3 ms·

I think where we disagree here is on whether it should be the bank's business how and when their depositors deposit and withdraw their money. In my ideal system

I think where we disagree here is on whether it should be the bank's business how and when their depositors deposit and withdraw their money. In my ideal system, the bank's consideration ends as soon as they receive the money and put it in their vault. In your ideal system, the bank considers the likelihood of the depositor coming back the next day and asking for their money. And you're right, at least in the current reality of fractional reserve banking. But from a fundamental perspective, it just seems morally wrong to me.

JumpCrisscross 4y ago
> the bank's consideration ends as soon as they receive the money and put it in their vault A regional bank is choosing to stick with its area of specialty. There remain banks who specialize in crypto, and differentiate themselves on that basis. > it just seems morally wrong to me Only one component is related to withdrawal probability. The others, like service cost, fraud risk, et cetera, are business decisions. It's odd to say a bank choosing a specialty is wrong. (Or vice versa, that a bank should be forced to serve clients it finds morally repulsive.) That said, you and I see eye to eye when it comes to natural persons: a bare-bones bank account should be entitled to. In the era of cheque-writing, there was a necessary credit component to account opening. That's no longer necessary. (For businesses, it would require dismantling our AML system.)
vkou 4y ago
> I think where we disagree here is on whether it should be the bank's business how and when their depositors deposit and withdraw their money. A bank's entire business model consists of borrowing money for variable-length terms from depositors, and lending it out at fixed-length terms to borrowers. This question is absolutely the bank's business. In fact, it is the most critical question that a bank needs to be asking itself every single day, if it wants to stay solvent, and actually be able to honor customer withdrawals. SVB, and its shareholders have been wiped out because it didn't have a good answer to that question.
- chatmasta 4y ago
  Yeah, I get that. But I do wonder, if we were designing the economy from first principles, whether we would not only invent such a ridiculous idea as fractional reserve banking, but if we would also decide it should be the central engine for economic growth. Alas, the people who dared to think from those first principles are now becoming unbanked from, or denigrated as criminals by, the very system they sought to replace. Perhaps they were onto something.
  - JumpCrisscross 4y ago
    > the people who dared to think from those first principles are now becoming unbanked Folks doing honest research are fine. Those scaling glorified slot machines are having a tougher time.
  - vkou 4y ago
    > if we were designing the economy from first principles, whether we would not only invent such a ridiculous idea as fractional reserve banking, but if we would also decide it should be the central engine for economic growth. I think it's quite likely that any society that wouldn't adopt it would be overtaken in economic productivity by a society that did. > Alas, the people who dared to think from those first principles are now becoming unbanked from, or denigrated as criminals by, the very system they sought to replace. Perhaps they were onto something. They are generally onto entrusting their money into organizations and investments ran by, or successfully attacked by criminals, which is why crypto money has a disturbingly frequent tendency to go poof. The moral of the story, here, is that if you have an ideological reason to... Somehow stick it to the man and stay out of the insured banking system, you're going to be in real bad company. (Also, isn't it kind of weird how quick crypto was to re-invent sub-prime lending, through coin staking, and how quick exchanges are to gamble with and lose customer funds?)

JumpCrisscross 4y ago

> the bank's consideration ends as soon as they receive the money and put it in their vault A regional bank is choosing to stick with its area of specialty. There remain banks who specialize in crypto, and differentiate themselves on that basis. > it just seems morally wrong to me Only one component is related to withdrawal probability. The others, like service cost, fraud risk, et cetera, are business decisions. It's odd to say a bank choosing a specialty is wrong. (Or vice versa, that a bank should be forced to serve clients it finds morally repulsive.) That said, you and I see eye to eye when it comes to natural persons: a bare-bones bank account should be entitled to. In the era of cheque-writing, there was a necessary credit component to account opening. That's no longer necessary. (For businesses, it would require dismantling our AML system.)

vkou 4y ago

> I think where we disagree here is on whether it should be the bank's business how and when their depositors deposit and withdraw their money. A bank's entire business model consists of borrowing money for variable-length terms from depositors, and lending it out at fixed-length terms to borrowers. This question is absolutely the bank's business. In fact, it is the most critical question that a bank needs to be asking itself every single day, if it wants to stay solvent, and actually be able to honor customer withdrawals. SVB, and its shareholders have been wiped out because it didn't have a good answer to that question.

chatmasta 4y ago
Yeah, I get that. But I do wonder, if we were designing the economy from first principles, whether we would not only invent such a ridiculous idea as fractional reserve banking, but if we would also decide it should be the central engine for economic growth. Alas, the people who dared to think from those first principles are now becoming unbanked from, or denigrated as criminals by, the very system they sought to replace. Perhaps they were onto something.
- JumpCrisscross 4y ago
  > the people who dared to think from those first principles are now becoming unbanked Folks doing honest research are fine. Those scaling glorified slot machines are having a tougher time.
- vkou 4y ago
  > if we were designing the economy from first principles, whether we would not only invent such a ridiculous idea as fractional reserve banking, but if we would also decide it should be the central engine for economic growth. I think it's quite likely that any society that wouldn't adopt it would be overtaken in economic productivity by a society that did. > Alas, the people who dared to think from those first principles are now becoming unbanked from, or denigrated as criminals by, the very system they sought to replace. Perhaps they were onto something. They are generally onto entrusting their money into organizations and investments ran by, or successfully attacked by criminals, which is why crypto money has a disturbingly frequent tendency to go poof. The moral of the story, here, is that if you have an ideological reason to... Somehow stick it to the man and stay out of the insured banking system, you're going to be in real bad company. (Also, isn't it kind of weird how quick crypto was to re-invent sub-prime lending, through coin staking, and how quick exchanges are to gamble with and lose customer funds?)