are absurdly insignificant compared to these other areas.
    - kbenson 11y ago
      > governments have deemed them too important for normal people and so they in effect subsidize them and fund them through amongst other things Fractional Reserve Banking. Isn't Fractional Reserve Banking where banks are required to keep a portion of the deposits available as a reserve in case their investments go bad? How is that governments subsidizing them? Without fractional reserve, banks would be free to lend out as much of your deposited money as they thought they could get away with. Edit: Ah, from reading some more it appears it's different in a few very important details, even if the structure is the same. The Banks are only allowed to lend a certain multiple of the cash reserves they have on hand, not a certain fraction. That is, reserve deposits are a fraction of lending, not vice-versa. I'm still not sure how that's governments subsidizing them though. Without the restriction on lending, I could see banks getting a little wild in the boom economies (which happened in the mid to late 2000s).
digi_owl 11y ago
> The central business problem for retail banks is how to earn more from deposits than they pay in interest, and to do so at a scale of billions of dollars. Far from it. They are not deposit constrained, no matter how much mainstream economics likes to think so. http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf http://www.bankofengland.co.uk/publications/Documents/quarte... See page 2 onwards, "money creation in reality". And note that this is published by the Bank of England.
- sooheon 11y ago
  Thanks very much for this read. A couple pages in an I've already learned more than in some of my classes this semester.
  - elcapitan 11y ago
    You might like this course: https://www.coursera.org/course/money https://www.coursera.org/course/money
  - haberman 11y ago
    If you want to learn more about the US system, this paper might be better. It is old (from the 90s), but I don't think things have changed all that much since then, at least as far as reserve requirements go: https://www.federalreserve.gov/monetarypolicy/0693lead.pdf https://www.federalreserve.gov/monetarypolicy/0693lead.pdf
  - digi_owl 11y ago
    Then you may like this: https://www.youtube.com/user/ProfSteveKeen/videos https://www.youtube.com/user/ProfSteveKeen/videos
- haberman 11y ago
  This is the second time I've seen this link come up recently. It is describing the banking system in the UK, which has no reserve requirement. The US, on the other hand, does: https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm
tryitnow 11y ago
Apple is kind of like an investment bank, but he should have said "merchant bank," but the principle is the same. Apple loans its capital to other corporations to finance capital investments.
bboreham 11y ago
He should have said "hedge fund" rather than "investment bank". Investment banks did enjoy acting like hedge funds, up until a few years back, but the Volcker Rule put paid to that. Mostly.
wcunning 11y ago
Apple Pay uses (used?) the American Express payments network. It's accepted at card terminals where they 1) have the hardware to talk to an iPhone and 2) accept Amex. The issue with Apple disintermediating the credit card networks is that they're currently in the loop. This means that they'll be far more capable of obstructing a disintermediation play, if for no other reason than that it'll be hard to do it as a surprise move. Otherwise, I totally agree that they're not a bank nor an investment bank. Really, they're highly unlikely to go in that direction at all, given that they don't have any incentive to lend or credit anyone. They're far more likely to directly interact with banks, heading in a direction somewhat like Paypal, if they can pull that off. At that point, they avoid most (all?) of the banking regulations, though it starts to look like a disintermediation play very quickly from there.
forgetsusername 11y ago
>I would strongly disagree with the author that Apple is a "de facto investment bank" The fact that they have piles of money which they need to park says otherwise. "Advising clients on financial transactions" is precisely what they are doing...internally. People seem to really underestimate the issues with dealing with such vast sums of cash for which you want to maintain value. It's not trivial, as the author points out. >But Apple isn't even CLOSE to competing with Visa and MasterCard in that regard At one point Apple wasn't even close to competing with Nokia or Blackberry in the smart phone space. Then a bit of innovation happened.

by nsedlet 11y ago

TheLogothete 11y ago

Why is this article even on the front page (#1 even) of HN? Is this guy famous? His article is pure ramblings and defies common sense.

DanBC 11y ago
Charles Stross is an author, and has written some (really good) SF that covers some stuff in a way that HN appreciates. He's also a member here, and sometimes comments. http://www.amazon.co.uk/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_2_0?qid=1459176293&sr=8-2-ent http://www.amazon.co.uk/Charles-Stross/e/B001H6IW0Q/ref=sr_t... http://www.amazon.com/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_2_0?qid=1459176293&sr=8-2-ent http://www.amazon.com/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_...
- dredmorbius 11y ago
  He submitted this item himself. Sneaky bastard.
pythonistic 11y ago
Stross is a well-known and popular science fiction author and former system administrator. Pundits and SF authors don't need to be accurate to project what may happen in the future (e.g., Clarke assumed we'd have manned communications space stations in geosynchronous orbit rather than automated robots).
- slindz 11y ago
  To me, your comment read as though he was a San Francisco author. It took another comment to figure out you meant Science Fiction. I read entirely too much HN.
  - sjs7007 11y ago
    Haha, same happened to me!
    - patrickmclaren 11y ago
      Just upvote, in this case, no need for 'me too' or +1s.
devy 11y ago
He probably is famous in hard sci-fi genre. He's got a wikipedia page[1]! I didn't know until this post. [1] https://en.wikipedia.org/wiki/Charles_Stross https://en.wikipedia.org/wiki/Charles_Stross
lisper 11y ago
What difference does it make if the author is famous or not? Famous people get things just as wrong as non-famous people. (And I have no idea why you think the article defies common sense. It seems like a perfectly cogent argument to me.)
- kbenson 11y ago
  I agree that fame should not be a sole qualifying attribute for getting on the front page here, but I think fame can be a qualifying factor, if used appropriately. That is, if a person is famous for being prescient in items relevant to the post, or if they are well known or respected in that sphere, that can help carry some legitimacy to their views to those that aren't entirely capable of assessing the merits of the argument, and would rather not spend time researching claims from someone that turns out to be a rambling idiot. There are also pieces by those famous that are less arguments, and more calls to action, in which the person't fame, or reputation, helps push the message, and as such it can be factored in as part of the message. It becomes useful for assessing how widespread the reach of the message will be. E.g. Brad Pitt speaking our against a social injustice vs Kim Kardashian commenting on fiscal policy. In one the fame helps spread the message (even if it doesn't, or at least shouldn't change the merits of the message itself), in the other the fame is irrelevant. For Stross, he's a fairly famous hard Science Fiction author, he's commented on the future and fiscal issues before, and has written books regarding interstellar money systems (haven't read yet) and possible problems with them. His fame in this area makes me want to see what he has to say, we'll see if I agree after I finish reading it...
  - marincounty 11y ago
    The late Christopher Reeve said it perfectecly. It never got any coverage, but it made me instantly like him more. Basically he got tired of reporters asking his opinion--on everything. It was right after Superman. He said in a tired voice, "Why are you asking for my opinion? Why us actors? Why not the Janitor down the hall. Guess what--that Janitor probally knows more? We read lines other people wrote?" The reporter walked away, like Superman didn't save the day?
- 11y ago
mercurial 11y ago
It's on the front page because people often find what Charlie Stross' writes to be of interest (even if they don't necessarily agree). It's democracy at work, basically.
anothermouse 11y ago
A CPAN author, former tech journalist, hugo award winner. His works are so on the intersection of economics and scifi that apparenly even Paul Krugman has reads him. http://crookedtimber.org/2009/01/27/stross-on-development-economics/ http://crookedtimber.org/2009/01/27/stross-on-development-ec...

ThomPete 11y ago

Yeah most people forget that banks today don't really make money on peoples normal savings accounts. The interest is simply too low. They mostly make their money on huge corporate loans, investing and housing market.

bradleyjg 11y ago
That's a false dichotomy. From a bank's perspective savings accounts are money they borrow, while mortgages and corporate loans are money they lend out. A bank can make money on a savings account via fees and the like, and having a large base of savings can provide massive political cover, but in the idealized system bank accounts were always a way of raising money and so a cost center not a profit center. The interest rate being low is a good thing from their perspective it means the cost of acquiring working capital is lower than when they have to pay out more.
- ThomPete 11y ago
  In theory you are right. In reality thats just not how they make their money. Amongst other reasons because the governments have deemed them too important for normal people and so they in effect subsidize them and fund them through amongst other things Fractional Reserve Banking. The big banks are considered too big to fail and so they more less have a get out of jail card to gear their risk. The money they can make from personal savings accounts are absurdly insignificant compared to these other areas.
  - kbenson 11y ago
    > governments have deemed them too important for normal people and so they in effect subsidize them and fund them through amongst other things Fractional Reserve Banking. Isn't Fractional Reserve Banking where banks are required to keep a portion of the deposits available as a reserve in case their investments go bad? How is that governments subsidizing them? Without fractional reserve, banks would be free to lend out as much of your deposited money as they thought they could get away with. Edit: Ah, from reading some more it appears it's different in a few very important details, even if the structure is the same. The Banks are only allowed to lend a certain multiple of the cash reserves they have on hand, not a certain fraction. That is, reserve deposits are a fraction of lending, not vice-versa. I'm still not sure how that's governments subsidizing them though. Without the restriction on lending, I could see banks getting a little wild in the boom economies (which happened in the mid to late 2000s).

digi_owl 11y ago

> The central business problem for retail banks is how to earn more from deposits than they pay in interest, and to do so at a scale of billions of dollars. Far from it. They are not deposit constrained, no matter how much mainstream economics likes to think so. http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf http://www.bankofengland.co.uk/publications/Documents/quarte... See page 2 onwards, "money creation in reality". And note that this is published by the Bank of England.

sooheon 11y ago
Thanks very much for this read. A couple pages in an I've already learned more than in some of my classes this semester.
- elcapitan 11y ago
  You might like this course: https://www.coursera.org/course/money https://www.coursera.org/course/money
- haberman 11y ago
  If you want to learn more about the US system, this paper might be better. It is old (from the 90s), but I don't think things have changed all that much since then, at least as far as reserve requirements go: https://www.federalreserve.gov/monetarypolicy/0693lead.pdf https://www.federalreserve.gov/monetarypolicy/0693lead.pdf
- digi_owl 11y ago
  Then you may like this: https://www.youtube.com/user/ProfSteveKeen/videos https://www.youtube.com/user/ProfSteveKeen/videos
haberman 11y ago
This is the second time I've seen this link come up recently. It is describing the banking system in the UK, which has no reserve requirement. The US, on the other hand, does: https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm

tryitnow 11y ago

Apple is kind of like an investment bank, but he should have said "merchant bank," but the principle is the same. Apple loans its capital to other corporations to finance capital investments.

bboreham 11y ago

He should have said "hedge fund" rather than "investment bank". Investment banks did enjoy acting like hedge funds, up until a few years back, but the Volcker Rule put paid to that. Mostly.

wcunning 11y ago

Apple Pay uses (used?) the American Express payments network. It's accepted at card terminals where they 1) have the hardware to talk to an iPhone and 2) accept Amex. The issue with Apple disintermediating the credit card networks is that they're currently in the loop. This means that they'll be far more capable of obstructing a disintermediation play, if for no other reason than that it'll be hard to do it as a surprise move. Otherwise, I totally agree that they're not a bank nor an investment bank. Really, they're highly unlikely to go in that direction at all, given that they don't have any incentive to lend or credit anyone. They're far more likely to directly interact with banks, heading in a direction somewhat like Paypal, if they can pull that off. At that point, they avoid most (all?) of the banking regulations, though it starts to look like a disintermediation play very quickly from there.

forgetsusername 11y ago

>I would strongly disagree with the author that Apple is a "de facto investment bank" The fact that they have piles of money which they need to park says otherwise. "Advising clients on financial transactions" is precisely what they are doing...internally. People seem to really underestimate the issues with dealing with such vast sums of cash for which you want to maintain value. It's not trivial, as the author points out. >But Apple isn't even CLOSE to competing with Visa and MasterCard in that regard At one point Apple wasn't even close to competing with Nokia or Blackberry in the smart phone space. Then a bit of innovation happened.