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> the obvious answer is people need to stop giving all their money to 1 institution that they can't assess the creditworthiness of. You literally just describe

by ttfkam 3y ago

> the obvious answer is people need to stop giving all their money to 1 institution that they can't assess the creditworthiness of. You literally just described everyone who has a bank account. The finance sector is anything but transparent. See: Bear Sterns. > I'd hope people are prepared with a history like that. People play the lottery. Humans are REALLY bad at probability. There's an argument that the human brain itself is bad at it. Human perception is the source of optical illusions, sleight of hand, logical fallacies, etc. We are not biologically primed to handle these kinds of problems. Snake on the ground is a threat? Excellent. Monty Hall Problem? Even after explaining it, a majority of folks still reject the solution because it isn't naturally intuitive.

roenxi 3y ago
roenxi: "This is a terrible idea" ttfkam: "You literally just described everyone who has a bank account." In some sense, well spotted. That is why I think the system is a bit cooked. People can't just put hand their money over to one institution, ignore what is done with it and expect to get a good outcome. This is a good way to get vast capital misallocations and, eventually, a lot of people ending up poor. More people than the alternative of the occasional bank run. I can see an argument for setting up full-reserve banks. But if people are going to lend their money to institutions that on-lend it, we should be seeing banking institutes get rolled up regularly and depositors losing at least some of their money. People shouldn't be allowed to ignore what is done with their money; it leads to some of the worst incentives in the modern economy. But technically no, some people have their money spread over a few institutions. And most people don't seem to have cash savings these days anyway (which is rational given the inflation regime).

by ttfkam 3y ago

roenxi 3y ago

roenxi: "This is a terrible idea" ttfkam: "You literally just described everyone who has a bank account." In some sense, well spotted. That is why I think the system is a bit cooked. People can't just put hand their money over to one institution, ignore what is done with it and expect to get a good outcome. This is a good way to get vast capital misallocations and, eventually, a lot of people ending up poor. More people than the alternative of the occasional bank run. I can see an argument for setting up full-reserve banks. But if people are going to lend their money to institutions that on-lend it, we should be seeing banking institutes get rolled up regularly and depositors losing at least some of their money. People shouldn't be allowed to ignore what is done with their money; it leads to some of the worst incentives in the modern economy. But technically no, some people have their money spread over a few institutions. And most people don't seem to have cash savings these days anyway (which is rational given the inflation regime).