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> commercial banks invest my money on my behalf without me having any control over the process. CBDC is presumably just a store. Central banks have been agains

by tonfa 6y ago

> commercial banks invest my money on my behalf without me having any control over the process. CBDC is presumably just a store. Central banks have been against direct accounts for retail for this reason, because they didn't want to be in the business of retail lending as well. What would be the alternative there? It seems unlikely that central banks would go into the business of vetting and giving out small business loans. Could a commercial bank function with only giving out loans and no deposit (I guess it would get loans directly from the central bank instead of balancing its balance sheet with deposits?)

perfunctory 6y ago
> Could a commercial bank function with only giving out loans and no deposit As I mentioned in another comment, banks will have to do a better job at convincing me to open a deposit. Hopefully this will increase competition between banks and make them more transparent.
- tonfa 6y ago
  > As I mentioned in another comment, banks will have to do a better job at convincing me to open a deposit. Hopefully this will increase competition between banks and make them more transparent. Not sure it makes sense, can they really compete against a "narrow banking" style bank? Why wouldn't narrow bank compete a better UI/services (and not offer any loans)? https://www.econlib.org/why-does-the-fed-oppose-narrow-banking/ https://www.econlib.org/why-does-the-fed-oppose-narrow-banki... explores a bit that part and the arguments against it.
  - perfunctory 6y ago
    > Not sure it makes sense, can they really compete against a "narrow banking" style bank? Sure they can. They should be able to offer a better interest rate on their deposits. "... new customers is one way, if not the cheapest way, to secure those reserves. Indeed, the current targeted fed funds rate—the rate at which banks borrow from each other—is between 0.25% and 0.75%, well above the 0.01% to 0.02% interest rate the Bank of America pays on a standard checking deposit.5 6 The banks don’t need your money; it’s just cheaper for them to borrow from you than it is to borrow from other banks." [0] Why is that? why is it cheaper for banks to borrow from me than from other banks? I say it's due to the lack of competition. [0]https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp https://www.investopedia.com/articles/investing/022416/why-b...
    - ac29 6y ago
      > Why is that? why is it cheaper for banks to borrow from me than from other banks? I say it's due to the lack of competition. The are many, many banks who will pay you something resembling the fed funds rate on a savings account (0.5% seems to be the number at the moment). Bank of America and other banks get away with paying 0.01% due to inertia and lack of consumer education.
- lifty 6y ago
  If interest rates are kept near zero and central banks open deposit accounts, the role of the banking system disappears. Their main role is to allocate money based on their risk management framework, but if money costs zero this need is very diminished.
  - perfunctory 6y ago
    > but if money costs zero this need is very diminished. commercial loan rates are nowhere near zero. I don't see what it has to do with CBDC.
    - toomuchtodo 6y ago
      Rates in question are the rates set by central banks, not commercial lending rates.
  - toomuchtodo 6y ago
    Central banks are attempting to prop up the banking system (through regulatory means) in light of WeChat and crypto currencies demonstrating a reduced need for the sector and the deposit services they offer.
- noxer 6y ago
  they dont want your deposit. its useless to them. that's why you have to pay for bank services nowadays.
pjc50 6y ago
Central banks don't have to do lending to take deposits. If they need somewhere to lend to, the government is a great debtor of last resort.
- tonfa 6y ago
  At least it seems like this should be an independent body, not tied to the government/politics (kinda like a central bank). But in any case, this still has the issue that it would be a massive institution, if it had to review all small business loans.

by tonfa 6y ago

perfunctory 6y ago

> Could a commercial bank function with only giving out loans and no deposit As I mentioned in another comment, banks will have to do a better job at convincing me to open a deposit. Hopefully this will increase competition between banks and make them more transparent.

tonfa 6y ago
> As I mentioned in another comment, banks will have to do a better job at convincing me to open a deposit. Hopefully this will increase competition between banks and make them more transparent. Not sure it makes sense, can they really compete against a "narrow banking" style bank? Why wouldn't narrow bank compete a better UI/services (and not offer any loans)? https://www.econlib.org/why-does-the-fed-oppose-narrow-banking/ https://www.econlib.org/why-does-the-fed-oppose-narrow-banki... explores a bit that part and the arguments against it.
- perfunctory 6y ago
  > Not sure it makes sense, can they really compete against a "narrow banking" style bank? Sure they can. They should be able to offer a better interest rate on their deposits. "... new customers is one way, if not the cheapest way, to secure those reserves. Indeed, the current targeted fed funds rate—the rate at which banks borrow from each other—is between 0.25% and 0.75%, well above the 0.01% to 0.02% interest rate the Bank of America pays on a standard checking deposit.5 6 The banks don’t need your money; it’s just cheaper for them to borrow from you than it is to borrow from other banks." [0] Why is that? why is it cheaper for banks to borrow from me than from other banks? I say it's due to the lack of competition. [0]https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp https://www.investopedia.com/articles/investing/022416/why-b...
  - ac29 6y ago
    > Why is that? why is it cheaper for banks to borrow from me than from other banks? I say it's due to the lack of competition. The are many, many banks who will pay you something resembling the fed funds rate on a savings account (0.5% seems to be the number at the moment). Bank of America and other banks get away with paying 0.01% due to inertia and lack of consumer education.
lifty 6y ago
If interest rates are kept near zero and central banks open deposit accounts, the role of the banking system disappears. Their main role is to allocate money based on their risk management framework, but if money costs zero this need is very diminished.
- perfunctory 6y ago
  > but if money costs zero this need is very diminished. commercial loan rates are nowhere near zero. I don't see what it has to do with CBDC.
  - toomuchtodo 6y ago
    Rates in question are the rates set by central banks, not commercial lending rates.
- toomuchtodo 6y ago
  Central banks are attempting to prop up the banking system (through regulatory means) in light of WeChat and crypto currencies demonstrating a reduced need for the sector and the deposit services they offer.
noxer 6y ago
they dont want your deposit. its useless to them. that's why you have to pay for bank services nowadays.

pjc50 6y ago

Central banks don't have to do lending to take deposits. If they need somewhere to lend to, the government is a great debtor of last resort.

tonfa 6y ago
At least it seems like this should be an independent body, not tied to the government/politics (kinda like a central bank). But in any case, this still has the issue that it would be a massive institution, if it had to review all small business loans.