4 ms·

I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their mone

I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.

Aloha 4y ago
I dont know a great many who would pay for that service.
- afiori 4y ago
  I imagine that people are paying for insurance for these kind of things. A less risky bank is worth at least a fraction of that.
micromacrofoot 4y ago
I can go buy a fireproof safe for a few hundred bucks. Or rent a safe deposit box. My money becomes less valuable the longer it sits in either.
- coldtea 4y ago
  Your money becomes less valuable in a bank too, as a bank account is not an investment vehicle anyway. It's just that now you also have the added risk of the bank defaulting like SVB. If you want to invest, invest. If you don't, you shouldn't have the added risk tied to your "sitting in the bank" money, just inflation.
  - deleted 4y ago
    [deleted]
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SketchySeaBeast 4y ago
So by keeping my money with you I lose spending power at a rate of your fees PLUS inflation? Where do I sign up?
- kamaal 4y ago
  Well in that case you must be ok with losing money that comes with the risk. Which many people surely are not ok with(Want bailouts). Makes perfect sense to me. If you are ok with the risk of losing it all. You go in for an investment vehicle. Or you go in for a vault.
  - SketchySeaBeast 4y ago
    Or I understand the insured limits on my accounts and make arrangements accordingly.
- coldtea 4y ago
  Combine it with another novel idea: the gold standard.
  - SketchySeaBeast 4y ago
    I know it's very trendy to advocated for that, but we do know that the removal of the gold standard was an attempt to keep the United State economy from melting down too, right? It's not actually a solution to all our economic woes. Sure, removing the gold standard created a new class of problems but going back isn't going to stop the ones we used to have.
    - coldtea 4y ago
      >I know it's very trendy to advocated for that, but we do know that the removal of the gold standard was an attempt to keep the United State economy from melting down too, right? I'd rather it was let to melt down, learned the lesson, and we went for a more sustainable model.
riffraff 4y ago
in case anyone is wondering, it's called a custodian bank https://en.wikipedia.org/wiki/Custodian_bank https://en.wikipedia.org/wiki/Custodian_bank
kordlessagain 4y ago
The problem there is the idea of "money". You can keep your float variables safe in a big vault called a distributed acyclic graph, but there's not much we can do about how people view what those numbers mean compared to the price of a toilet seat.
collectedparts 4y ago
It's called "narrow banking" or full-reserve banking. It's been tried, and was rejected by the very same regulators who now had to bail out SVB: https://www.econlib.org/why-does-the-fed-oppose-narrow-banking/ https://www.econlib.org/why-does-the-fed-oppose-narrow-banki...
- afiori 4y ago
  > A narrow bank takes deposits and invests the money in interest-bearing reserves deposited at the Fed. Because that’s all these banks would do, they would be very low cost and hence could pass along to depositors the interest earned on reserves, minus a small fee. Narrow banks could attract many large depositors, who currently receive much lower interest rates on their deposits at ordinary commercial banks. This does not sound like keeping all the cash in a vault, this looks like reselling a service of the government not meant for this use. It could be interesting to see if a service oriented to very low interests (or even negative) rates would be (in theory) feasible.
koheripbal 4y ago
That's just a waste of capital and leads to zero business investments. It's exactly what happens in crypto because it's deflationary, and it's the main reason there is no crypto economy beyond the price speculation.
- malborodog 4y ago
  No it just increases the hurdle rate for valuable investments. It just means that entrepreneurs have to prove that their ideas are worth more than the security of knowing your money is safe. Is that so bad??
  - koheripbal 4y ago
    If you expect individuals to evaluate investments, then you're nuts - but if you're saying that the bank should do it for them, then you're suggesting the same system that already exists.
- deleted 4y ago
  [deleted]
- tyre 4y ago
  Yes, this is essentially correct. Every few months the idea of narrow banking is re-discovered and presented as a magic cure-all. What played out over the past week was all fine. The FDIC and Treasury worked. The contagion was the VCs freaking everyone out. It was a bad week for “leaders in tech” fomenting FUD when they could have been calming the situation down. SVB had safe assets. They mismanaged interest risk. The government stepped in. It’s fine. Thank god for centralized financial systems.
gonzo41 4y ago
You're talking about the gold standard, there's better things to do with gold. These crisis are like car crashes, they happen. But in the end, it's still fun to drive cars really fast, overloaded on wet, winding roads at twilight.
pokot0 4y ago
I'll add on to that idea. What if that is considered a basic human right. One line in a database with your name and a number. And governments, the most powerful entities on earth offer it for free. Doesn't seem very expensive to offer compared to the amount of times we have to bailout banks....
ianpurton 4y ago
You're very close to how it works. In big business it's called Treasury, which derives from Trezor or Safe. For example Apple will have a Treasury department to manage it's cash. They don't put it in safes anymore, because, well you seem like an honest person, but your predecessors had a tendency to steal the money from the safe. You generally don't put it all in one Bank either as they have a tendency to either steal it or gamble it on the markets. A treasury I worked at had software that would pull money from banks across the world into more trusted banks. That's called cash pooling. Then traders in the treasury market would buy up government bonds from stable governments. This costs money and is big business. So perhaps there's a market for treasury as a service (TAAS).
- cultureswitch 4y ago
  Interestingly, even the current, very inefficient and clunky set of popular cryptocurrencies can fit that role quite well. You can quickly buy and sell millions in BTC and ETH and no bank can go and gamble with it even if you leave it there for years. The only obvious problem is volatility, but that goes both ways.
swarnie 4y ago
Why? You can recklessly make money off it for years then when you eventually get it wrong the government will step in and fix your "Oopsie" That sounds way more profitable.
deleted 4y ago
[deleted]

I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.

Aloha 4y ago

I dont know a great many who would pay for that service.

afiori 4y ago
I imagine that people are paying for insurance for these kind of things. A less risky bank is worth at least a fraction of that.

micromacrofoot 4y ago

I can go buy a fireproof safe for a few hundred bucks. Or rent a safe deposit box. My money becomes less valuable the longer it sits in either.

coldtea 4y ago
Your money becomes less valuable in a bank too, as a bank account is not an investment vehicle anyway. It's just that now you also have the added risk of the bank defaulting like SVB. If you want to invest, invest. If you don't, you shouldn't have the added risk tied to your "sitting in the bank" money, just inflation.
- deleted 4y ago
  [deleted]
- deleted 4y ago
  [deleted]

SketchySeaBeast 4y ago

So by keeping my money with you I lose spending power at a rate of your fees PLUS inflation? Where do I sign up?

kamaal 4y ago
Well in that case you must be ok with losing money that comes with the risk. Which many people surely are not ok with(Want bailouts). Makes perfect sense to me. If you are ok with the risk of losing it all. You go in for an investment vehicle. Or you go in for a vault.
- SketchySeaBeast 4y ago
  Or I understand the insured limits on my accounts and make arrangements accordingly.
coldtea 4y ago
Combine it with another novel idea: the gold standard.
- SketchySeaBeast 4y ago
  I know it's very trendy to advocated for that, but we do know that the removal of the gold standard was an attempt to keep the United State economy from melting down too, right? It's not actually a solution to all our economic woes. Sure, removing the gold standard created a new class of problems but going back isn't going to stop the ones we used to have.
  - coldtea 4y ago
    >I know it's very trendy to advocated for that, but we do know that the removal of the gold standard was an attempt to keep the United State economy from melting down too, right? I'd rather it was let to melt down, learned the lesson, and we went for a more sustainable model.

riffraff 4y ago

in case anyone is wondering, it's called a custodian bank https://en.wikipedia.org/wiki/Custodian_bank https://en.wikipedia.org/wiki/Custodian_bank

kordlessagain 4y ago

The problem there is the idea of "money". You can keep your float variables safe in a big vault called a distributed acyclic graph, but there's not much we can do about how people view what those numbers mean compared to the price of a toilet seat.

collectedparts 4y ago

It's called "narrow banking" or full-reserve banking. It's been tried, and was rejected by the very same regulators who now had to bail out SVB: https://www.econlib.org/why-does-the-fed-oppose-narrow-banking/ https://www.econlib.org/why-does-the-fed-oppose-narrow-banki...

afiori 4y ago
> A narrow bank takes deposits and invests the money in interest-bearing reserves deposited at the Fed. Because that’s all these banks would do, they would be very low cost and hence could pass along to depositors the interest earned on reserves, minus a small fee. Narrow banks could attract many large depositors, who currently receive much lower interest rates on their deposits at ordinary commercial banks. This does not sound like keeping all the cash in a vault, this looks like reselling a service of the government not meant for this use. It could be interesting to see if a service oriented to very low interests (or even negative) rates would be (in theory) feasible.

koheripbal 4y ago

That's just a waste of capital and leads to zero business investments. It's exactly what happens in crypto because it's deflationary, and it's the main reason there is no crypto economy beyond the price speculation.

malborodog 4y ago
No it just increases the hurdle rate for valuable investments. It just means that entrepreneurs have to prove that their ideas are worth more than the security of knowing your money is safe. Is that so bad??
- koheripbal 4y ago
  If you expect individuals to evaluate investments, then you're nuts - but if you're saying that the bank should do it for them, then you're suggesting the same system that already exists.
deleted 4y ago
[deleted]
tyre 4y ago
Yes, this is essentially correct. Every few months the idea of narrow banking is re-discovered and presented as a magic cure-all. What played out over the past week was all fine. The FDIC and Treasury worked. The contagion was the VCs freaking everyone out. It was a bad week for “leaders in tech” fomenting FUD when they could have been calming the situation down. SVB had safe assets. They mismanaged interest risk. The government stepped in. It’s fine. Thank god for centralized financial systems.

gonzo41 4y ago

You're talking about the gold standard, there's better things to do with gold. These crisis are like car crashes, they happen. But in the end, it's still fun to drive cars really fast, overloaded on wet, winding roads at twilight.

pokot0 4y ago

I'll add on to that idea. What if that is considered a basic human right. One line in a database with your name and a number. And governments, the most powerful entities on earth offer it for free. Doesn't seem very expensive to offer compared to the amount of times we have to bailout banks....

ianpurton 4y ago

You're very close to how it works. In big business it's called Treasury, which derives from Trezor or Safe. For example Apple will have a Treasury department to manage it's cash. They don't put it in safes anymore, because, well you seem like an honest person, but your predecessors had a tendency to steal the money from the safe. You generally don't put it all in one Bank either as they have a tendency to either steal it or gamble it on the markets. A treasury I worked at had software that would pull money from banks across the world into more trusted banks. That's called cash pooling. Then traders in the treasury market would buy up government bonds from stable governments. This costs money and is big business. So perhaps there's a market for treasury as a service (TAAS).

cultureswitch 4y ago
Interestingly, even the current, very inefficient and clunky set of popular cryptocurrencies can fit that role quite well. You can quickly buy and sell millions in BTC and ETH and no bank can go and gamble with it even if you leave it there for years. The only obvious problem is volatility, but that goes both ways.

swarnie 4y ago

Why? You can recklessly make money off it for years then when you eventually get it wrong the government will step in and fix your "Oopsie" That sounds way more profitable.

deleted 4y ago

[deleted]