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FDIC. Everyone else pays for your shitty banking choices via inflation instead. To me the crypto version is better TBH, which would force either private insur

FDIC. Everyone else pays for your shitty banking choices via inflation instead. To me the crypto version is better TBH, which would force either private insurance or none at all. Believe it or not you can buy private insurance for crypto, which would achieve something like FDIC.

gasull 4y ago
FDIC covers only up to 200k USD. Many people have lost life savings when banks collapse. Also, not everybody lives in the US or in countries with a semi decent banking system.
- rsj_hn 4y ago
  > Many people have lost life savings when banks collapse. Do you have some data for this statement? (in the US, post FDIC deposit era) Because even when a bank fails, there is usually more than enough to cover depositors, and what the FDIC does is arrange for the bank to be taken over by a healthy bank, with the deposits migrated (but equity and bondholders can take a bath). E.g. no depositor lost a penny in the financial crisis of 2008 -- which was the biggest financial crisis since the Great Depression -- even if they had money in excess of the limits. However it's quite unusual to have money in excess of the limit -- if you have that much, you wont keep it as a deposit, you'll hold some government guaranteed bonds like agencies or treasuries. It is extremely poor cash management for an individual to have more than 200K in a demand deposit account when they can be earning more with government guaranteed bonds that are just as liquid as cash. You can even open an account with Treasury Direct.
  - dragonwriter 4y ago
    > E.g. no depositor lost a penny in the financial crisis of 2008 No depositor has lost a penny in an FDIC insured account (even with total balances above the insurance limit) ever since the FDIC has existed.
    - rsj_hn 4y ago
      Do you have an example of a depositor losing money they stored in excess of this? Even a single example would do.
      - dragonwriter 4y ago
        No, I’m saying even with excess balances, no one has lost money in accounts subject to FDIC insurance; there are no examples, it hasn't happened.
        rsj_hn 4y ago
        Sorry, I misunderstood -- thanks!
  - gasull 4y ago
    It has happened in other countries, like Cyprus. Accounts were also insured up to 200k EUR (or I think it was only 100k at the time).
astrange 4y ago
FDIC rescuing a bank doesn’t involve money printing. Since the bank still closes and can’t offer new loans, it’s slightly deflationary.
- notch656a 4y ago
  The events of the bank closing may be deflationary. The giving of now-gone money to the depositors is inflationary. The fallacy of your above statement is you're considering the system of 'fail, then FDIC pays out depositors' when in fact the alternative is 'fail, depositors eat losses'. The former is inflationary relative to the latter, and in fact punitive to those who chose banks that didn't fail. The net difference between the two is the discussed inflationary event 'FDIC pays out depositors.'
  - astrange 4y ago
    No, it doesn't increase the money supply because the FDIC has a pre-existing fund for it. They're not funded by the Treasury and when they are they pay it back. Though the US could've used more inflation at any point up to 2021 considering our inability to ever get unemployment low enough. (since they're theoretically more or less directly related)
    - notch656a 4y ago
      Pre-existing Funds that are just sitting waiting around to be put into depositor accounts once a bank fails have low to no velocity. Giving them to money-spending depositors is inflationary by virtue of increasing the velocity of that money that was previously just sitting on the sideline. Even in the scenario you present is inflationary.
      - astrange 4y ago
        Eh, if it was sitting in a bank before and now it’s sitting in a different bank that’s not a difference. The depositors never got an unexpected increase in spending power, they just avoided an unexpected decrease. What matters is where the old funds went. The bank might’ve been spending it out the back, but in that case the inflationary actions already happened.

gasull 4y ago

FDIC covers only up to 200k USD. Many people have lost life savings when banks collapse. Also, not everybody lives in the US or in countries with a semi decent banking system.

rsj_hn 4y ago
> Many people have lost life savings when banks collapse. Do you have some data for this statement? (in the US, post FDIC deposit era) Because even when a bank fails, there is usually more than enough to cover depositors, and what the FDIC does is arrange for the bank to be taken over by a healthy bank, with the deposits migrated (but equity and bondholders can take a bath). E.g. no depositor lost a penny in the financial crisis of 2008 -- which was the biggest financial crisis since the Great Depression -- even if they had money in excess of the limits. However it's quite unusual to have money in excess of the limit -- if you have that much, you wont keep it as a deposit, you'll hold some government guaranteed bonds like agencies or treasuries. It is extremely poor cash management for an individual to have more than 200K in a demand deposit account when they can be earning more with government guaranteed bonds that are just as liquid as cash. You can even open an account with Treasury Direct.
- dragonwriter 4y ago
  > E.g. no depositor lost a penny in the financial crisis of 2008 No depositor has lost a penny in an FDIC insured account (even with total balances above the insurance limit) ever since the FDIC has existed.
  - rsj_hn 4y ago
    Do you have an example of a depositor losing money they stored in excess of this? Even a single example would do.
    - dragonwriter 4y ago
      No, I’m saying even with excess balances, no one has lost money in accounts subject to FDIC insurance; there are no examples, it hasn't happened.
      - rsj_hn 4y ago
        Sorry, I misunderstood -- thanks!
- gasull 4y ago
  It has happened in other countries, like Cyprus. Accounts were also insured up to 200k EUR (or I think it was only 100k at the time).

astrange 4y ago

FDIC rescuing a bank doesn’t involve money printing. Since the bank still closes and can’t offer new loans, it’s slightly deflationary.

notch656a 4y ago
The events of the bank closing may be deflationary. The giving of now-gone money to the depositors is inflationary. The fallacy of your above statement is you're considering the system of 'fail, then FDIC pays out depositors' when in fact the alternative is 'fail, depositors eat losses'. The former is inflationary relative to the latter, and in fact punitive to those who chose banks that didn't fail. The net difference between the two is the discussed inflationary event 'FDIC pays out depositors.'
- astrange 4y ago
  No, it doesn't increase the money supply because the FDIC has a pre-existing fund for it. They're not funded by the Treasury and when they are they pay it back. Though the US could've used more inflation at any point up to 2021 considering our inability to ever get unemployment low enough. (since they're theoretically more or less directly related)
  - notch656a 4y ago
    Pre-existing Funds that are just sitting waiting around to be put into depositor accounts once a bank fails have low to no velocity. Giving them to money-spending depositors is inflationary by virtue of increasing the velocity of that money that was previously just sitting on the sideline. Even in the scenario you present is inflationary.
    - astrange 4y ago
      Eh, if it was sitting in a bank before and now it’s sitting in a different bank that’s not a difference. The depositors never got an unexpected increase in spending power, they just avoided an unexpected decrease. What matters is where the old funds went. The bank might’ve been spending it out the back, but in that case the inflationary actions already happened.