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"So, since you don't want to store that money under your mattress"... I never understood/agreed with this argument. I'd much rather withdraw all my money and k

"So, since you don't want to store that money under your mattress"... I never understood/agreed with this argument. I'd much rather withdraw all my money and keep it in a safe than lock in a loss. I suppose for most people though the minor loss of principal outweighs that inconvenience, but for me, as a matter of principle, I refuse to be paid less than my principal (I didn't mean for that to come out as cheesy as it did).

deleted 7y ago
[deleted]
bryanlarsen 7y ago
That safe and ancillary services like armed guards or insurance could quite likely cost more than 0.5% per annum.
fauigerzigerk 7y ago
So you would rather buy a safe and take out insurance than pay a fee to someone who already has both (i.e a bank)?
WJW 7y ago
In order to make the calculation 'correctly', don't forget to price in the correct amount of risk. As an example, say there is a 0.2% chance in any given year of your house catching fire, either through your own fault or from a neighboring property on fire. If there is a 50% chance of you being able to rescue the money in such a situation, then that is an estimated 0.1% loss in any given year. There is also a similarly priceable risk for theft etc, which would probably increase with the amount stored. If it becomes known that there is 500k in cash stored in your house, there are probably plenty of people greedy or desperate enough to break in with heavy tooling when you're out and steal the whole safe.
- solaxun 7y ago
  Well, while we're in the realm of discussing tail risks - what is the risk that if your assets exceed FDIC insurance limits, the bank you have them in defaults? Since we're discussing a negative rate environment, presumably this is a stressful time for the economy making this more likely than history would indicate. If you have your assets at multiple institutions to stay under the limits, what's the probability of one of those failing, and what's the probability the FDIC fails? Depending on how negative rates are, the math can quickly turn those probabilities you outlined above into risks I'm willing to take.
hluska 7y ago
When I was 19, I had an economics professor who did a great job of explaining that idiom to our young ears. He talked about feudal times when landowners had to store their gold. So they had to build these massive castles with walls, hire professional soldiers, train their kids to wield weapons and even give some of their land to particularly good soldiers. That system was really expensive so they needed slaves to keep the whole system going. Since all the other landowners knew that you had all your gold in your castle, when they came upon hard times they would often attack. So, you would give your slaves primitive weapons and have them fight to defend ‘their homes’. From the serf’s perspective, that system sucked. They worked hard, didn’t get paid and occasionally had to go into battle to protect their landowner. After a few generations, when you say “you know, Grandpa died in a battle. Dad and all my uncles died in battles. Three of my siblings died as infants. And they want me to take a fucking spear and protect that system? Over the years, the system collapsed because slaves could get a better deal in cities. Landowners couldn’t afford their fortunes and castles fell into disrepair. Basically, banks seem like a real ripoff until you consider the reality of having to store all your money in an environment where everyone knows whereabouts you have it stored!
- solaxun 7y ago
  That analogy works when everybody is doing the same thing and it's common knowledge that the average person has their assets sitting in their castle, but we're talking about 2020 when that would be the exception, not the norm. You're acting like I would go on hackernews and tell everybody where my money is or something...
  - bryanrasmussen 7y ago
    I assume if you were going to tell hackernews it would be with a Show HN post for your new pirate app that allows users to find where you have hidden the treasure in your house.
    - bitxbitxbitcoin 7y ago
      I believe the HN-friendly term for that is "geo-caching."
eloff 7y ago
This is exactly what German banks are doing rather than parking their euros with the central bankhttps://www.bloomberg.com/news/articles/2020-01-31/german-banks-are-hoarding-so-many-euros-they-need-more-vaults https://www.bloomberg.com/news/articles/2020-01-31/german-ba...

deleted 7y ago

[deleted]

bryanlarsen 7y ago

That safe and ancillary services like armed guards or insurance could quite likely cost more than 0.5% per annum.

fauigerzigerk 7y ago

So you would rather buy a safe and take out insurance than pay a fee to someone who already has both (i.e a bank)?

WJW 7y ago

In order to make the calculation 'correctly', don't forget to price in the correct amount of risk. As an example, say there is a 0.2% chance in any given year of your house catching fire, either through your own fault or from a neighboring property on fire. If there is a 50% chance of you being able to rescue the money in such a situation, then that is an estimated 0.1% loss in any given year. There is also a similarly priceable risk for theft etc, which would probably increase with the amount stored. If it becomes known that there is 500k in cash stored in your house, there are probably plenty of people greedy or desperate enough to break in with heavy tooling when you're out and steal the whole safe.

solaxun 7y ago
Well, while we're in the realm of discussing tail risks - what is the risk that if your assets exceed FDIC insurance limits, the bank you have them in defaults? Since we're discussing a negative rate environment, presumably this is a stressful time for the economy making this more likely than history would indicate. If you have your assets at multiple institutions to stay under the limits, what's the probability of one of those failing, and what's the probability the FDIC fails? Depending on how negative rates are, the math can quickly turn those probabilities you outlined above into risks I'm willing to take.

hluska 7y ago

When I was 19, I had an economics professor who did a great job of explaining that idiom to our young ears. He talked about feudal times when landowners had to store their gold. So they had to build these massive castles with walls, hire professional soldiers, train their kids to wield weapons and even give some of their land to particularly good soldiers. That system was really expensive so they needed slaves to keep the whole system going. Since all the other landowners knew that you had all your gold in your castle, when they came upon hard times they would often attack. So, you would give your slaves primitive weapons and have them fight to defend ‘their homes’. From the serf’s perspective, that system sucked. They worked hard, didn’t get paid and occasionally had to go into battle to protect their landowner. After a few generations, when you say “you know, Grandpa died in a battle. Dad and all my uncles died in battles. Three of my siblings died as infants. And they want me to take a fucking spear and protect that system? Over the years, the system collapsed because slaves could get a better deal in cities. Landowners couldn’t afford their fortunes and castles fell into disrepair. Basically, banks seem like a real ripoff until you consider the reality of having to store all your money in an environment where everyone knows whereabouts you have it stored!

solaxun 7y ago
That analogy works when everybody is doing the same thing and it's common knowledge that the average person has their assets sitting in their castle, but we're talking about 2020 when that would be the exception, not the norm. You're acting like I would go on hackernews and tell everybody where my money is or something...
- bryanrasmussen 7y ago
  I assume if you were going to tell hackernews it would be with a Show HN post for your new pirate app that allows users to find where you have hidden the treasure in your house.
  - bitxbitxbitcoin 7y ago
    I believe the HN-friendly term for that is "geo-caching."

eloff 7y ago

This is exactly what German banks are doing rather than parking their euros with the central bankhttps://www.bloomberg.com/news/articles/2020-01-31/german-banks-are-hoarding-so-many-euros-they-need-more-vaults https://www.bloomberg.com/news/articles/2020-01-31/german-ba...